Ryanair Holdings PLC (LON:RYA) warned that it expects strikes by pilots and cabin crew to continue during the peak summer period as it reported a 20% drop in first-quarter profits.
Shares fell 5.3% to €14.6 in morning trading.
The budget airline said it was “not prepared to concede to unreasonable demands” by unions across Europe that will “compromise either our low fares or our highly efficient model”.
Irish-based pilots held two strikes in July and have threatened a third for Tuesday in a dispute with Ryanair over pay and conditions. The industrial action has resulted in hundreds of flight cancellations.
READ: Ryanair cabin crew to strike in late July
The group expects further strikes over summer and said it may also need to review its winter schedule, which may lead to fleet reductions at disrupted bases and job losses.
Strikes by French air traffic controllers
In the first quarter to the end of June, strikes by French air traffic controllers (ATC) over staffing and rostering led to 2,500 flight cancellations. They went on strike for nine of the 13 weekends in April, May and June, resulting in the loss of higher yielding weekend traffic and a steep rise in costs.
Profit after tax fell to €397mln in the first quarter from €319mln the same period a year ago due to lower fares, higher fuel prices and pilot costs.
Tough competition in Europe and the earlier timing of Easter led to a 4% drop in average fares to €38.68. Staff costs rose by 34% after raising pay for pilots by 20% and pay for non-flight staff by 3%.
Despite the flight cancellations, traffic increased by 7% to 37.6mln passengers in the first quarter, sending revenue up 9% to €1.9bn from €2.1bn.
The load factor, the ratio of passengers to seats available, came to 96% in the period.
Full-year guidance unchanged
Ryanair maintained its guidance for the year for profit after tax of €1.25bn to €1.35bn.
READ: Ryanair on the 'pessimistic side of cautious' as it cuts profit guidance
For the second half, the company continues to expect flat fares since there is “almost zero visibility” for the period.
The group said ancillary revenue continues to “perform well” but will not offset a €430mln higher fuel bill or a 6% increase in ex-fuel unit costs.
“This guidance is heavily dependent on close-in second quarter fares, crew strikes, continuing ATC staff shortages/strikes, the absence of unforeseen security events and no negative Brexit developments.”
Ryanair said it remains concerned about the impact of a hard Brexit, which will likely result in UK shareholders will be treated as non-EU.
The company may be forced to restrict the voting rights of all non-EU shareholders in the event of a hard Brexit, to ensure it remains majority owned and controlled by EU shareholders.
First quarter results beat consensus
Liberum said the first quarter results were better than the consensus forecast but short of its assumptions.
However, the broker left its rating on the stock at 'buy' with a target price of €18.5.
"Strike action is bad for sentiment and creates short-term risks to earnings, but should not impact Ryanair's long-term competitive position, cost leadership, financial strength or cash generation," it said.
Neil Wilson, chief market analyst at for Markets.com, said it "may be unwise to read too much into a single quarter's numbers".
He noted that the full year guidance remains unchanged while Ryanair is well-placed to take advantage of the consolidation in Europe following the collapse of Air Berlin and Monarch.
However, the loss of capacity in European short-haul that has helped easyJet is yet to feed through to Ryanair, Wilson added.