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Ryanair upbeat as fares, passenger traffic climb

Ryanair upbeat as fares, passenger traffic climb
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First Published: Mon, Jan 31 2011. 04 46 PM IST
Updated: Mon, Jan 31 2011. 04 46 PM IST
Dublin: Europe’s biggest low-cost airline Ryanair sees its full-year profit at the upper end of expectations as rising passenger numbers and average fares help offset disruption from strikes and bad weather.
The Irish airline said it was on track to make net profit in the year to March towards the top of a €380 million ($517 million) to €400 million target range.
Ryanair, which operates more than 1,500 flights a day, said it made a net loss of €10 million in the third quarter to the end of December. This compared with an €11 million loss a year earlier and a forecast for a net loss of 13.4 million euros by in-house broker Davy.
“This small Q3 loss is disappointing, as we were on track to break even, but earnings were hit by a series of air traffic controllers (ATC) strikes compounded by a spate of bad weather airport closures in December,” said CEO Michael O’Leary.
Ryanair did not quantify the cost of the disruption.
Rivals easyJet and Air Berlin said last week they would take hits of £31 million and €30 million euros respectively from strikes and winter weather across Europe.
Shares in Ryanair, which had lost around 10% of their value over the last three weeks on fears over the impact from the disruption, were up 1.6$ to 3.68 euros at 0930 GMT.
NCB analyst Murray McCarter said Ryanair’s update was reassuring following easyJet’s recent profit warning.
“In particular the strong increase in fares and ancillary revenues is impressive despite the challenging conditions through the winter,” he said.
Ryanair cancelled over 3,000 flights in the third quarter compared with over 1,400 cancellations in the previous year.
Airlines traditionally lose money in the third quarter which is the quietest period of the year for the industry.
The company said last month it would take legal action against Spanish unions over an ATC strike which forced it to cancel 500 flights.
O’Leary said he expected passenger numbers and average fares to continue to benefit in the fourth quarter from a better mix of new routes. The airline has offset weakness in the domestic economy by growing in lower cost markets like Spain and Italy. O’Leary also said Ryanair had been protected from significant rises in oil prices in recent months by its fuel hedging strategy.
The airline is 90% hedged for the fourth quarter at a price of $750 per tonne compared with the current spot price of $890 per tonne, it said. Ryanair said it was benefiting from flag carriers being weakened by raising their prices through putting fuel surcharges on many short haul flights.
In an interview with Reuters, finance director Howard Millar said he expected that trend to continue in 2011.
“I think you’ll see fuel prices move upwards for the industry. As part of that we expect flag carriers to put up fuel surcharges. That widens the gap between their fares and our fares,” he said.
Davy analyst Stephen Furlong said Ryanair would be a beneficiary of current fuel prices.
“We still believe that Ryanair will be one of the key winners in this higher fuel environment, the key being that demand for its business model remains strong,” he said.
Millar said Ryanair was picking up market share and anticipated continuing to do so in the coming year.
“Ourselves and easyJet are the only two carriers of any size and shape growing this year and next year. The flag carriers have stopped growing and are continuing to retreat,” he said.
Millar said Ryanair would be interested in buying Ireland’s 25 percent stake in rival Aer Lingus should it be put up for sale by a new government looking to raise money through the sale of state assets after the forthcoming election.
“Everything’s up for grabs now. We’re going to have a new government soon. At some stage they’ll have to think about it.”
Ryanair said it grew total revenue by 22% to €746 million during the quarter benefiting from a 6% increase in passenger numbers to 17 million and a 15% rise in average fares.
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First Published: Mon, Jan 31 2011. 04 46 PM IST
More Topics: Company Results | Ryanair | Airlines | Economy | Europe |