Ryanair’s profits boosted by triple effect

Michael O'Leary
Michael O'Leary
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HIGHER fares, lower fuel costs and a desire to go on holiday after the Olympics have all boosted Ryanair, Europe’s biggest budget airline.

The airline, which flies out of Leeds Bradford Airport, raised its full-year profit forecasts yesterday.

Passenger numbers rose seven per cent to 48 million in the six months to September 30.

In addition the airline enjoyed a six per cent rise in average fares accompanied by a lower than expected fuel bill.

Half-year profits rose 10 per cent to £478m.

Chief executive Michael O’Leary said there is very little visibility on winter bookings, but said that Ryanair will make full-year profits of between £392m and £416m.

The airline will ground up to 80 aircraft this winter as a result of high oil prices and seasonally weaker demand.

It is benefiting from the demise of European rivals such as Spanair and Hungarian firm Malev.

Many airlines have been hit hard by Europe’s struggling economy and high fuel costs. Ryanair has fared better than most, thanks to its size and focus on low costs and low prices.

Ryanair’s finance director Howard Millar said: “It was a strong performance after the Olympic Games, we certainly saw an upward rise in average fares. Many people who appeared to stay at home came back in force post the Olympic Games.”

Goodbody Stockbrokers analyst Donal O’Neill said: “A very impressive set of results with a sizeable upgrade from the second quarter results. We expect Ryanair to outperform near term and recover some of the relative underperformance versus easyJet.”

Ryanair makes most of its money from leisure travellers and normally records a loss in its seasonally quieter second half.

The airline, with an average fare of 53 euros or £42, said it is cautious on winter trading due to low visibility on fourth-quarter bookings, but expects the positive trends to continue, with good forward bookings into the third quarter.

“We expect fares will rise for the full-year by about four per cent, about one per cent higher than we expected, and our fuel bill will be down a bit more than we had previously guided,” said Mr Millar.

He said Ryanair’s fuel bill was lower than expected due to a fuel saving programme which manages the way pilots fly aircraft and where they buy fuel.

The airline now expects its fuel bill to rise £208m this financial year, £32m less than previously assumed.

Mr O’Leary said oil prices will fall over the medium-term.

He called for oil futures to be investigated for market manipulation in the wake of the rigging of the benchmark interest rate Libor.

“I still do not understand why, for example, oil futures are so high. We are still waiting for some regulator to investigate them,” he said.

Over the next decade, Ryanair hopes to seize an 18 per cent share of the European short-haul air travel market from its current 12 per cent.

It expects traffic will be broadly flat over the current half year, leading to growth in full-year passenger numbers of four per cent to 79 million.

The airline added: “We expect market conditions to remain tough as recession, austerity, high fuel costs, and excessive Government taxes dampen air travel demand.

“Further airline failures and consolidations are inevitable.”

Ryanair flies to 27 destinations from Leeds Bradford, ranging from city breaks to winter and summer sun holiday resorts there.

The airline based a third aircraft at Leeds Bradford airport for summer 2012 which added six new routes from Leeds Bradford to Chania (Crete), Corfu, Dinard, Kos, Milan (Bergamo) and Tenerife and extended its Kaunas and Riga routes to its summer 2012 schedule.

2012 saw the announcement of a new route to Reus (Costa Dorada).

Setback to bid for Aer Lingus

EU antitrust regulators could object to Ryanair’s proposed takeover of rival Aer Lingus because the Irish budget airline has not offered sufficient concessions.

Insiders said a statement of objections, a confidential document that sets out in detail the concerns it has about a proposed merger or takeover deal, is likely.

The objections are likely to be sent to Ryanair in the coming week or two.

It is understood that the European Commission has not sought feedback from consumers or competing airlines on the concessions offered by Ryanair, indicating it is unconvinced by the airline’s arguments.