Recession slices into quarterly profit at Ryanair

The Dublin-based airline said it is unable to push through significantly higher fares as consumers cut their spending and governments raise taxes.

Underlying pre-tax profits in the three months to the end of June dropped 29 per cent to 99m euros (£77m) from 139m euros (£108m) a year earlier.

“We are seeing Europe being impacted by a recession – falling consumer confidence, governments are increasing taxes and they’re also cutting back expenditure,” said finance director Howard Millar.

“People are feeling it in their pockets. Everybody has been impacted by the recession.

“We do not see much in the way of fare increases.”

However, the airline, which has a base at Leeds Bradford airport, maintained its forecast for a profit of between 400m euros (£312.7m) and 440m for the year to the end of March 2013. It is also returning about 483m euro (£377m) to shareholders through a special dividend.

“Currently we have no visibility of next year’s winter yields but expect that continuing austerity, European Union recession and lower yields at new bases will (continue) to restrain growth,” said chief executive Michael O’Leary.

Ryanair’s growth in average fares slowed significantly to four per cent during the quarter – with passengers paying an average of 44 euros versus 43 euros a year earlier. That compared with average fare increases of 16 per cent last year.

“I would like to double them (fares). But that’s not going to happen,” said Mr Millar. “Governments aren’t spending, there’s a lot more people unemployed.

“(That) has affected the ability to move up average fares to make up for higher fuel costs.”

Ryanair is grounding 80 planes this winter in the face of weaker demand. Last winter it grounded 80 planes, and another 40 planes the prior year.

“In the winter it does not make commercial sense to run these routes. Passengers won’t pay a much higher fare to fly in winter. The more you fly, the more you lose.”

However, despite the squeeze on customers, it grew revenues per passenger to 57 euros from 54 euros, as it sold more add-on or ancillary services such as snacks, travel insurance, hotel rooms and car hire.

“Once people make that travel decision they seem to want to spend,” said Mr Millar. “It’s slightly against what you would expect.”

Fuel took a bigger slice of costs – up to 47 per cent of operating costs from 43 per cent a year earlier. The airline spent 543.8m euros on fuel during the three month – 27 per cent more than a year earlier.

“We are fully hedged for this year,” said Mr Millar. “However, it will increase operating costs.”

Its passenger numbers grew six per cent 21.3m during the quarter, and Ryanair expects to carry 79m passengers during the year.

It plans to open more bases, but is shifting planes away from Madrid, Barcelona and the Canaries, after the Spanish government raised taxes.

Mr Millar said Ryanair “welcomes competition” after leisure airline Monarch announced plans create its sixth base at Leeds Bradford, adding 12 new routes and creating 200 jobs. It also competes with airlines including Jet2.com, British Airways, BMI and Flybe at the airport.

“Anything that continues to put Leeds Bradford on the map is a good thing,” he said. “We don’t want an exclusive monopoly, we love competition. People are fighting about fares – that’s great, it creates a lot of momentum in the market.”

Mr Millar said Ryanair, which is bidding to take over Irish carrier Aer Lingus, has strong finances.

It moved to a 171m euros net cash position versus a 109m euros net debt position a year earlier.

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