Ryanair shares fall on back of rising oil costs

Europe’s biggest low-cost airline said average air fares will rise by 12 per cent in the current financial year, having already increased fares by the same proportion in the 12 months to March 31.

One of the firm’s executives told the Yorkshire Post that Leeds Bradford, where it will have 21 routes for the summer season, had led the way in its focus on economies.

“We are working very well with the airport,” said head of communications Stephen McNamara.

“It has a real focus on cost management which means that airlines like Ryanair can continue to grow at Leeds Bradford whereas in other UK provincial airports we have seen a cut in routes and passenger numbers. Leeds Bradford has bucked that trend and continues to do so.”

The Irish carrier opened a base at the West Yorkshire airport in March last year and earlier this month chief executive Michael O’Leary said it was in talks with it over extra routes. Ryanair will grow its number of passengers there to at least one million this year.

Mr McNamara said: “We will be up 100,000 or 150,000 passengers at Leeds Bradford. With a winter schedule that is pretty much complete we will start looking at expansion and new routes for summer.”

Shares in Ryanair fell to 3.36 euros (£2.93) yesterday after it warned that higher air fares in the year to March 2012 will only help to cover higher fuel costs. It now expects full-year profits to be flat year on year.

The company, which operates more than 1,500 flights a day, also said higher oil prices will lead to “more airlines going broke”, creating further growth opportunities.

The warning came as Ryanair reported a 26 per cent increase in underlying pre-tax profits to 319 million euros (£277m) in the year to March 31.

Its fuel costs increased by 37 per cent to 1.2 billion euros (£1bn) in the last financial year as average oil prices increased from $62 a barrel to $73 but Mr O’Leary said rising crude oil prices presented opportunities.

He said: “Higher oil prices will force competitors to continue to increase fares and fuel surcharges which makes Ryanair’s lower fares even more attractive... Higher oil prices will lead to further consolidations, increased competitor losses and more airlines going broke.”

Earlier this month, rival easyJet reported a near doubling in half-year losses as it battled higher fuel prices.

Ryanair cancelled 14,000 flights in the last financial year due to volcanic ash disruptions, airport snow closures and repeated air traffic control strikes.

It still saw eight per cent traffic growth to 72.1 million passengers, however, and revenues increased 21 per cent to 3.6 billion euros (£3.1bn) as airfares rose.

The airline also benefited from a 21 per cent surge in ancillary revenues, such as in-flight sales of refreshments and entertainment, to 802 million euros (£697.1m).

Mr O’Leary last night called for regulators to be “a bit more sensible” over the new ash cloud from Iceland.

Higher prices among factors slowing traffic

Ryanair said it expected traffic growth to slow to four per cent in 2012, meaning it will carry 75 million passengers.

Longer and more lucrative routes and growth in France and Germany will help drive up fares, but this will be offset by higher costs and weakness in southern Europe and the Irish domestic market.

“I see a lot of upside in us not growing for the next year or two, at least not growing in the top line,” said Mr O’Leary.

The focus will be on cutting costs and increasing yields. Johannes Braun, an analyst at Commerzbank said: “Given that Ryanair is already fuel hedged by 90 per cent, the very cautious outlook came a little bit as a surprise.”