Ryanair reports profit rise but warns of 'downward pressure'

Ryanair reports profit rise but warns of 'downward pressure'

Ryanair saw annual profits rise by 13% to €569 million as passenger numbers hit almost 80 million, but warned of continued pressure on future results.

Traffic rose by 5% on the year to March despite the budget carrier grounding up to 80 aircraft in the winter.

Fuel costs increased by more than €290 million and now represent 45% of total costs.

Excluding fuel, unit costs were up 3% due to what the Irish carrier described as “excessive and unjustified” increases in Italian air traffic control, Eurocontrol and Spanish airport fees.

Chief executive Michael O’Leary said: “With almost zero yield visibility into H2 [the second half of the current financial year] and the EU-wide recession, we expect that there will continue to be downward pressure on yields which will dampen full-year profit growth.

“We expect modest yield and traffic growth for the full year to be partly offset by higher oil and Eurocontrol costs resulting in another year of profit growth in which - subject to winter yield outturns - should increase to a range of between €570 million to €600 million".

Ryanair is in “active discussions” with the new owners of Stansted and new management at Dublin airport.

“While no agreements have yet been reached, if a competitive cost base emerges, then we could restart growth at one or other airports as early as September 2013,” O’Leary said.

“We expect growth opportunities for Ryanair to expand and improve for the foreseeable future.

“Our new route teams continue to handle more growth opportunities than our current fleet expansion allows. Significant opportunities are opening up in Germany, Scandinavia and central Europe in particular, where Air Berlin, SAS and LOT continue to restructure.”

The carrier is targeting more than 100 million passengers a year over the next five years.

“Our recent order for 175 firm Boeing 737-800 aircraft represents an enormous opportunity for shareholders as Ryanair returns to higher rates (5% p.a.) of traffic growth,” said O’Leary.

“We are pleased to have reached acceptable pricing with Boeing, and the controlled delivery programme from autumn 2014 to end of 2018 will provide the opportunity to expand Ryanair's fleet to over 400 aircraft and our traffic to over 100 million p.a.”

Ryanair claims to be “uniquely positioned” to offer many of Europe's airports sustained traffic growth in return for low cost, efficient facilities.

“I am confident that in time this new order will enable Ryanair to extend its traffic leadership over Europe's airlines, and generate further returns for our shareholders,” O’Leary added.

He voiced disappointment that the European Commission blocked Ryanair's third offer for Aer Lingus in February.

He described the decision as “bizarre” after the EU waved through British Airways' offer for British Midland with few remedies, yet months later rejected Ryanair's offer for Aer Lingus which was accompanied by a “revolutionary remedies package delivering two upfront buyers to open competing bases in Dublin and Cork airports”.

O’Leary added: “We have no doubt that this was yet another politically motivated decision by Europe's competition authority and it is inexplicable in the context of its stated policy of promoting European airline consolidation.”

The airline opened seven new bases and more than 200 routes in the past 12 months.

“However, with 9 (net) additional aircraft and longer sectors, traffic growth this summer will be very modest at approx. 2%,” O’Leary said.

By grounding fewer aircraft next winter the carrier expects to deliver slightly faster monthly growth in the second half of the current financial year, which should result in annual traffic growth rising by more than 2 million to 81.5 million passengers.

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