Ryanair Holdings Plc reported a 10.3 million-euro ($14 million) loss for the three months ended Dec. 31 and said fuel costs could begin to threaten less profitable carriers as the crisis in Egypt sustains pricing pressures.
The loss, which was narrower than the 19.5 million euros predicted by analysts, came as snow and air traffic control strikes disrupted flights and oil pushed through $90 a barrel. Sales rose 22 percent to 746.3 million euros, Ryanair said.
Oil futures gained as much as 1.7 percent to $90.87 today, extending a Jan. 28 jump that was the biggest in 16 months, as protests in Egypt stoked concern that unrest will spread across the Middle East. Ryanair is hedged on 82 percent of fuel needs for the fiscal year beginning April 1 at about $81 a barrel, Chief Operating Officer Michael Cawley said in an interview.
“We’re pleased to be in that position, particularly as spot has been much higher and given the volatility that’s there in the background with uncertainty in the Middle East,” Cawley said on Bloomberg Television’s Countdown with Maryam Nemazee. “We’ve been here before -- a lot of airlines are very fragile financially and we’re in a strong position to take advantage.”
Ryanair’s hedging position and the introduction of new routes to keep more planes flying through the rest of the winter mean that full-year earnings will be toward the upper end of previous guidance for net income of 380 million euros to 400 million euros, the Dublin-based company said in a statement.
Shares of Europe’s biggest discount carrier rose as much as 3.5 percent and were trading 1.6 percent higher at 3.68 euros as of 11:40 a.m. in Dublin, paring the decline this year to 2.4 percent and valuing it at 5.48 billion euros.
While Ryanair doesn’t use surcharges to pass on costs from unhedged fuel, price escalators employed by carriers such as British Airways tend to boost demand for the Irish company’s flights, pushing up yields or fares, Cawley said. Average ticket prices rose 15 percent in the fiscal third quarter, he said.
“Fuel surcharges are creating a fairly benign yield environment for them,” said Joe Gill, an analyst at Bloxham Securities in Dublin with an “outperform” rating on Ryanair. The carrier’s hedging position is also “very important” as the situation in Egypt make it vital to have supplies “locked away.”
EasyJet Plc, Europe’s No. 2 discount airline, fell 16 percent Jan. 20 -- the most in 6 1/2 years -- after saying its first-half loss may double because of the oil price and wintry weather that’s already cost 18 million pounds ($29 million).
EasyJet is hedged at $755 a metric ton on 65 percent of its fuel requirements for the six months to Sept. 30 this year and at $808 a ton on 26 percent of its needs for the following year.
Ryanair has more extensive cover, being 80 percent hedged for the 12 months to March 31, 2012, at $800 a ton, having lifted its position from 60 percent at $760 a ton since the last quarter, according to today’s statement.
At Ryanair, the blizzards caused the number of flight cancellations to more than double to 3,000 in the fiscal third quarter, the company said. The loss for the period still narrowed from 10.9 million euros a year earlier.
Ryanair’s full-year guidance implies a fourth-quarter loss of about 40 million euros. Europe airlines, especially discount carriers that rely mainly on leisure travelers, typically make less money in the winter months as passenger numbers decline.
Fleet Vs Dividend
Ryanair, which carried 72.7 million passengers in 2010 and is still adding planes, is “in conversation” with manufacturers about its future fleet plans and those talks include Chinese and Russian manufacturers, as well as Boeing Co. and Airbus SAS, Cawley said, though prices aren’t yet at the right level to buy.
“We’re not wedded to any aircraft manufacturer,” the executive said at a press conference in London. “We’d do anything that saved us money.”
Should Ryanair fail to place an aircraft order in the next 18 months it will probably pay a dividend to shareholders in 2013, the second in its history following one totaling 500 million euros last October, Cawley said.
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