Ryanair Boosts Full-Year Profit 13% as Routes Spur Sales
Stock Chart for Ryanair Holdings PLC (RYA)
Ryanair Holdings Plc (RYA), Europe’s biggest discount airline, boosted full-year profit 13 percent as it added routes and planes to target short-haul markets in which full-service operators are struggling to stem losses.
The Dublin-based carrier’s earnings after tax rose to 569 million euros ($732 million) in the 12 months to March 31, minus one-time items, from 503 million euros a year earlier, it said today in a statement. Analysts had predicted a profit of 560 million euros, based on the average of 19 estimates.
Chief Executive Officer Michael O’Leary, who has occupied the role for almost two decades, said last week he’ll probably stay for another five years to consolidate Ryanair’s European dominance as network carriers increasingly exit short-haul flying. The Irish company said today it aims to win a 20 percent share of the European short-haul market by 2018 after adding 5 percent more passengers last year for a total of 79.3 million.
“We see tremendous opportunities right across Europe, there’s a lot of retrenchment going on,” Chief Financial Officer Howard Millar said in a phone interview. Ryanair said it will idle fewer planes than usual next winter, boosting the passenger total by 2 million for the year to 81.5 million and lifting earnings to between 570 million euros and 600 million euros.
Shares of Ryanair, which had said Jan. 28 it expected a profit close to 540 million euros, rose as much as 8.9 percent, the biggest gain since Feb. 1, and were trading 8.7 percent higher at 6.88 euros as of 12:13 p.m. in Dublin.
The stock has gained 46 percent this year, valuing the company at 9.98 billion euros. EasyJet Plc (EZJ), Europe’s second-largest discount airline, has added 61 percent as it lures more business passengers with higher frequencies and paid-for perks.
While passenger traffic will increase by only 2 percent during the summer, Ryanair will operate about 20 aircraft next winter that were grounded a year ago, driving a 5 percent traffic gain for the period, Millar said, adding: “Our big challenge is we don’t have a huge amount of capacity available to us and that’s why we’re changing our tactics.”
Net income this quarter will be lower than last year due to the timing of Easter, the carrier said.
Ryanair’s full-year revenue rose 13 percent to 4.33 billion euros and the carrier added 15 new aircraft, taking the fleet to 305 planes as of the year’s end. It also opened 217 new routes to bring the total to more than 1,600 and established seven new bases in Greece, the Netherlands, Morocco, Poland and Croatia, while still achieving an 82 percent occupancy level.
Ryanair is expanding as carriers including Air France-KLM (AF) Group, Deutsche Lufthansa AG (LHA) and British Airways parent International Consolidated Airlines Group SA (IAG) undergo the latest revamp of unprofitable short-haul flights. O’Leary, who predicts the experiment will fail, told Bloomberg TV’s Surveillance program its rivals are “like drunks holding up the bus shelter.”
CFO Millar said at a London briefing that Ryanair could bid for slots at London Gatwick airport held by regional operator Flybe Group Plc. That could heighten competition with EasyJet, which has its main base there and may also be interested in the slots, and lead to a greater overlap with British Airways, which generally operates from bigger airports than the Irish company.
“Network carriers and weak carriers are shrinking,” Liberum Capital analyst Peter Hyde said in a note to investors. “Ryanair and EasyJet are maintaining capacity discipline.”
Ryanair is 90 percent hedged for its fiscal 2014 fuel bill at $980 a ton and partially hedged for the financial year ending 2015 at $930 a ton. The strengthening of the euro against the dollar will create a “currency headwind,” with kerosene costs per passenger increasing by 7 percent, Millar said.
The airline has sought to consolidate its grip in Ireland with last June’s revived bid to buy Aer Lingus Group Plc. (AERL)
The offer, which valued the smaller company at 694 million euros, was blocked in February by European Union regulators who ruled it would increase fares and reduce choice. A separate inquiry by the U.K. Competition Commission may require Ryanair to reduce or dispose of a remaining 30 percent holding.
Ryanair ordered 175 Boeing Co. (BA) 737-800 single-aisle jets in March, with the first due for delivery in March, 2014, and has appointed a team to work on a follow-up deal to add a further 100, most likely the U.S. company’s new 737 Max model, giving a total list price of more than $20 billion.
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