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Ryanair Boosts Profit 32%, Increases Full-Year Target

Ryanair Holdings Plc CEO Michael O'Leary
Michael O’Leary said the carrier has benefited as the recession and continuing economic concern prompt people to rein in spending. Photographer: Simon Dawson/Bloomberg

Ryanair Holdings Plc, Europe’s biggest discount airline, boosted second-quarter profit 32 percent on rising traffic and fares. The stock fell as a higher full-year forecast barely matched analysts’ predictions.

Net income jumped to 330.3 million euros ($461 million) in the three months ended Sept. 30 from 250.5 million euros a year earlier, Dublin-based Ryanair said today in a statement, slightly less than the 343 million euros estimated by analysts.

Passenger numbers advanced 12 percent in the quarter, with fares increasing by the same degree. That will help lift annual profit to between 380 million and 400 million euros, Ryanair said, up from a forecast of 350 million to 375 million euros.

“They have only slightly increased their estimate and I think people were looking for something a bit more optimistic,” said Yan Derocles, an analyst at Oddo Securities in Paris with an “add” recommendation on Ryanair. Analysts were already expecting a full-year profit of 400 million euros, he said.

Ryanair shares, which reached their highest price in more than 2 1/2 years last week, traded 3.6 percent lower at 3.98 euros as of 11:33 a.m. in Dublin, paring gains this year to 32 percent and valuing the company at 5.92 billion euros.

Today’s statement continues a trend of airlines announcing higher earnings and upgrading forecasts, not always to the benefit of their share prices.

BA, Air France

British Airways Plc posted its first profit in two years last week as surging sales of business tickets allowed it to ramp up fares. The stock, which had gained 50 percent since the start of the year, fell 3.6 percent. Air France-KLM Group and Deutsche Lufthansa AG also raised forecasts. EasyJet Plc, Ryanair’s biggest discount rival, reports figures on Nov. 16.

“This strengthens a trend that’s really been gathering pace over the past couple of weeks,” said Joe Gill, an analyst at Bloxham Securities in Dublin with an “outperform” rating on Ryanair stock. “Pretty much every major airline in the world has now come in with strong numbers and raised their guidance on the back of solid summer and autumn trading.”

Ryanair’s sales advanced 29 percent to 1.28 billion euros in the second quarter, it said today. The passenger total reached 22 million for the period and is up 13 percent over the past 12 months, including bookings on flights canceled because of April’s volcanic eruption in Iceland.

Market Share Boost

Chief Executive Officer Michael O’Leary said he’s “cautiously pessimistic” about the economy and that a double-dip recession can’t be ruled out, though the uncertainty is to the benefit of Ryanair as it prompts people to shun costly rivals.

Ryanair’s ticket prices should gain by close to 10 percent in the current quarter, which is usually among the weakest for low-cost airlines, the CEO said.

“The old analysis is that in a recession people stop flying, or fly less,” O’Leary said in an interview on Bloomberg Television’s Countdown with Maryam Nemazee. “In fact it’s not true. They just become much more price sensitive and switch off the high-fare carriers and on to Ryanair.”

Ryanair says it overtook Madrid-based Iberia Lineas Aereas de Espana SA in July to become the No. 1 passenger carrier at Spain’s airports. It has added Barcelona El Prat to the network and will establish Seville and Valencia as hubs this month.

The Icelandic eruption, which produced ash that closed European airspace intermittently over several weeks this spring, will cost about 32 million euros in refunds and expenses, down from a previous estimate of 50 million euros, Ryanair said.

The Irish carrier paid a one-time dividend of 500 million euros in October, the first-ever payment to shareholders, after O’Leary opted to limit fleet growth as the discount market matures. The CEO is “a long way away” from considering a further dividend of that magnitude, he said today.

The fleet, which numbered 250 aircraft as of June 30, will still swell to 299 planes by 2013 as the carrier takes delivery of more single-aisle Boeing Co. 737-800s. O’Leary said the company has kept open a dialogue about more aircraft with both Boeing and Airbus SAS, though there are no formal negotiations.

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