Ryanair Holdings Plc, Europe’s biggest discount airline, said fiscal first-quarter profit fell 29 percent as fuel costs rose and a sluggish economy limited its ability to increase fares.
Net income for the three months ended June 30 fell to 98.8 million euros ($121 million) from 139.3 million euros a year earlier, Ryanair said today. Analysts had expected a profit of 106 million euros, based on the average of six estimates in a Bloomberg survey. Sales rose 11 percent to 1.28 billion euros.
Ryanair said its fuel bill jumped by 117 million euros or 27 percent in the quarter, wiping out the positive impact of a 6 percent increase in passenger numbers and 4 percent boost in fares. The Dublin-based carrier is seeking to sustain growth by adding bases in Eastern Europe and making a 694 million-euro takeover bid for Irish rival Aer Lingus Group Plc.
“There’s austerity right across piece, it’s everywhere,” Chief Financial Officer Howard Millar said in a telephone interview, reiterating that full year earnings will shrink to between 400 million euros and 440 million euros after rising 25 percent to 502.6 million euros in the 12 months to March 31.
Ryanair fell as much as 5.4 percent and was trading 3.9 percent lower at 3.75 euros as of 8:07 a.m. in the Irish capital. The stock has gained 2 percent so far this year, giving a value of 5.33 billion euros. EasyJet Plc, Europe’s second-biggest discount carrier, has advanced 44 percent.
The deepening European slump means it’s tougher to increase prices this year after Ryanair idled 80 aircraft last winter, curbing capacity and helping to boost average fares 16 percent.
Pricing may improve slightly this quarter, generally the busiest for the airline industry, with fares up as much as 7 percent, Millar said. For the 12 months, passenger numbers should increase by about 5 percent or 4 million to 79 million.
The full-year fuel bill is likely to be about 1.95 billion euros, up 320 million euros, the CFO said, and while Ryanair is hedged at $94 a barrel on 50 percent of its requirement for the first half of fiscal 2014, versus $100 this year, that will be more than offset by the euro’s lower value versus the dollar.
“Our outlook remains cautious for the year,” Chief Executive Officer Michael O’Leary said in the statement.
Millar said Ryanair’s bid for shares of Aer Lingus that it doesn’t already own has too many cost implications for it not to be meant as a serious offer, even though EU regulators blocked two previous approaches.
Dublin-based Aer Lingus on July 18 urged investors to reject O’Leary’s 1.30 euros-a-share offer, saying it was too low and probably incapable of completion under antitrust rules.
Ryanair last week asked an English court to block a U.K. Competition Commission probe into its existing 29.8 percent Aer Lingus stake, added six years ago, arguing that it violates the jurisdiction of the EU, which is considering the latest bid.
The 2012 Olympics, being held in London, are having little impact on Ryanair, Millar said, even though the U.K. is its biggest market. EasyJet said last week that the games have hurt demand as Britons avoid travel and business visitors stay away.
Ryanair has no interest in buying more planes at the prices currently on offer from Boeing Co., Millar said, adding that the company has “sold lots of aircraft to people who have no money.”
The Irish carrier is continuing to work with Commercial Aircraft Corp. of China, which is developing the C919 jet, though there’s no prospect of an order soon, the executive said.
“We’re helping them out,” he said. “But it’s a long way off. You are talking towards the end of this decade.”