The FINANCIAL — Ryanair, one of the Europe’s largest scheduled airlines today (Nov 1) announced a 17% increase in half year Profit to €452m.
Revenues rose 23% to €2.2bln as traffic grew by 10% to 40.1m passengers and average fares rose by 12%. Unit costs rose by 13% (excluding fuel they rose by 4%) as sector length increased by 12%.
Announcing these results Ryanair’s CEO, Michael O’Leary, said:
"17% increase in half year Net Profit to €452m is testimony to the robustness of Ryanair’s lowest costlowest fare model which continues to deliver traffic and profit growth even during a deep recession. We continue to gain market share across Europe from the big three high fare flag carrier groups led by Air France, BA and Lufthansa. We expect this trend to continue as consumers switch to Ryanair for the lowest fares, the most on time flights, and the best customer service.
Average fares this summer rose by 12% to €44 in line with a 12% sector length increase as our new routes and bases at Faro, Malaga and Malta performed well. Ryanair overtook Iberia in July to become the No.1 passenger carrier operating at Spanish airports. We launched the new Barcelona (El Prat) base in September and our Valencia and Seville bases will launch in November which will strengthen Ryanair’s market leadership in Spain. We continue to welcome vigorous competition between airports for Ryanair’s traffic growth. This has led to airport unit costs falling by 3% during the half year despite huge and unjustified increases at Dublin and Shannon.
Unit costs increased by 13% primarily due to the 12% growth in sector length and higher fuel costs. Our fuel bill rose by 44% to €660m due to the increased level of activity and higher prices. Unit costs excluding fuel rose by 4%, and sector length adjusted they fell by 8%, as we lowered aircraft ownership, airport and handling costs. We are 90% hedged for FY11 at $730 per tonne and 60% hedged for FY12 at $760 per tonne. We extended our dollar cover and are 60% hedged for FY12 at €/$ 1.35 versus €/$ 1.40 for FY11.
We welcome the recent UK Court of Appeal decision which upheld the Competition Commission’s recommendation that the BAA airport monopoly be broken up in the interest of competition and a better deal for consumers. Their dismissal of the BAA monopoly’s appeal means the sale of Glasgow and Stansted airports can now proceed, which will lead to much needed competition and a better deal for airport users and passengers. This, we hope, will allow the new owners to work with Ryanair to reverse Stansted’s traffic declines in recent years under the BAA monopoly’s high costs and mis-management.
The break up of the UK’s failed BAA airport monopoly model lends weight to our campaign to break up the equally high cost, failed DAA airport monopoly in Ireland where sadly, as we predicted, tourism is collapsing. Traffic at Dublin airport is heading for a second year of record losses during a year when Ryanair’s traffic will grow by 7m passengers. We expect Dublin traffic to fall by another 3m in 2010 to under 18m passengers. This will amount to an almost 30% decline in Dublin traffic from 24.5m passengers over the past 2 year’s since the introduction of the Irish government’s disastrous €10 tourist tax and the DAA’s unjustified 40% price increases in 2010 when inflation is 0%. We have again cut our Dublin winter capacity by 15%, and have switched more aircraft to other European countries which have scrapped tourist taxes, and cut airport charges. The Irish government must scrap this damaging €10 tourist tax, and break up the failed DAA airport monopoly if Ireland is to once more become a growing-competitive-tourist destination. We warmly welcome last week’s ESRI (Irish Government Research Institute) report which recommended that the government should consider selling off the 2 terminals at Dublin airport to competing operators (in order to promote competition and pay down the DAA’s enormous debts), which would finally end the failed high cost DAA airport monopoly.
As a direct result of repeated Belgian, French and Spanish ATC strikes and work to rules this year, we have had to cancel over 2,000 flights and delay a further 12,000, disrupting over 2.5m passengers. These highly paid protected bureaucrats have now disrupted more passengers than the Icelandic volcano and still the EU sits idly by and does nothing. Under the bizarre EU261 regulations airlines suffer the costs of these disruptions without any recourse against those unions calling strikes, or the EU Governments who, despite owning these ATC’s, repeatedly allow European airspace to be closed. We have called on the EU Commission to reform ATC by removing the “right to strike” for such an essential service, as well as deregulating Europe’s ATC services to allow non striking ATC’s to keep EU skies open. These repeated government owned ATC strikes highlight the urgent need to reform EU261 regulations to relieve airlines of the ‘right to care’ obligations, in such force majeure cases, which are clearly outside of airlines’ control.
In April and May the unnecessary government closures of European airspace (following the Icelandic volcano) led to the cancellation of 9,400 Ryanair flights and the loss of 1.45m passengers. We have refunded 100% of the tickets on these cancelled flights and have processed over 90% of the reasonable expense claims under the unfair and disproportionate EU261 regulations. Our initial estimate of these exceptional costs was €50m, but our experience of actual claims now requires this guidance to be reduced to €32m.
Our balance sheet strength continues to be driven by our increased profitability. Cash on hand at Sept 30th, rose by €212m to €3.026bln. On October 1 we paid the €500m one-off dividend to shareholders following their AGM approval. This brings the total funds returned by Ryanair to shareholders over the past 3 years to almost €850m.
Our outlook for the remainder of the fiscal year remains cautious as we have little visibility on Q4 yields. Based on Q3 forward bookings we now anticipate that winter (H2) yields will be slightly better than previously forecast, so we expect the full year yield increase to be at the upper end of the +5% to +10% range previously guided, i.e. close to 10%. Given these somewhat better winter yield forecasts, although with the usual caveats about limited Q4 visibility, we now believe that full year Net Profit will exceed the upper end of our previous forecast range (€350m to €375m) and will now finish (subject to Q4 yields) within a range of €380m to €400m."