The FINANCIAL — Budget airline Ryanair Holdings PLC on Monday increased its profit forecast for the year after posting a narrower-than-expected third-quarter loss.
Net income will likely be 275 million euros ($382 million) in the year ending March, the Dublin-based carrier said in a statement. It had earlier forecast profit toward the “lower end” of a range from 200 million euros to 300 million euros, Business Week reports. The carrier was able to boost passenger numbers in the third quarter with smaller than expected price cuts as its won market share from rival carriers. Hedging contracts also enabled the airline to avoid the full impact of higher fuel prices.
"We have now increased our full-year net profit guidance to 275 million euros from the lower end of the range of 200 million to 300 million previously guided," Chief Executive Michael O'Leary said in a statement.
“To be raising your guidance in this environment is a sign that the business is in rude health,” said Joe Gill, an analyst at Bloxham Stockbrokers in Dublin, according to the same source. “It’s quite a material upgrade.” He rates the carrier ‘buy.’
For the three months to Dec. 31, Ireland's largest budget airline posted a net loss of EUR10.9 million, sharply narrower than the EUR118.8 million loss last year, as a 37% fall in fuel costs offset a 12% fall in fares, The Wall Street Journal reports. Unit costs excluding fuel fell by 23%; including fuel, they fell 4%.
Despite the higher profit forecast, Ryanair warned that market conditions remained difficult, BBC informs. Even so, the Irish-based airline said it would continue to pick up market share from rivals, and expected to do particularly well in Italy, Scandinavia, Spain and the UK. The company has been criticised for charging for a raft of extras on top of its basic ticket price.
"Market conditions remain difficult, although the increasing pace of consolidation and closures among our competitors–allied to Ryanair's continuing fleet expansion–will lead to further market share gains this year in particular in Italy, Scandinavia, Spain, and the U.K.," said O'Leary, Ryanair reports.
Last month, the Office of Fair Trading Budget accused Ryanair of being "puerile and childish" over its payment policy, with customers only avoiding fees when they pay online if they use a Mastercard prepaid card, according to BBC. In an interview with the BBC, Ryanair chief operating officer Michael Cawley said such criticism was not a concern to the company when it was expanding so fast. He said it was the fastest-growing airline in Europe – and one of only two in the region that were growing at all.
Ryanair recently extended its hedging for fiscal 2011 with 90% of the first three quarters and 25% of the fourth now hedged at $720 per ton, The Wall Street Journal reports. Ryanair had over EUR1.01 billion in cash and cash equivalents at end-December against EUR1.41 billion in the year-earlier period. It expects to generate up to EUR1 billion of surplus cash by the end of 2013 "which would be available to return to shareholders," Ryanair informs.
O'Leary said ancillary revenues grew by just 5.8% to EUR139.4 million in the third quarter. Ryanair also posted a 1% rise in third quarter revenue to EUR612 million and an adjusted basic loss per share of 0.74 cents versus 6.88 cents a year ago, according to the same source. The airline confirmed last December that it was terminating discussions with Boeing Co (BA) for an order of up to 200 aircraft. O'Leary said, "Although we had agreed pricing and delivery dates between 2013 and 2016, Boeing regrettably insisted on changing our delivery terms and conditions which were not acceptable to Ryanair."
Discussion about this post