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Ryanair increases profit forecast - but says sliding oil prices mean more competition from rival carriers Ryanair increases profit forecast - but says sliding oil prices mean more competition from rival carriers
(about 4 hours later)
Ryanair has increased its profit guidance – as boss Michael O'Leary welcomed a revamp of the budget carrier. Ryanair has increased its profit forecast for the third time in four months - but the budget carrier cautioned on the coming year's growth because it has already bought most of its fuel nearly double the price of current levels.
The company now expects an annual profit of €840 million to €850 million (£629 million to £636 million), up from previous guidance of €810 million to €830 million (£606 million to £621 million). The low-cost airline, which owns 29.8 per cent of British Airways bid target Aer Lingus, said it had hedged 90 per cent of 2015-16 fuel requirements at the equivalent of $92 a barrel against today’s spot price of $51.
However, Ryanair warned of "modest" growth in the following financial year. Chief executive Michael O'Leary said: "We would counsel shareholders and analysts to temper expectations for the 2016 financial year.
"As lower oil prices kick in over the next two years, Ryanair intends to pass on much, if not all, of these savings to our rapidly growing customer base in the form of lower fares and therefore our profit growth will be modest in FY16," the group said. "While we are still finalising our budget, we believe that any growth in profits will be modest as our fuel is hedged at $92 whereas some competitors (whose weak balance sheets rendered them unable to hedge forward) will be significant beneficiaries of lower oil prices and this may lead to downward pressure on air fares in 2015/16."
It added that although fares would be lower due to sliding oil prices, rivals who had bought less fuel in advance stood to benefit more. But O'Leary was upbeat about the airline’s final quarter saying he expected traffic to grow by 25 per cent and fares to fall by between 6 per cent and 8 per cent as he grows the network and adds to its flight schedules.
Ryanair said net profit for the third quarter to the end of December was €49 million (£37 million), up from a loss of €35 million (£26 million) in the same period a year before. He added: "We have noticed a softening in prices for forward bookings during the first weeks of January."
Investors were rewarded with a €400 million (£300 million) share buy-back programme while there will also be a €520 million (£390 million) special dividend. But shares, which recently hit an all-time high, fell 3 per cent. Ryanair shares, which have risen from €7 in October following profit upgrades in November and December, fell 50 cents to €9.90.
O’Leary said: "These strong results confirm that our 'Always Getting Better' customer programme and expanded business schedule, coupled with our substantial fare and cost advantage over competitor airlines is drawing millions of new customers to Ryanair." O'Leary’s shift of policy to make Ryanair more customer friendly and to try to attract more business passengers is clearly paying off.
Traffic should grow by 25 per cent and average fares fall by 6 to 8 per cent as price cuts are used to help expand the network and boost business schedules. Third-quarter revenues rose by 17 per cent to €1.13 billion (£750 million) with passenger numbers up 14 per cent to 20.8 million. At the same time the load factor, or measure of how full planes are, rose by 6 per cent to 88 per cent, making each flight more profitable.
Ryanair, which is this year celebrating its 30th anniversary, said passenger traffic in the third quarter grew 14 per cent to 21 million with the average fare up 2 per cent to  €40 (£30). Revenues grew 17 per cent to €1.13 billion euros (£846 million). That enabled it to raise its after-tax profit forecast range from €810 million- €830 million to €840 million- €850 million for the year to end-March.
Load factors - a measure of how full aircraft are - rose from 82 per cent to 88 per cent, attributed to its ”Always Getting Better“ programme and expanded winter schedule. O’Leary played a straight bat over the €1.3 billion bid for Aer Lingus, where Ryanair’s near-30 per cent stake will be crucial.
The carrier had previously set out plans for new winter bases in Cologne, Gdansk and Glasgow. Today it said new winter routes and bases were performing well.It will open three new bases in Bratislava, Copenhagen and Ponta Delgada in the Azores in March and April. He said: "Since Ryanair has received no formal approach, or offer for our shares in Aer Lingus, we will not engage in any speculation about this proposal, other than to restate our position which is that the board of Ryanair will carefully consider any such offer."
Ryanair said it expected to carry 100 million customers in 2015/16, becoming the first EU carrier to do so. But elsewhere there is plenty of speculation that BA owner IAG's latest proposed bid of €2.50 per share is enough to keep O'Leary happy while the real fight for control is around the Irish government’s 25 per cent stake.
Meanwhile, Ryanair said it had received no formal approach over its shares in Aer Lingus, following the announcement of a proposed takeover of the airline by British Airways owner International Airlines Group (IAG).
It reiterated that the board would "carefully consider any such offer, should one be received, from IAG or any other party, in due course".
Additional reporting by Press Association