Airline Code [RYR]
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Tags :UK, Ryanair
Ryanair announced half year profits of EUR215million, 47% down on last years interim profits as half year fuel costs more than doubled from EUR392.7million to EUR788.5million. Traffic grew by 19%, as average fares (incl. bag charges) fell by 4% to EUR47, while total revenues grew by 16% to EUR1.8billion.
Unit costs excluding fuel fell by 6%, (incl. fuel they rose 21%), despite a 2% increase in average sector length.
Ryanair’s CEO Michael O’Leary said:
“Achieving a half year net profit of EUR215m in very difficult trading conditions with record oil prices is a testimony to the strength of the Ryanair lowest fare model, which delivered 19% traffic growth, and a 4% yield decline (due to the absence of Easter and falling baggage penetration rates). Ancillary revenues which grew by 28% to EUR322m account for almost 18% of revenues versus 16% last year. Unit costs including fuel rose by 21%. Fuel accounted for more than 50% of our total operating costs.
High oil prices and the global recession has, (as we predicted), caused a string of airline bankruptcies and/or consolidations in Europe. Recent failures include Alitalia, Excel Airways, Futura, LTE, Sterling and Zoom. Many more loss making European airlines will go bust this winter because of unsustainable losses and insufficient cash reserves. Airline consolidation will continue as flag carriers merge into 3 high fare, fuel surcharging groups, led by Air France, BA, and Lufthansa. Ryanair will continue to compete with these high fare mega carriers most of whom stubbornly refuse to reduce their fuel surcharges to reflect the recent 50% fall in oil prices.
Our new bases at Birmingham, Bologna, Bournemouth, Edinburgh and Reus performed well as consumers flock to Ryanair’s guaranteed lowest fares and no fuel surcharges. We have announced 3 new Italian bases for March‘09 at Alghero and Cagliari in Sardinia and Trapani in Sicily to capitalise on Alitalia’s cutbacks as more airports realise that only Ryanair can deliver rapid sustainable traffic growth. Advance bookings this winter are slightly ahead of target although this is due to repeated price promotions resulting in lower than expected fares.
We have implemented our plans to ground 15 Stansted aircraft and 4 Dublin aircraft this winter following further unjustified increases in the already high passenger charges at these airports. Despite these reductions, we expect Ryanair’s traffic will still grow by 9% this winter, and by 14% to 58m for the full year. The economic recession has caused consumer confidence to collapse. Ryanair’s fares are now even more attractive as consumers become more price sensitive and trade down from high fare, fuel surcharging airlines, like Air France, BA and Lufthansa. As more airlines go bust, and the wave of European consolidation continues, the strongest survivors will be those airlines -like Ryanair- who are well financed, have a strong balance sheet, and the lowest cost base.
The outlook for the remainder of this fiscal year (2008/09) is dependant upon fares and fuel prices. The recession will continue to drive down oil prices and fares this winter. We will continue to respond with lower fares and aggressive price promotions to keep Europe flying and to maintain our market leading load factors. Although we have limited visibility, we now believe that average fares in the second half will fall by between -15% to -20% leading to losses in the 3rd and 4th quarters. Our full year average fare could fall by almost -12% although these lower fares will be largely offset by lower fuel costs. As a result our previous guidance remains unchanged and we remain confident that we will break even for the full year.
We expect continuing bankruptcies and consolidations to create even more opportunities for Ryanair to grow. If oil prices remain at approx. $80 pbl next year then our earnings will rebound strongly. We have a significant cost advantage over our competitors many of whom have hedged fuel next year at significantly higher levels than current market prices. This will force competitors to further increase airfares and widen the price gap between them and Ryanair’s lowest fares. With one of the strongest balance sheets in the airline industry, EUR2.1billion in cash and the lowest cost base, Ryanair is strongly positioned to take advantage of the opportunities that will inevitably arise from the financial crisis and economic recession over the coming year”.
(c) Centre for Asia Pacific Aviation. Date posted: 04-Nov-08 For in-depth analysis of the low cost airline sector worldwide, subscribe now to the peerless Peanuts! Weekly
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Ryanair reports fall in profit for half year 
