OREANDA-NEWS. May 23, 2011. Ryanair, Europe’s largest low fares airline today (May 23) announced a 26% increase in annual profits to €401m. Revenues increased 21% to €3,630m as traffic grew 8% and av. fares rose 12%. Unit costs rose by 11% due to higher oil prices and a 10% increase in sector length. Excluding fuel, (up 37% to €1,226m) unit costs rose by just 3%.
Announcing these results Ryanair’s CEO, Michael O’Leary, said:

 “The highlights of the past successful year for Ryanair include:-

  • Profits rose 26% to €401m.
 • Traffic grew 8% to 72m.
 • 40 new aircraft (y/e fleet 272 aircraft).
 • 8 new bases, El Prat, Gran Canaria, Kaunas, Lanzarote, Malta, Seville, Tenerife, Valencia (total 44 bases).   
 • 328 new routes (total over 1,300 routes).
 • Customer Service further improved (No 1 on time airline).
 • Dividend of €500m (€846m returned to shareholders over 3 years).

We were pleased to deliver a 26% increase in profits and 8% traffic growth, despite higher oil prices, the global recession, and volcanic ash disruptions in Q1 last year. Revenues grew 21% to €3,630m as av. airfares rose 12% (almost in line with the 10% increase in sector length) while traffic grew 8% to 72m. Fuel increased 37% to €1,227m as av. oil prices rose from USD 62 to USD 73 pbl. Excluding fuel, unit costs rose 3%. Sector length adjusted unit costs fell by 7%, thanks to rigorous cost control, including reductions in staff, and airport & handling unit costs. With another strong performance in inflight sales, ancillaries grew 21% to €802m somewhat faster than traffic growth, and amounted to 22% of total revenues.      

 In 2010, following a 27% hike in fees, Dublin airport traffic fell by 3m passengers to just over 18m, a fall of 30% from its 2007 peak of 24.5m pax. Dublin’s traffic continued to decline in Q1 2011. To reverse this disastrous collapse, and return to tourism growth, the DAA airport monopoly should be broken up and replaced with competing terminals and airports, which will deliver competitive airport charges. Unless the new Government introduces these reforms then traffic at the DAA airports will continue to fall, leading to further tourism and job losses in the Irish economy. We welcome the Government’s recent decision to scrap the tourist tax as a step in the right direction, but unless accompanied by competitive airport charges, traffic growth will not return at the Government owned, high cost, Irish airports.   

 Last year 14,000 Ryanair flights were cancelled due to volcanic ash disruptions, airport snow closures, and repeated ATC strikes. The unfair and discriminatory EU 261 regulations require airlines to pay “right to care” and/or compensation during these events even though they are beyond the control of any airline. It is discriminatory that train, ferry, and coach operators (as well as insurance companies) escape this liability during force majeure events, yet EU 261 compels airlines to suffer these costs. These discriminatory regulations must be reformed to provide a fair and level playing field for all EU transport operators.

 High Oil Prices.

Higher oil prices will force competitors to continue to increase fares and fuel surcharges which makes Ryanair’s lower fares even more attractive. In many cases competitor’s fuel surcharges are higher than Ryanair’s lead-in fares. Higher oil prices will lead to further consolidations, increased competitor losses, and more airlines going broke. This creates further growth opportunities for Ryanair because we operate the most fuel efficient aircraft, have the lowest operating costs, and the strongest balance sheet. We expect to increase market share and expand into new markets as high oil prices force competitors to further cut capacity (or go bust) this winter.

Ryanair is 90% hedged for FY12 at USD 820 per tonne (approx. USD 82 per barrel), a 12% price increase on last year, but significantly below current prices. Higher oil prices next winter, and the refusal of some airports to offer lower charges, makes it more profitable to tactically ground up to 80 aircraft (40 last winter) rather than suffer losses operating them to high cost airports at low winter yields. Although we expect to grow traffic in FY12 by 4% to over 75m passengers, this will be characterized by strong growth of up to 10% in H1, but these steeper winter capacity cuts will cause monthly traffic in H2 to fall by approx. -4%. Despite these winter capacity cuts we still expect our full year fuel bill to increase by approx. €350m.  

 Balance Sheet.

Ryanair’s balance sheet remains one of the strongest in the industry with €3bn in cash despite having returned €850m to shareholders over the past three years. Our floating cash deposits will benefit from rising interest rates, and we have taken advantage of the recent low interest rates to secure almost 60% of our fleet financed over 7 years at all-in rates of under 4%. We also extended our long term dollar hedging programme to cover all our remaining Boeing deliveries and we will be purchasing these new aircraft in 2011 & 2012 at €/ USD exchange rates of 1.43.

 Outlook.

We expect to grow traffic by 10% in H1, and then cut traffic by 4% in H2. We anticipate traffic in FY 12 will grow 4% to 75m passengers. H1 figures will be boosted by the late Easter and modest prior year comparables due to volcanic ash disruptions last April/May, but will be impacted by a 40% increase in Q1 fuel costs due to volume increases and favourable hedges in Q1 last year.   

Due to higher oil prices we expect operating cost per passenger to rise by 13% in FY12. Excluding fuel, sector length adjusted unit costs will rise by just 2% due mainly to Eurocontrol and Staff cost increases. Since we have limited visibility on bookings, we remain concerned at the impact of the recession, austerity measures, and falling consumer confidence on fares. Despite these concerns we cautiously expect that our average fares will rise by up to 12% this year due to a better mix of new routes and bases, slower traffic growth, and higher competitor fuel surcharges. However, these higher fares will only help us to finance higher fuel and rising sector length related costs, and accordingly, we expect profit after tax for FY12 to be similar to the FY11 result of €400m.