OREANDA-NEWS. July 25, 2011. Ryanair, Europe’s largest passenger airline today (July 25) announced a Q1 net profit of EUR 139m a slight increase of 1% on Q1 last year.  Revenues grew by 29% to EUR 1,155m as traffic increased 18% and ave. fares rose 11%.  Unit costs rose by 14% due to a 49% increase in fuel costs.  Excluding fuel, sector length adjusted unit costs fell by 1%. 

Announcing these results Ryanair’s CEO, Michael O’Leary, said:

“Traffic growth in Q1 was flattered by the unnecessary airspace closures in April/ May 2010 (following the Icelandic volcanic eruptions) which led to the cancellation of 9,400 flights, and the loss of almost 1.5m passengers.  Our 18% traffic growth combined with an 11% rise in ave. fares led to a 29% increase in revenues. Significantly higher revenues were largely offset by higher operating costs as fuel rose 49% (by EUR 140m), to EUR 427m.  Despite substantially higher fuel costs we recorded a profit after tax of EUR 139m, up on Q1 last year.  This robust result is testimony to the strength of Ryanair’s lowest fares/lowest cost model which continues to deliver profit and traffic growth despite the recession and high oil prices.    

Ancillary sales grew 22% to EUR 248m, somewhat faster than traffic, and amounted to 21% of total revenues.  We have recently started trials of “reserved seating” for 21 extra legroom seats on selected routes for a fee of EUR 10 per seat.  If successful we will roll out reserved seating across more of our network this winter.  Unit costs increased by 14% as fuel increased 49% to EUR 427m.  Excluding fuel, sector length adjusted they fell by 1%, as we rigorously controlled costs, despite a 2% increase in basic pay, higher Eurocontrol charges, and substantially higher charges at Dublin airport.            

Our new routes and bases are performing well.  We recently announced our 45th base in Manchester which starts in October with 2 aircraft/17 routes rising to 4 aircraft/26 routes in summer 2012.  A combination of recession and competitor capacity cuts continues to create growth opportunities across Europe as airports aggressively compete to attract Ryanair.    

We expect Dublin airport’s traffic to fall in 2011 (its 4th consecutive annual fall), due to the DAA’s unjustified 40% increase in airport charges, which has led to winter capacity cuts by Ryanair and many other carriers operating to Dublin.  These higher charges were recently (and correctly) described as “insane” even by Aer Lingus.  Traffic at Dublin has plummeted by 30% to just over 18m pax in 2010 from its 2007 peak of 24.5m pax.  The Irish govt. can only reverse this downward spiral and return to tourism and jobs growth when the DAA airport monopoly is broken up, and replaced with competing terminals and competing airports which will lead to more competitive airport charges and more efficient terminal facilities.  We have submitted a proposal to the Irish govt. to deliver 5m extra passengers p.a. over the next 5 years to kick start Irish tourism, and generate at least 5,000 much needed jobs in the Irish economy.  This growth proposal is based on airport charges falling to competitive levels, and the govt. scrapping the EUR 3 tourist tax and we await the government’s response.    

The latest UK Competition Commission’s confirmation (of its original 2008 recommendation), that the BAA airport monopoly should be forced to sell Stansted and at least one Scottish airport will, we hope, finally end the BAA ‘s policy of using legal manoeuvres to delay this sale. These delaying tactics have not stopped the BAA at Stansted overcharging airlines, generating excess monopoly profits, while losing more routes and traffic. The UK govt. should force the early sale of Stansted and one of the Scottish airports to allow competition between airports in order to deliver better facilities and lower costs for airport users.  We intend to shortly launch legal proceedings against BAA Stansted, seeking a recovery of the substantial overcharges which Ryanair believes it and other Stansted airlines have suffered at the BAA Stansted monopoly’s hands in recent years, which have been used to fund Ferrovial’s (owners of Stansted airport) acquisition and operation of Heathrow.

Fuel prices remain stubbornly high as spot is trading at USD 118 per barrel.  We are 90% hedged for FY12 at USD 860 per tonne (approx. USD 86 per barrel), an 18% price increase on last year, but significantly below current prices.  We have taken advantage of recent price dips to hedge 20% of Q1 FY13 at an ave. price of USD 1,035 per tonne (approx. USD 103 per barrel).  High oil prices are forcing competitors to further increase their fuel surcharges and fares which make Ryanair’s low fares even more attractive.  It will also drive further consolidation, and more airlines will exit the industry.  This will generate growth opportunities for Ryanair because we operate the most fuel efficient aircraft, and have the lowest operating costs.

The recent Brighter Planet survey of the world’s 20 largest carriers confirmed that Ryanair was the cleanest greenest airline in the world and had the lowest CO2 emissions per passenger mile.  Ryanair has invested over USD 8bn in an all new Boeing 737-800 fleet with low CO2 and noise emissions, with an ave. age of just 3 years.  This is in stark contrast to our high fare, fuel surcharging, flag carrier competitors who continue to operate older, inefficient, gas guzzling aircraft.

In June we signed an MOU with COMAC, the Chinese aircraft manufacturer, to enter discussions on a new 200 seater shorthaul aircraft for Ryanair that should be available from 2018.  We believe this aircraft will be a real alternative to the existing duopoly of Boeing and Airbus.  Real competition in the aircraft manufacturing industry will deliver more choice and lower costs for airlines.  We also believe that it will make economic sense for Ryanair to become a 2 aircraft operator if the present Boeing fleet economies can be matched or improved by another aircraft manufacturer. 

Our outlook for the remainder of the year remains unchanged.  We anticipate traffic in FY12 will grow by 4% comprising 10% growth in H1, and then fall by approx. 4% in H2 due to already announced winter capacity cuts.  We expect average fares in FY12 to rise by up to 12% due to the better mix of new routes and bases, our winter capacity cuts, higher competitor fares and fuel surcharges.  We anticipate Q2 yields will rise by 12% to 15%.  We expect operating costs per passenger for FY12 to rise by 13% due to higher oil prices.  Excluding fuel, sector length adjusted unit costs should rise by just 2% mainly due to Eurocontrol, Dublin airport, and staff cost increases.  With very limited visibility on H2 bookings or yields at this time, our full year guidance remains unchanged as we expect profit after tax for FY12 to be similar to the FY11 result of EUR 400m.