Ryanair, Europe’s No. 1 low fares airline, yesterday announced record profits for Q1 ended 30 June 2004 of €53.1m. Passenger volumes grew by a record 28% to 6.6m passengers whilst yields declined by 6% during the quarter and, as a result, total revenues rose by 23% to €302.8m. Unit costs fell by 4% and in turn the net margin after tax remains stable at an industry leading 18%.
Announcing these results, Ryanair’s Chief Executive, Michael O’Leary said:
“These record quarterly results reflect the continued disciplined roll out of Ryanair’s low fares model. Passenger volumes grew by 28% to 6.6m in the quarter and we carried more passengers in 3 months than the total traffic carried by Aer Lingus in a full year. Our two new bases at Rome Ciampino and Barcelona Girona have performed particularly well. Ryanair’s strong performance is also reflected in the recent increases in monthly traffic and load factors.
“Yields were 6% lower than last year, a decline that was towards the lower end of our -5% to -10% guidance. Our forward yield guidance remains unchanged. In Quarter 2 we anticipate a yield decline of between -5% to -10%. Next winter, we expect the yield decline to be in the -10% to - 20% range as chronically loss making competitors will continue to dump prices, resulting in even more airline casualties this winter.
The higher oil prices have continued through the summer and unlike many high fare flag competitors, we have not imposed fuel surcharges. We remain almost fully hedged until the end of Quarter 2 but largely unhedged thereafter. We believe that over the medium term prices will fall and therefore it would be unwise to lock-in at the current high rates. We anticipate that we will be able to largely offset these higher oil prices in this fiscal year by making cost savings in other areas.
We have announced a major expansion of our London Luton base from 1 to 4 aircraft. In addition to our successful Dublin and Milan routes, we will now fly from Luton to Barcelona Girona, Barcelona Reus, and Murcia in Spain, Dinard and Nimes in France, Esjberg in Denmark, Rome Ciampino and Venice in Italy, and Stockholm in Sweden. We have also announced two new routes from London Stansted to Santander and Zaragossa in Spain and continue to grow our base at Rome Ciampino launching new routes to Santander in Spain, Paris-Beauvais and Eindhoven in Holland. We also have launched our expansion into the new EU member countries and will start 3 routes from Riga - the capital city of Latvia - to London, Tampere and Frankfurt on 30 October next. Many more airports continue to encourage Ryanair to launch new routes and as usual we have far more offers than we can presently handle and this will drive down airport costs.
Unit costs fell by 4% during the quarter (excluding fuel and route charges unit costs fell by 5.4%). We continue to benefit from the ongoing introduction of the larger 737-800’s as they replace the remaining thirteen 737-200’s. The remaining 737-200’s will be retired by December 2005. We continue to focus on lowering our cost base and pass on these lower costs in the form of even lower fares to our passengers.
The legislation recently introduced by the Irish government to break up Aer Rianta will enable (for the first time ever) all of the government owned Irish airports to compete on a level playing field. We welcome this much delayed legislation and encourage the Minister to quickly introduce competition at Dublin airport by directing the construction of a second and third competing terminals. This initiative will finally introduce competition, will result in lower prices, deliver better facilities, and bring millions more visitors to Ireland.
We have recently filed proceedings in the High Court in London for the recovery of overcharging on fuel levies by BAA plc, the monopoly operator of London’s three major airports. The BAA has been charging a fuel levy since 1991, which was agreed at the time to recover the £12.5m cost of the fuel hydrant system. Since that date, thanks to Ryanair’s enormous growth, BAA has recovered over £39m in fuel levies or more than three times the original cost and yet this extortionate levy remains unchanged. BAA have also issued Court proceedings arising out of the fuel levy dispute and we look forward to the Court’s ruling on the BAA overcharging. Ryanair continues to oppose anti-consumer charges at these monopoly airports. It is untenable for the BAA airport monopoly to impose fuel levies in excess of 300% of cost on its low fare consumers, whilst at the same time providing free of charge car parking to politicians. This anti-consumer rip-off must end.
We continue to be cautious in our outlook for the remainder of the year. We expect to achieve passenger volume growth this fiscal year in the order of 20% and deliver increased load factors. We believe that yield attrition this winter will be within our forecast range of -10% to -20%. The reality is that the high cost, high fare airlines, and those so called low fare loss makers are unable to compete with Ryanair’s low fares, low cost base and industry leading customer service. As Southwest has repeatedly demonstrated in the US for many years, the lowest cost carrier always wins.”