Passenger growth boosts Ryanair profits

Ryanair has announced record third quarter profits for the three months to Dec 2006 up by 30 percent to 47.7 million euro, compared to 36.8 million euros for the same quarter a year ago.
Ryanair’s chief executive officer Michael O’Leary said the ‘exceptional increase’ in third quarter profits during a period of higher oil prices, intense competition, and 21 percent seat capacity growth again demonstrated the robustness of Ryanair’s lowest fare model.

Full statement

Ryanair, Europe’s biggest low fares airline, today (Monday, 5th February 2007) announced record Q3 results. Net profit rose 30% to €48m., traffic grew 19% to 10.3m., yields were up 7% as total revenues increased 33% to €493m. Unit costs rose by 14% as fuel costs increased 52% to €175m. Despite much higher oil costs, Ryanair maintained a net margin of 10% in Q3, which is significantly ahead of expectations.
Announcing these results, Ryanair’s CEO, Michael O’Leary, said:

“This exceptional 30% increase in Q3 profits during a period of higher oil prices, intense competition, and 21% seat capacity growth demonstrates, yet again, the robustness of Ryanair’s lowest fare model.

“Scheduled revenues rose by 28%, thanks to a 19% growth in traffic and a better than forecasted 7% rise in average yields. The 7% rise in yields largely reflects the impact of competitors excessive and unjustified fuel surcharges as well as revenues from checked baggage charges which were introduced in March ‘06 and lack of a prior year comparative in this quarter’s numbers. We anticipate that the baggage charges will encourage passengers to travel with fewer checked bags thereby reducing the revenues from this source, and more importantly, reducing baggage handling costs.


“Ancillary revenues grew by 61%, significantly faster than traffic growth, thanks to a higher passenger spend, increased service penetration and receipt of a one off settlement arising from an early contract termination by our hotel partner. We expect to announce the selection of a replacement hotel service provider before the end of March.

“Unit costs rose by 14% largely due to a 52% increase in fuel - which now accounts for 40% of our total cost base. We are 90% hedged to 31st March ‘07 at $73 per barrel. Our low cost base allows us to absorb these higher oil prices - without imposing fuel surcharges - while still reporting record profits. We took advantage of the recent oil price weakness to extend our hedging position for fiscal 2008. We are now just over 50% hedged through H1’08, and 90% hedged through H2 08 at 10% less than we are paying this year. Hedging at these rates has enabled us to lock in significant fuel savings of approx €60m for the coming fiscal year.

“Our new bases at Marseilles and Madrid are performing well. Advance bookings for the Bremen base which starts in April are strong. We will increase our Dublin base from 15 to 20 aircraft this Summer and the 22 new routes are already booking strongly. We expect to announce a 19th base - which will be in Continental Europe - before the end of February.

“Ryanair’s customer service continues to deliver real benefits for passengers. While our competitors maintain high and unjustified fuel surcharges, Ryanair guarantees no fuel surcharges. Our on time performance is the best of any major European airline. Our baggage charges are beginning to have the desired effect with fewer passengers travelling with check in baggage. A growing number of passengers are using our on line check in/ priority boarding facility, arriving later at airports, bypassing check in queues and proceeding directly to the boarding gate, where they are priority boarded and have their choice of seats. We expect that the quantum of passengers opting for this service will continue to grow, and we are looking to extend this service to passengers travelling with checked in luggage to broaden its appeal.

“The recent hysteria in the UK about the impact of aviation on climate change has been misguided and misplaced. Aviation accounts for less than 1.6% of greenhouse gas emissions and, we expect, in time that the media and Governments will focus on the causes of 98% of greenhouse gas emissions and not the aviation industry. By investing in a fleet of brand new aircraft, valued at $10bn, over the past eight years, we have reduced our noise and CO2 emissions by almost 50% on a per passenger kilometre basis. The recent decision by the UK’s Chancellor of the Exchequer, Gordon Brown, to double the rate of departure tax in the UK from £5 to £10 per ticket is bad news for British tourism and visitors. This is just another tax on tourists. The fact that it represents a 35% rate of tax on Ryanair’s average fare of £28 shows how regressive, unfair, and penal it is. Ryanair will continue to oppose these taxes on passengers travelling on Europe’s greenest, cleanest airline, and we will continue to highlight the fact that aviation, at 1.6% of greenhouse gas emissions, is neither the cause of, nor the solution to, climate change.

“We welcome the OFT’s recent decision to refer the BAA airport monopoly to the Competition Commission, and we hope that this review will lead to the break up of this over-spending, inefficient monopoly. Despite the opposition of most Stansted airline users (and the local community), the BAA continues to press ahead with its gold plated second runway and terminal proposals. While they admit that the runway itself will cost just £100m., the BAA propose to waste a further £2.1bn. (three times the cost of Wembley Stadium) building a second terminal and associated facilities. Ryanair believes that a second runway and second terminal can and should be built at Stansted for approx £1bn., less than half of the cost proposed by the BAA. Competition is the only way to deliver these efficiencies, and the sooner BAA’s monopoly over the London airports is broken up the better.

“In November, Ryanair increased its stake in Aer Lingus, bringing its holding to 25.2% at a total cost of €342m. The EU Commission has decided to refer Ryanair’s offer to a Phase 2 review. Ryanair remains confident that its offer - which will see lower fares, reduced fuel surcharges, and improved fleet and passenger service - will be good for Aer Lingus’ passengers, and good for competition. At a time when the European Union is encouraging airlines to consolidate, we remain confident that our offer for Aer Lingus will obtain EU Commission approval following this phase 2 review.

“In the current (fourth) quarter, Ryanair continues to roll out substantial capacity expansion. We expect passenger volumes to rise by 25%. Fuel costs will remain high compared to last year. We now have some visibility over Q4 bookings and anticipate that yields will be in line with last year, a better outturn than the small decline we had previously expected. Our earnings in the fourth quarter will also be positively impacted by the weakness of spot oil prices, which significantly reduces the cost of the 10% of our volumes which were not already hedged at $73 per barrel. As a result of this better than expected performance in H2, we now expect that Ryanair’s net profit after tax for the fiscal year ended 31st March 2007 (which we previously guided to rise 16% to €350m) will in fact rise by approx 29% to €390m.

“Ryanair recently received shareholder approval to complete a 2 for 1 stock split, and we plan to implement this split on 26th February 2007. The purpose of this stock split is to improve the marketability and liquidity of Ryanair’s shares, and the existing ratio of five ordinary shares to one ADR will be retained”.