Profit rise for Ryanair as it pushes brighter Winter

5th Nov 2007

Ryanair has posted a 26 percent rise in second-quarter net profit to 268.7 million euros. It has also raised full-year guidance as it pointed to brighter prospects for the winter.

However, shares in Europe’s biggest low-cost carrier fell in trading highlighting the company’s failure to beat market expectations.

There are also concerns that record oil prices could hit the airline’s future.

Full statement

Ryanair, Europe’s largest international airline, today (5 November) announced record half year after tax profits of €408m, a 24% increase over last year. Traffic grew by 20% to 26.6m and yields fell by 1% as revenues rose by 24% to €1,554m. Unit costs increased by 5%, mainly due to higher fuel, staff, and airport costs. Despite these higher costs, Ryanair maintained an industry leading after tax margin of 26%.


Summary Table of Results (IFRS) - in Euro

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

“These record profits reflect a 20% growth in passenger volumes, a 1% decline in yields, and strong ancillary growth. Ancillary revenues grew by 54% to €252m, due to improved penetration of car hire, hotels, travel insurance, as well as strong onboard sales and excess baggage revenues. Ancillaries now account for just over 16% of total revenues as we make steady progress towards our 20% target. Our inflight mobile phone service will be tested on 25 aircraft before the end of March 2008 which will allow passengers to make and receive calls and texts on their mobile phones and blackberrys.

Unit costs rose by 5%, slightly lower than expected, due to the higher oil prices, doubling of airport charges at Stansted as well as significantly higher charges for portacabin facilities at the Dublin airport monopoly. Staff costs rose by 29% to €146.3m due to volume growth, an employee share option charge of €9.1m, and increased cabin crew ratios. We continue to aggressively tackle costs and anticipate that unit costs for the remainder of the year will grow by 5%, slightly lower than previously guided.

The UK Competition Commission’s investigation of the BAA monopoly clearly confirmed that they are responsible for the abysmal service and long security queues which passengers are suffering at Stansted airport. This report also highlighted the negative impact of the BAA’s monopoly ownership of the main London airports which has resulted in excessive charges and retarded their development. We believe that the BAA’s abusive monopoly should be broken up, urgently, if the best interests of consumers are to be realised. Competition works - airport monopolies don’t. The CAA has repeatedly failed to effectively regulate this monopoly which is why it continues to provide third world service levels, at extortionate prices, especially at Stansted, where users’ requirements are repeatedly ignored by an airport which plans to waste £4bn building a gold plated second terminal and runway when these facilities should be provided at less than one quarter of this cost.

Our new routes and bases have performed well over the summer. This winter we will open 4 new bases at Alicante and Valencia in Spain, Belfast City in Northern Ireland, and Bristol in England. We will also start over 130 new routes across Europe. Advance bookings on our new routes and bases are in line with our winter targets. We intend to announce a further 1 or possibly 2 bases in the coming weeks for launch during next summer’s schedule.

We have recently concluded direct negotiations and a new four year agreement with our Dublin based pilots which will significantly improve their pay and rosters and bring them in line with the better pay and benefits previously negotiated by pilots at our other Irish bases. Sadly, the failed attempts by the Irish Airline Pilots Union (“IALPA”) to interfere in Ryanair’s direct negotiations with our pilots has cost each of our Dublin Captains over €80k each over the past 4 years. We are pleased that the Dublin pilots have finally recognised the abject failure of this IALPA led campaign and have returned to talking directly with us.

We have now launched our free web check-in/priority boarding facility for all passengers travelling with hand luggage which allows them to avoid airport queues and be amongst the first to board the aircraft. Passengers who do not avail of free web check-in/priority boarding will be charged £2/€3 for using airport check-in. As a further innovation all passengers can now purchase priority boarding online and at airport ticket desks. These service enhancements have been well received by passengers resulting in the doubling of passengers using priority boarding/web check-in in the first month since its introduction.

Chancellor Alistair Darling’s plans to change the basis of UK APD in 2009 from a per passenger charge to a per flight charge fails to address the fundamental inequity of this travel tax scam. Aviation which accounts for less than 2% of EU CO2 emissions (just half the figure for marine transport), is not the cause of climate change and taxing it will not have any effect on this problem. Not one penny of the extra £1bn raised annually by this UK travel tax scam has been spent on environmental projects. Despite repeated requests, the UK Treasury refuses to confirm how this money will be spent. The reality is that this is just another government tax on passengers and we again call on the Chancellor to end this modern day highway robbery.

We have implemented our planned 20% reduction in Stansted aircraft numbers this winter due to the doubling of costs by the BAA monopoly. As a result we anticipate that full year passenger volumes will grow by approximately 19% to 50.5m. These capacity reductions will bring more stability to winter yields, reduce operating costs and eliminate losses on non profitable winter routes at Stansted.

Our outlook for the remainder of the fiscal year remains cautious as we have very little visibility beyond the next two months. Shareholders should note that the anticipated decline in Q3 yields will result in Net Profit being significantly lower than last years Q3 comparative which included a one off settlement arising from an early contract termination by our hotel partner. Based on our current Q3 forward bookings and the impact of Easter in Q4, we now anticipate that winter (H2) yields will be somewhat better than previously forecast with the expected yield declines being towards the lower end of the -5% to -10% range. As a result of these better winter yield forecasts and the costs savings which we continue to realise, we now believe that full year Net Profit will rise by 17.5% to approximately €470m, rather than the €440m previously guided.

During the last two months we undertook a series of share buy backs amounting to a total of 53.5m shares a cost of €267m. The shares cancelled represent approximately 3.5% of the company’s pre-existing issued share capital.


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