Ryanair hikes forecast as fuel price tumbles

Ryanair has raised its profit forecast for 2009 due to tumbling fuel costs. The low-cost carrier said it was likely to report an annual profit of between €50m and €80m, against previous guidance that it would just break even.

It posted a €128.7 million loss (£114 million) before tax in its third quarter to December 31, but it expects that figure to start improving immediately. Michael O’Leary, chief executive, said: “Our Q3 loss of €102m was disappointing, but in line with expectations, and was almost entirely due to a €136m increase in fuel costs. Average fares (due to recession and weaker Sterling) fell by 9% to €34, but this decline was largely funded by a 3% reduction in non-fuel operating costs.”

He predicted that Ryanair’s fourth quarter to March 31 would see fares drop by 20 per cent, reflecting a “degrading environment”, but because fuel costs have fallen to US$500 a tonne, he said that losses in the period would be “smaller than previously anticipated”.

The profit recovery was forecast to continue into the 2009-10 financial year, with Mr O’Leary promising a return “to substantial profitability next year, at a time when many of our competitors will be reporting losses” because fuel prices have been hedged at US$650 a tonne—38 per cent below the price paid in the third quarter.

However, the chief executive warned that fare revenues would drop by up to 10 percent and, “if the recession deepens, it could be worse than this”.

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“The general economic environment remains extremely difficult, as the recession saps consumer confidence, but this is proving to be good for Ryanair’s traffic growth, as more and more passengers switch to Ryanair’s lowest fare lowest cost model.  Many of our competitors have in recent months reported short-haul traffic falls, while Ryanair continues to grow.  We will continue to lower fares to maintain our traffic growth and high load factors,” he added.

“We are the Lidl, Aldi, Ikea and McDonald’s of the European airline industry -  the best value and lowest cost provider by a distance.”

“The longer and deeper this recession, the better it is for the lowest-cost producer, the better it is for us. People want better value.”
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