Ryanair, Europe’s No.1 low fares airline today (3 June’03) announced record traffic and profit growth for the year (end 31 Mar’03). Passenger traffic for the year grew by 42% to 15.7m as average load factors increased from 81% to 84%, primarily due to a 6% reduction in average fares. This reduction in yields was a result of continuing price promotions, the launch of over 20 new routes, a new base in Milan-Bergamo, and Ryanair’s commitment to offer the lowest fares in every market it serves. Total revenues in the year rose by 35%, however operating costs rose at a slower rate by 26%. As a result Ryanair’s after tax margins increased exceptionally from 24% to 28%, and Net Profit increased by 59% to €239.4m.
Announcing these results, Ryanair’s Chief Executive, Michael O’Leary said in London today;
“These results demonstrate how robust Ryanair’s lowest fares business model is in Europe. Our fares are much lower than any other EU airline and our outstanding team of 1,900 people remain committed to relentlessly driving down air fares. As our people now form one of our largest shareholder blocks, I am delighted that their efforts are being rewarded, not just with higher pay and rapid promotion, but also with increasingly valuable share options. We will continue to lower costs and we will use these low costs and record profit margins to drive down fares even faster and stimulate rapid growth.
“Ryanair has - for the fifteenth year in a row - delivered increased profits, despite a 6% reduction in average fares, at a time when most of our competitors are reducing capacity and announcing losses. The market has suffered from high fuel prices, the war in Iraq, the impact of SARS and the continuing effect of the economic downturn in many European countries. Despite these difficult conditions Ryanair’s continued profitability stems from the fact that we have the lowest costs and the lowest air fares which no other European airline can match. I can think of no better way to prove our determination to lower air fares than to announce a record low fare seat sale. So this morning we released one million low fare seats at £19.99 and £29.99 one way for travel during the peak Summer months of June, July and August. Passengers should book these immediately at www.RYANAIR..COM because these record low prices, for peak Summer flights will be snapped up in record time.
“Shareholders should be aware that these results for the past 12 months have been exceptional. We have repeatedly stated that profit margins of almost 30% are a one off and non-sustainable. Our business plan remains (a) to grow traffic on average by 25% per annum and (b) maintain a profit (after tax) margin of approximately 20%. Obviously some years we will fall below these averages and some years - such as above - we will exceed them..
“In recent months we have launched two new bases (Milan Bergamo and Stockholm Skavsta) and 12 former Buzz services among a total of 50 new routes. These new routes will generate abnormal traffic growth of 50% for the coming year. We will drive down fares (by more than our normal 5% target) and at this stage expect yields for the year to decline by at least 10% and possibly more depending on the extent to which Sterling weakens against the Euro. This is great news for our customers but bad news for competitors (many of whom are hoping that their fares will rise). With the launch of 50 new routes out of a total network of 125 load factors will also decline this year to about 80%. Our margins will also be diluted by the closure and relaunch of the Buzz operation (which was grounded for the entire month of April) and the negative impact of operating expensive BAe146 aircraft on certain routes which will be replaced by larger and lower cost Boeing 737-800’s next year.
“The last quarter of the year was also notable for a significant increase in our aircraft order with Boeing which was increased, at lower prices to 125 firm and 125 option aircraft. This is the largest ever order by any European airline for narrowbody aircraft. Ryanair intends to continue with the single aircraft fleet model which was pioneered by Southwest and which has proven so profitable for us over the past fifteen years. These aircraft give us the capacity to continue to grow (after this year) at about 25% per annum by opening up new bases and new routes from existing bases.
“With up to 40 new airports and 9 potential new bases presently under negotiation we have more growth opportunities than we need for the next five years. We will continue to grow in a safe and controlled manner, and within the next three years we plan to carry more than 30 million international scheduled passengers per annum at which point we will overtake both Lufthansa and British Airways to become the largest international scheduled airline in the world. The fact that the largest international airline in Europe will also be the one offering the lowest fares and the best customer service (we are presently ranked No.1 in Europe for on-times, completions and fewest lost bags) is good news for European consumers and bad news for our higher fare competitors.
“It is depressing - yet again - to record that Ireland continues to be the only country in Europe to miss out on this extraordinary traffic and tourism growth. We are still waiting for the Irish Government to stop talking about competition and start doing something about it. The development of competing terminals and the splitting up of the Aer Rianta monopoly has received further support from the Government appointed Committee of “Wisemen”, the Irish Hotels Federation, Aer Lingus - the Irish State airline - and the Government’s own tourism review group. At a time when the Irish Prime Minister has recently called for greater competitiveness in every area of Irish life, one would think that he would at least set an example by breaking up his own airport monopoly and we again call on him to get on with it. It’s time for less talk and more action from this Government if the Irish tourism industry is to be rescued.
“Our business in the current quarter continues to grow very strongly. As we announced this morning, traffic for the month of May - with the inclusion for the first month of the former Buzz routes - was 53% greater than May last year. We have driven down yields by 15% during the month, of which 5% points is due to the weakness in Sterling against the Euro. I personally expect no near term improvement in either the low fare environment or the strength of the Euro, and believe therefore that yields for the year will continue to be 10% to 15% lower than last year. However this negative revenue effect (of weaker Sterling) will be partially compensated by lower Sterling costs. In addition the strength of the Euro against the Dollar will substantially lower costs of aircraft acquisitions, fuel and spares over the coming years.
“Looking forward we remain confident of another successful year for Ryanair during which we will deliver substantial traffic growth. Even though we will drive down fares and yields we expect to maintain our normal profit margins of just over 20% and record our sixteenth consecutive year with a material increase in profits.