Ryanair, Europes largest low fares airline today (5 August 03) announced record traffic, and profit growth for the quarter ended 30 June 03. Passenger traffic grew by 45% to 5.1m although both average load factors and yields declined by 5 points to 78% and by 14% to €41.71, respectively. These predicted reductions were due to the launch of 50 new routes and two new bases; the weakness of Sterling to the Euro; the closure of Buzz for the month of April and Ryanairs commitment to offer the lowest fares in every market it serves. Total revenues rose by 26%, operating costs rose by 29%, after tax margins declined from 20% to 18%, while Adjusted Net Profit increased by 12% to a record €43.8m.
Ryanairs Chief Executive, Michael OLeary said in London today;
“These record quarterly results reflect the continuing success right across Europe of Ryanairs low fares formula. During what B.A. last week described as the most testing period in aviation history, we continue to drive down airfares, reduce costs, but at the same time deliver increased profits and exceptional margins. Passenger volumes grew by 45% to a record 5.1m thanks to the successful launch of 50 new routes, two new bases at Milan-Bergamo and Stockholm-Skavsta, and the acquisition and relaunch of Buzz in May. This strong performance continues, as evidenced by the substantial increase in traffic and load factors for July03 (statistics were released yesterday). These recorded a 40% growth in traffic over July02 and a 6 point improvement in load factor from 79% in June to 85% in July.
” Yields, as we predicted, were impacted by a combination of (1) the launch of the 50 new routes and the 2 new bases, (2) the weakness of Sterling to Euro, and (3) by our continuing policy of driving down airfares. We believe that yields for the fiscal year will be lower than last year by between 10% and 15% as we offer consumers lower fares whilst dismaying our competitors who forlornly hope that yields and fares will rise during this year. Of the 14% decline in yields during the quarter, 6% was due to the weakness of Sterling (half of all our sales are in sterling). This yield dilution will be partially offset by sterling cost savings. Our margins have also been diluted by the operation of the inefficient Buzz BAe146 aircraft on some routes, but these will be replaced by larger and lower cost 737-800s in October following our next set of deliveries from Boeing.
” Apart from offering our passengers even lower air fares, we are tremendously proud of our outstanding customer service. The Association of European Airlines (AEA) has begun publishing customer service statistics since January, and these numbers prove that Ryanair is number one among Europes major airlines for punctuality, least cancellations and fewest lost bags. As the recent British Airways strikes at Heathrow confirmed, the service that high fares airlines provide when things go wrong is no different to that provided by low fares carriers, despite the fact that people flying B.A. are paying air fares that are 5 to 10 times higher than they pay Ryanair.
” Recently some competitor airports and airlines have initiated spurious legal actions to try to restrict route development, competition and lower fares at publicly owned airports. It is quite beyond our comprehension how an administrative court in Strasbourg could recently require the Strasbourg Chamber of Commerce to terminate our low cost agreement within two months. Despite the fact that Ryanair is the only airline operating the London-Strasbourg route, and delivering almost six times the traffic previously delivered by Air France, we may now be forced - against our wishes - to either increase air fares on the route, or pull off the route in the short-term, until such time as we can appeal and reverse this decision.
” It is ludicrous that Air France having withdrawn ten international services from Strasbourg Airport over the last seven years (one of which was the London route) can win a local legal action which prevents 200,000 European consumers benefiting from low fare services between London and Strasbourg. We believe these passengers will not travel on a high fare Air France service which forces them to go via Charles de Gaulle to get to London or Strasbourg. This decision is wrong, it is bad for the regional airports of France, it is bad for regional tourism in France and could result in some 200 jobs being lost in the Strasbourg and Alsace region. We will appeal it, and are confident that this appeal will succeed and allow us to continue to develop low fare traffic at Strasbourg and tourism in the Alsace region.
The only grey cloud on our commercial horizon at present is the continuing EU investigation of our low cost base at Brussels Charleroi Airport. The European Commission, which has consistently promoted and championed deregulation and competition in inter-EU air travel needs to send a strong signal to the market that it will not allow political lobbying or local court orders to prevent Ryanair (and other low fares airlines) making air travel more affordable for consumers all over Europe. Over the past twelve months our 18 million passengers will have saved over €2.0bn compared to the air fares charged by our high fare flag carrier competitors and this year more than 20,000 jobs will be created as a result of Ryanairs traffic at secondary and regional airports all over Europe. Many European consumers who werent rich enough to fly with the flag carriers can now afford to travel to visit friends and families and/or go on holidays. We remain confident that Commissioner de Palacio will support competition and low fare air travel and will support the right of publicly owned airports to compete on an equal basis with privately owned airports for this business.
” We welcome Minister Brennans announcement that the Irish airport monopoly will be split up enabling Dublin, Cork and Shannon to compete against each other for traffic. Competition is good for consumers and will be good for Irish tourism. We remain concerned about the lengthy timescale for the implementation of the split and the mystifying lack of progress in the development of competing Terminals at Dublin airport. Why are we still waiting for the Irish Government to do something in order to kick start Irish tourism and to create more badly needed jobs in the Irish economy€ Unless this competition is implemented by November it will mean that yet another year of tourism growth will be lost to the Irish economy. We therefore strongly urge Bertie Aherns government to stop dithering, take some decisions in the interest of consumers, and urgently split up the Aer Rianta monopoly by introducing multiple competing terminals at Dublin airport.
” As highlighted by the release of our July traffic statistics yesterday, current trading continues to be in line with expectations and previous guidance. In July Ryanair became the first low fares airline in Europe to carry over 2m passengers in one month, which renews our confidence that substantial traffic growth for the full year will be achieved. We still continue to believe that yields will be between 10% to 15% lower than last year, however, we expect profits to grow materially and that we will (as previously predicted) maintain net margins in excess of 20%.
” This continuing profit growth separates Ryanair from almost all other airlines in Europe, and re-emphasises the superiority of Ryanairs low-cost, low fares business model, and disciplined way in which we are rolling it out across Europe”.