Ryanair, Europe’s No.1 low fares airline today (Wed 28 Jan 2004) released financial results for the quarter ended 31 Dec’03 showing record profits and traffic figures, whilst passengers benefited from fares which were on average 11% lower than the equivalent period last year.

Traffic for the quarter grew by 54% to 6.1m, whilst average fares declined by 11%. Total revenues rose by 37%, operating costs rose by 42% - significantly less than the rate of traffic growth - as unit costs fell by 8%, whilst after tax margins declined from 23% to 19% for the quarter. Adjusted net profit after tax rose by 10% to €47.5m.

This quarter marked a number of important milestones in Ryanair’s growth as follows;

* Overtaking Easyjet to become Europe’s largest low fares airline.
* Overtaking BA’s UK/Europe traffic, making Ryanair Britain’s favourite airline.
* Selected 2 more new European bases in Rome and Barcelona.
* Cumulative after tax profit margin continues to be over 20%.
* Closing cash balances of €1.12 billion.

As we have consistently highlighted in previous quarterly statements, we remain very cautious in our outlook for fares and yields. Based on initial bookings for the first three calendar months of 2004 (Q.4 of 2003/04) we now expect that yields during this final quarter may decline by between 25% to 30% over those recorded in the comparable quarter last year. These reductions in fares are significantly greater than the 10% to 15% range recorded over the first three quarters. If these lower fares and yields occur (bearing in mind we have not completed even the first month of this quarter) then we would expect net profit before exceptionals for the fiscal year to reduce by up to 10% from a net profit of €239m last year to approximately €215m for the current fiscal year.

Announcing these results in London this morning, Ryanair’s Chief Executive, Michael O’Leary said;

“We are very pleased with the strong growth in traffic and profits for the third quarter which demonstrates the success of our strategy of rapid capacity expansion across new bases and new routes, over the past year. The yield reduction of 11% - although greater than originally expected - has stimulated a 54% increase in traffic, whilst an 8% reduction in unit operating costs has ensured that our strong profitability continues.

“Early indications for yields in our fourth quarter suggest a marked further reduction of between 25% to 30% due to 1) our continuing substantial capacity growth, 2) the launch in January and February of two new bases at Rome Ciampino and Barcelona Girona, 3) the impact of Sterling’s continuing weakness against the Euro, 4) intense price competition all over Europe as a result of enormous capacity growth, particularly from chronically loss making start-up airlines and flag carriers.

“There is therefore considerable downward pressure on fares and yields as many of these loss making airlines try to compete and survive. Despite this difficult market Ryanair continues to profitably develop new routes, new bases and grow market share. In many cases Ryanair is leading the downward pressure on prices and yields, but unlike our competitors we continue to generate world leading profit margins as a result of our aggressive cost management and lowest cost base.

“Ryanair’s strategy continues to be successful all over Europe. Traffic has grown by over 50% so far this year. We have launched 4 new bases in Europe, and 73 of our 146 routes are in their first 12 months of operation. While we now expect after tax profits for the current year to dip slightly, our annualised profit margin will still be in excess of 20% and Ryanair will continue - by some considerable distance - to be the world’s most profitable airline by margin.

“We have seen a number of these cycles in the industry before. Ryanair continues to grow strongly and profitably, even during periods such as now when fares and yields are being lowered at a faster rate than predicted. Our response to these market conditions will be to continue to lower fares and yields, exploit our huge cost advantage, and tightly manage further cost reductions so that we continue to deliver industry leading low fares and profit margins.

“Our determination to continue to reduce fares and yields is strengthened by our experience in recent quarters where many competitors have been forced to reduce their frequency and capacity or withdraw from markets were they compete with Ryanair’s low fares.

“Looking forward to the next fiscal year (04/05) it is impossible in the current climate to make accurate forecasts on fares and yields other than to state that Ryanair will always offer the lowest fares in all markets. Despite this overall caution we expect the yield decline next year to be of a lower order of magnitude for the following reasons;

1. We do not expect any further weakness of Sterling against the Euro.
2. From May onwards, Ryanair’s rate of capacity growth will fall from over 50% for the past two years to just 20% per annum.
3. Initial indications suggest that the two new bases (Rome Ciampino and Barcelona Girona) will be significantly stronger performers than some of the new routes and bases launched in previous years.

“We are confident that average seat costs for the coming year will continue to decline strongly, thanks to continuing cost reductions, the higher proportion of more efficient 737-800’s in service, redelivery of the Buzz BAe 146 aircraft and the other recent lease-ins. The weaker U.S. dollar will also have a positive impact on fuel, aircraft and spares costs whilst there will be continued strong growth in ancillary revenues.

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