Ryanair has celebrated its 20th birthday by announcing record results for the year end 31 March 2005. Both passenger volumes and net profits grew by 19% to 27.6m and €268.9m respectively. Yields were 2% higher than last year (partially offsetting the 14% yield decline in 2003/04) and ancillary revenues grew by 40%, much faster than passenger volumes, which resulted in total revenues rising by 24% to €1.337bn. Operating costs rose by 25%, fractionally faster than the growth in revenues reflecting higher fuel costs. As a result, Ryanair’s adjusted after tax margin for the full year fell by just 1% to an industry leading 20% as Adjusted Net Profit increased by 19% to a record €268.9m.
Announcing these results Ryanair’s Chief Executive, Michael O’Leary, said:
“We can think of no better way to celebrate Ryanair’s 20th birthday than to announce another year of record traffic and record profits, with after tax margins at an industry leading 20%. Our robust trading performance over the past 12 months, despite intense competition and significantly higher oil prices reaffirms the unique strength of Ryanair’s lowest cost model in Europe. While many airlines recorded losses, Ryanair increased after tax profits for the Winter half year by 33% from €51.0m to €67.6m, while our year end cash balances increased to €1.61 billion equating to 121% of annual revenues.
“Contrary to initial expectations, average yields for the 12 months rose by 2%, despite a 16% increase in capacity. This is partially due to the lower comparables last year (when yields fell by 14%), and continuing capacity reductions by the European flag carriers in markets where they compete with Ryanair. Most of our yield growth was due to multiple fuel surcharges imposed by the flag carriers on short-haul passengers, which have further widened the gap between their high fares and our low fares. Ryanair’s traffic growth and yields have benefited substantially from our refusal to impose fuel surcharges.
“Clearly fuel costs remain high, and the market is volatile. Higher oil prices will continue to impact our cost base over the coming 12 months. We are unhedged for the remainder of this Summer and are benefiting from the recent oil price declines. In order to remove some cost uncertainty during the volatile Winter period, we have now hedged 75% of next Winter’s fuel requirement at rates equivalent to $47 per barrel. We will continue to exploit our hedging policy where we believe it can remove uncertainty from our business at acceptable cost levels.
“Our new routes and bases continue to perform well. We have been most encouraged by the strong advance bookings at our new Luton and Liverpool bases where passengers are looking for an alternative to Easyjet’s high prices. Traffic at our new Shannon base is also booking strongly, although yields have been slightly lower than we expected. Recently we announced five new routes from London to Poland (4) and Slovakia (1) and expect that these will be the first in a series of new route announcements over the coming weeks for next Winter.
“Without question, the single most important initiative of the past 12 months was the purchase of 140 additional Boeing 737-800’s (comprising 70 firm and 70 options), for delivery during the period 2008 - 2012, at a substantial discount to our previous competitively priced aircraft order. This new order, which also included the repricing of the balance of the previous order, will enable Ryanair to significantly reduce our aircraft per seat operating costs, and substantially improve our cash balances, while we maintain a disciplined rate of passenger growth out to 2012, by which time we expect to carry over 70m passengers per annum, making Ryanair, Europe’s largest airline. We expect to overtake British Airways’ monthly traffic later this Summer. This will be a very significant milestone for a small Irish airline which only started flying in 1985 and yet in just over 20 years (thanks to low fares, lowest costs and brand new Boeing aircraft) has overtaken British Airways.
“On the regulatory front, we were pleased with the recent settlement of the fuel levy dispute with the BAA at Stansted Airport, which will reduce the fuel levy for all airlines at Stansted for the coming 3 years. We continue to lobby against the BAA’s grandiose plans at Stansted Airport for a gold-plated second runway. When the cost of a runway and even a second terminal should run to no more than £400m, the BAA’s proposed spend of £4 billion is gold-plating on a rip off scale, which will result in overcharging of ordinary passengers for many decades into the future.
“If the BAA monopoly was broken up, and Stansted forced to compete with Gatwick and Heathrow, then low cost efficient facilities would be developed with the co-operation of user airlines like Ryanair and Easyjet. Instead we have the truly bizarre proposal that £4 billion be wasted by Stansted, building facilities that its airlines unanimously oppose, with part of the cost to be subsidized by passengers at Gatwick and Heathrow (who get no benefit from Stansted) and all of this waste is designed so that the BAA airport monopoly can claim a return on £4 billion of capital expenditure instead of £400 million. The CAA presently stands idly by while the BAA ignores the stated wishes of the very airline users at Stansted who are expected to pay for these extravagant and over specified facilities.
“In Ireland, the situation at Dublin Airport has descended into a farce. The Dublin Airport Authority which is responsible for this third world facility is to be rewarded for its incompetence by being allowed to build the second terminal. This facility will not be available until 2009 at the earliest and in the mean time passengers at Dublin will be forced to endure long queues and intolerable overcrowding while the Government protects this failed monopoly by blocking competition. It should be remembered that thirteen expressions of interest to build and operate this second terminal were received by the Irish Government as far back as October 2002, many of them from established airport operators who were prepared to invest in and offer genuine competition at Dublin.
“The Taoiseach (Prime Minister) recently demonstrated how hopelessly out of touch he is by claiming that the present overcrowded terminal has the capacity for 6 million more passengers per annum. It would appear that there aren’t any queues at the VIP escort to the Government jet. “We have instructed our lawyers to prepare the necessary papers to oppose this second terminal on competition and public procurement grounds. We will also vigorously oppose any planning application which is based on over specified or inefficient terminal facilities, which is all that the DAA have ever developed either here at Dublin, or Cork, or Shannon. Had the Irish Government heeded Ryanair’s calls for a competing second terminal seven years ago, this current embarrassment for Irish tourism would have been avoided. As always in Ireland the ordinary passengers suffer, while the politicians fudge.
“Our outlook for the coming 12 months is more positive than it was this time last year. We continue to budget for higher oil prices, but anticipate that these higher costs will be partially offset by a slightly more benign yield environment. If our competitors continue to maintain surcharges or continue to remove capacity from our markets then yields should be more stable, even as we continue to expand. Advance bookings for the Summer months are strong, and we are raising our traffic growth forecast for the coming year from 34m (+23%) to 35m (+27%). We expect that ancillary sales will continue to significantly outstrip traffic growth. Our new aircraft pricing and new airport deals will continue to have a downward impact on operating costs even though fuel volatility will remain a variable.
“It is becoming increasingly clear that being the lowest cost operator is the key competitive advantage in our industry. There is no better business model in the short haul market. Lowest cost wins. Like Wal-mart, Tesco and Dell in their respective markets, Ryanair’s low fares cannot be matched nor beaten by any of our competitors. As the published statistics for punctuality, cancellations and lost bags confirm, none of our competitors can match our customer service either. We remain confident that Ryanair’s unique combination of lowest costs, direct flights, brand new aircraft and market leading punctuality will ensure that the travelling public continues to fly Ryanair for the next twenty years, just as enthusiastically as they have in our first twenty.
“To celebrate these record results, we are running a “50% off our lowest fares” seat sale from today until midnight Thursday 2nd June for travel during the last 2 weeks in June and first 2 weeks in July.”