Ryanair Sees Bumper Profits From Global Crude Slump
May 23 2016 - 2:30AM
Dow Jones News
LONDON—Ryanair Holdings PLC Monday posted a 43% rise in
full-year net income but warned profit growth would slow and that
concerns over terrorist attacks could weigh on ticket prices.
Net profit for the 12 months ended March 31 was €1.24 billion
($1.39 billion), up from €867 million for the prior financial year.
Europe's largest budget airline by traffic benefited from the sharp
drop in fuel costs amid a global slump in crude prices, fuller
planes and a focus on higher-paying passengers.
Sales rose to €6.5 billion from €5.7 billion as the Irish
airline carried 106.4 million passengers, 18% more than a year
earlier and a new Ryanair record. The airline's planes were packed
as load factor, a measure of seats sold, rose to 93%.
After the bumper profit growth, Ryanair forecast a more modest
pace for earnings improvement for the financial year that began in
April. "Fares are the biggest question mark," Neil Sorahan, the
airline's chief financial officer, said.
Profit should rise only around 13% to €1.38 billion to €1.43
billion, the Dublin-based airline said. The carrier's earnings
guidance at the start of a financial year typically is conservative
and often adjusted upward in subsequent months.
Rivals have warned that bookings have been impacted by the
terror attacks in Brussels in March and that ticket prices are
expected to weaken amid strong price competition. Some carriers,
including British Airways parent International Consolidated
Airlines Group SA have trimmed capacity growth and accelerated
cost-cutting efforts to compensate for the fall in ticket
prices.
The crash for still undetermined reasons of an EgyptAir flight
Thursday flying from Paris to Cairo with 66 people on board could
once more dampen bookings.
"If people have a feeling this is terrorist related then we
probably will see a kind of softening of demand," Mr. Sorahan said
in an interview.
Ryanair said ticket prices in the final quarter of the last
financial year suffered because of the Brussels attacks and
strikes.
The start of the new financial year also has been hit by
air-traffic control strikes in several European countries and the
weakness of the British pound ahead of a June 23 referendum, which
could see the U.K. exit the European Union, the carrier said.
Britain is a major source of Ryanair bookings.
Ryanair vowed to maintain its low-cost edge over rivals,
promising to cut nonfuel costs 1% this year. The fuel bill should
be €200 million lower.
Even though fuel costs on the spot market have inched higher in
recent weeks, Mr. Sorahan said pricing in futures markets has moved
less. That has allowed Ryanair to lock around 44% of its expected
fuel consumption for the next financial year at low prices, a
higher level than typical for the carrier, he said.
The airline expects to carry around 116 million passengers and
maintain its packed planes with around 93% of seats sold on a
typical flight. Average fares should fall about 7% as Ryanair cuts
ticket prices to lure passengers.
Ryanair has been adding capacity aggressively, introducing 31
new Boeing Co. 737 single-aisle planes as part of its expansion
plan in the first four months of this year, according to the plane
maker. The airline expects to take delivery of 52 new Boeing plane
this financial year, growing its fleet to 380 planes including
disposals of older aircraft.
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
May 23, 2016 03:15 ET (07:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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