Huge Ryanair profit jump raises forecast

A Ryanair profit jump of 152% to €197 million in the Q1 2014 compared to €78 million in the same quarter last year triggered a raised profit forecast. The increase follows a profit warning by Lufthansa and Air France KLM.

Ryanair Holdings PLC, Europe’s largest budget airline and the world’s 5th largest according to the number of passengers carried, cautioned that the result was distorted by Easter falling in Q1 2014 but not in Q1 2013.

Ryanair informed that in Q1:

  • traffic increased to 24.3 million,
  • load factors grew by 4% to 86%,
  • average fares went up by 9% (due to the strong Easter period),
  • total revenues jumped 11% to €1.496 billion,
  • unit costs declined by 2% (but rose 1% excl. fuel).

Ryanair’s CEO, Michael O’Leary, said:

“Q1 profits were boosted by a strong Easter.  The earlier launch of our summer schedule and actively raising our forward bookings has delivered a 4% increase in load factor to 86% and enabled us to better manage close-in yields.  Ancillary Revenues rose 4% in line with traffic growth, as airport and baggage fee reductions were offset by the rising uptake of allocated seating.”

Load factors increasing

The airline’s four new bases, in Rome, Lisbon, Brussels and Athens are performing strongly, and load factors are rising partly because of its strategy to raise forward bookings, the company said. Their summer schedule for 2015 will be released in September, three months earlier than in 2013.

During the coming winter, Ryanair will open bases in Glasgow, Warsaw and Gdansk, and will significantly increase the number of new routes and frequencies at Dublin and Stansted.

Ryannair plane

While European national flag carriers issue profit warnings, Ryanair does the opposite.

Ryanair outlook

Based on its Q1 results and strong forward bookings, Ryanair says it is evident that it is on track to deliver a strong H2 2014, with traffic increasing by 3% and fares by 6% (subject to late booking fares in August and September).

However, the company warns investors and analysts that there are some “company-specific challenges in H2” and that the economic environment remains difficult.

Other airlines are lowering fares, partly in response to Ryanair’s strong forward bookings, which makes for a “much softer pricing environment” in H2.

Ryanair says it will raise capacity by 7% and 10% in Q3 and Q4 respectively “to take advantage of growth discounts and build out business-friendly frequencies from Stansted and Dublin in particular.”

These initiatives will push down fares, thus H2 yields are forecast to decline by between 6% and 8%, resulting in full-year yields rising by just 2%. Unit costs excluding fuel for fiscal year 2015 will increase by about 4%, which is marginally better than the previously forecast 5%.

Ryanair Financials Q1

(Data source: Ryanair)

Ryanair wrote in a communique:

“In summary, we now expect full year traffic to grow by 5% to 86m. This increased traffic and higher load factors, combined with a slightly improved performance on unit costs allows us to cautiously raise our full year profit after tax guidance (from the previous range €580m to €620m) to a range of €620m to €650m.”

“However this guidance, which is about a 21% rise over last year’s net profit, is heavily, reliant upon the final outturn for H2 yields over which we currently have zero visibility.”

Dividend payout

The Dublin-based carrier, which warned investors on profit last year, informed that it plans to pay a special €520 million (37.50 euro cents a share) dividend.

If approved by shareholders, the dividend will be paid in Q4 (ending March 31), which will bring its total payout since 2008 to €2.5 billion.