Ryanair increases profit guidance as winter bookings grow

Ryanair Ltd. increased its full year profit guidance by 18% on Monday, citing higher-than-expected winter bookings. The budget airline says it will reduce airfares by 10% next year to gain market share in the European short-haul market.

The Dublin-based low-cost carrier said it would fly 2.2 million more passengers in the first six months of the financial year than previously predicted.

In a statement the airline forecasts that it will fly 89 million passengers in this financial year.

The company says that for the full financial year, ending in March 2015, it expects profits to rise to between €750 million and €770 million. It cautions that its higher guidance depends on the strength of close in bookings for the remainder of the third quarter.

Ryanair’s CEO, Michael O’Leary, said:

“We are pleased to report this significant increase in H1 profits. While partially due to the presence of Easter in Q1 and a weak prior year comparable, we have also enjoyed a strong summer thanks to our strategy (announced Sept. 2013), of raising forward bookings and improving our customer experience which has delivered higher load factors and yields.”

Mr. O’Leary wants more business passengers.

The no-frills airline has been pushing to improve its image. It has softened its stance on booking conditions and baggage charges, and introduced allocated seating. There is also a new business service. The strategy appears to be paying off.

Ryanair says there are several opportunities open to it. It aims to compete more vigorously at key airports and attract business traffic, which tends to remain comparatively high during the winter.

Ryanair signed an order for 200 extra Boeing aircraft, which have more seats and additional leg room. The fuel-efficient airplanes, which will start being delivered in 2019, will considerably lower costs and allow the company to reduce fares further.

Budget airlines such as EasyJet and Ryanair are raising their profit forecasts while many national flag carriers, including Lufthansa and Air France are struggling. The exception is IAG, which owns British Airways, Iberia and Vueling.

Last week, IAG increased its full year profit guidance after reporting a 30% third quarter profit rise. Operating profit jumped to €900 million versus €690 million last year.

Lufthansa warned that its profit guidance for the year would be lower than its original prediction of €2 billion. However, the company did not provide an exact figure. Lufthansa has had several devastating pilot strikes this year.