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Ryanair announces €867m full-year profit, up 66%

Ryanair has reported a full-year net profit of €867 million for its financial year ending 31 March 2015, which is a 66% increase on the profit of €523 million achieved in the previous financial year.

Built on an 11% increase in customer bookings and a 12% increase in revenue, the result was ahead of previous guidance.

Bookings in FY15, as opposed to passengers flown since no-shows rarely receive refunds, totalled 90.6 million compared with 81.7 million in FY14, with the load factor rising from 83% to 88%. Revenue for the respective periods was €5,654 million and €5,037 million. Basic earnings per share (EPS) in eurocents rose by 69% from 36.96 to 62.59.

Ryanair’s CEO, Michael O’Leary, commented, “We are pleased to celebrate Ryanair’s 30th birthday by reporting this 66% increase in net profit which demonstrates the enduring strength of Ryanair’s lowest fare/lowest cost model which has been transformed by the success of our “Always Getting Better” (AGB) customer experience programme. AGB has attracted millions of new customers to Ryanair.”

O’Leary noted that unit costs excluding fuel were flat, while including fuel they fell 5%. Additionally, the earlier loading of schedules led to materially stronger forward bookings.

“Over the past year we have relentlessly improved our lowest fare/lowest cost model. We have expanded into primary airports, added business schedules and extended long-term low-cost growth deals at major bases including London (STN) and Dublin where the Irish Government has rebooted tourism by abolishing the travel tax,” O’Leary remarked.

“Our AGB programme is transforming our customer experience, our service, and the way we listen and respond to our customers. We have won substantial traffic and share gains in all markets. We are now the no.1 or oo.2 airline in most EU countries except France and Germany (where we are a rapidly growing no.3). Since our Year 1 AGB programme has been so successful we have launched our Year 2 programme as part of our strategy to make Ryanair Europe’s most customer-friendly, as well as its lowest-fare, airline.

“Our summer 2015 fleet of 320 aircraft is insufficient to handle the demand for Ryanair’s low fares,” he continued. “We will lease-in six aircraft in the peak period (seven in 2014) to help meet this surging demand. We expect over half of our growth to occur at primary airports such as Brussels, Lisbon, Rome, Athens, Copenhagen, Berlin, Cologne, Dublin and London (STN). Much of this growth is being stimulated by our Business Plus and Family Extra services which have been key features of our AGB programme and our successful entry/growth at these primary airports.

“Last year we set out a strategy to drive stronger forward bookings, encourage customers to book earlier to avail themselves of lower prices and to deliver higher load factors. These higher load factors have helped to reduce unit costs and boosted ancillary sales. Forward bookings, as we enter the summer 2015 peak (June to September), are on average 4% ahead of last year, and we expect this will lead to a two percentage point rise in load factors from 88% to 90% in FY16.

“Our rising profits are generating significant free cash flows, which has enabled us to deliver substantial returns to shareholders. In February 2015 we paid our third special dividend of €520 million (€0.37 per share) and then launched our sixth share buyback under which we hope to buy and retire €400 million of ordinary shares by the end of August. This will bring the cash returned to shareholders over the past 8 years to almost €3 billion,” O’Leary declared.

“Despite these pay-outs, we still finished the year with €364 million in net cash and a balance sheet rated BBB+ by both S&P and Fitch Ratings, the highest rating of any airline worldwide. We expect our Eurobond programme, (under which we have raised €1.7 billion unsecured at blended rates of 1.50% p.a.) will lower our financing costs, boost profitability and continue to strengthen our balance sheet. “

From monetary matters, O’Leary moved on to regulation, stating his belief that Europe’s airline industry continues to be “blighted by over-regulation which frequently places producer monopoly protection above the interest of consumers, or growth in tourism and jobs. Examples such as Europe’s discredited emissions trading system (ETS), the shambles of our single sky project and the failure to prohibit ATC strikes (either by “no strike” legislation, or binding arbitration) allows the ATC unions to regularly and repeatedly close Europe’s skies,” he argued.

“Ryanair strongly supports the development of additional runway capacity in the London market,” O’Leary said. “We believe that the market should be free to develop three new runways, one each at Heathrow, Gatwick and Stansted which is the only long-term solution to the capacity crisis in southeast England, and which will encourage all three airports to deliver additional capacity quickly and cost efficiently.”

Ryanair’s outlook for the current financial year includes growth into primary airports. “We continue to experience strong demand and forward booking momentum,” O’Leary confirmed. “The average load factors in the first four months of 2015 grew by 10%. While this will slow to 1% or 2% over the peak summer months, forward bookings are on average 4% ahead of this time last year, as our earlier schedules, lower prices and AGB customer programme, particularly at primary airports attracts millions of new customers to Ryanair.

“While our traffic growth this year will be strong (up 10%), it would be foolish not to expect some irrational pricing response from competitors who cannot compete with our lowest costs and fares,” O’Leary forecast. “Therefore, even with the benefit of lower oil, aircraft and financing costs we may suffer periods of fare/yield weakness especially during the H2 winter season. This is why our yield guidance remains cautious at broadly flat in H1 but down 4% to 8% in H2 for a forecast FY yield decline of 2%. If this decline proves accurate then we believe that lower unit costs in FY16 will still provide a 10% improvement in profits, which should (subject to H2 yields over which we have no visibility) rise to a range of €940 million to €970 million for the full year to March 2016,” he concluded.

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