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Ryanair increases half year profit to €452m

Ryanair has reported a 17% increase in half year profit – to the end of September 2010 – to €452 million from €387.0 million in the six months to 30 September 2009.

Revenues rose by 23% to €2,182 million for the period (from €1,767 million in the same period last year) as traffic grew by 10% to 40.1 million passengers and average fares rose by 12%. The airline’s unit costs rose by 13% as sector length increased by 12%. Excluding fuel the unit costs rose by just 4%.

“A 17% increase in half year net profit is testimony to the robustness of Ryanair’s lowest cost/lowest fare model which continues to deliver traffic and profit growth even during a deep recession,” remarked Ryanair’s CEO, Michael O’Leary. “Average fares this summer rose by 12% to €44 in line with a 12% sector length increase as our new routes and bases at Faro, Malaga and Malta performed well. Ryanair overtook Iberia in July to become the No.1 passenger carrier operating at Spanish airports. We launched the new Barcelona (El Prat) base in September and our Valencia and Seville bases will launch in November which will strengthen Ryanair’s market leadership in Spain.

“Unit costs increased by 13% primarily due to the 12% growth in sector length and higher fuel costs. Our fuel bill rose by 44% to €660 million due to the increased level of activity and higher prices. Unit costs excluding fuel rose by 4%, and sector length adjusted they fell by 8%, as we lowered aircraft ownership, airport and handling costs. We are 90% hedged for FY11 at $730 per tonne and 60% hedged for FY12 at $760 per tonne. We extended our dollar cover and are 60% hedged for FY12 at €/$ of 1.35 versus €/$ of 1.40 for FY11.

Figures for the half year ended 30 September 2010 exclude an exceptional item of €27.9 million (pre tax €31.7m) for costs associated with volcanic ash disruptions in April and May 2010, while those for the half year ended 30 September 2009 exclude an exceptional item of €13.5 million for the write down of Ryanair’s investment in Aer Lingus.

Commenting on operations and industry affairs, O’Leary stated, “We welcome the recent UK Court of Appeal decision which upheld the Competition Commission’s recommendation that the BAA airport monopoly be broken up in the interest of competition and a better deal for consumers. [It] means the sale of Glasgow and Stansted airports can now proceed. which will lead to much needed competition and a better deal for airport users and passengers.”

Asked whether the airline had been in discussions with potential buyers of Stansted, O’Leary commented, “No, until there’s a process of sale at Stansted we’re not talking to anyone. But we will as soon as that is announced, because we believe we can work with any potential buyer to bring better operations and lower fares to the airport.”

In terms of expenditures enforced on the airline by EU Regulation 2004/261, O’Leary called for rapid changes so that airlines don’t have to pay compensation for ATC strikes. “As a direct result of repeated Belgian, French and Spanish ATC strikes and work to rules this year, we have had to cancel over 2,000 flights and delay a further 12,000, disrupting nearly 3 million passengers,” he explained. “These highly paid protected bureaucrats have now disrupted more passengers than the Icelandic volcano and still the EU sits idly by and does nothing. Under the bizarre EU261 regulations airlines suffer the costs of these disruptions without any recourse against those unions calling strikes, or the EU Governments who, despite owning these ATCs, repeatedly allow European airspace to be closed. We have called on the EU Commission to reform ATC by removing the ‘right to strike’ for such an essential service, as well as deregulating Europe’s ATC services to allow non-striking ATCs to keep EU skies open. These repeated government-owned ATC strikes highlight the urgent need to reform EU261 regulations to relieve airlines of the ‘right to care’ obligations, in such force majeure cases, which are clearly outside of airlines’ control.”

O’Leary estimated that the costs from EU261 payments resulting from the ATC strikes could end up being twice as high as the costs incurred – again, because of EU261 – when European airspace was closed due to volcanic ash in April and May 2010.

The CEO then turned his ire to travel taxes, both new and recently increased. In Germany, the airline has already cut operations from its Frankfurt Hahn base because of the introduction of an €8 travel tax to be introduced in January 2011. “And we expect to announce cuts at our bases in Bremen and Dusseldorf Weeze between now and Christmas,” he confirmed.

“Then you come to the increase today [1 November] in UK Air Passenger Duty (APD). That will cause UK traffic to continue the decline we’ve seen since the introduction of APD,” he added. “I’ve no doubt that APD affects UK airlines more than the German tax will affect its airline market. The travel tax in Germany will see people moving from air to car or train. You can’t do that as much for the UK and Ireland because they are islands.”

Looking ahead, O’Leary said the airline’s outlook for the remainder of the fiscal year remains cautious as it has little visibility on Q4 yields. “Based on Q3 forward bookings we now anticipate that winter (H2) yields will be slightly better than previously forecast, so we expect the full-year yield increase to be at the upper end of the +5% to +10% range previously guided – so, close to 10%,” he noted. “Given these somewhat better winter yield forecasts, although with the usual caveats about limited Q4 visibility, we now believe that full year net profit will exceed the upper end of our previous forecast range (€350 million to €375 million) and will now finish (subject to Q4 yields) within a range of €380 million to €400 million.”

Bernie Baldwin, editor, Low-Fare & Regional Airlines/LARAnews.net
London, UK

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