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With little to report on either the fleet or the routes front and only a few skirmishes in the courts the main part of this report deals with Ryanair's announcement of its full year figures (to 31st March) on 23rd May. For any other airline announcing a 26% increase in annual profits to €401 million, this would be big news but for Ryanair it almost expected that they will have double digit growth. The €401million net result also came in ahead of the guided €380-400 million range.

Revenues increased 21% to €3,630 million as traffic grew 8% and average fares rose 12%. Unit costs rose by 11% due to higher oil prices and a 10% increase in sector length. Excluding fuel, unit costs rose by just 3%. Ryanair's balance sheet remains one of the strongest in the industry with €3 billion in cash despite having returned €850 million to shareholders over the past three years. Other significant figures were:-

• Ancillary revenue: €801.6 million, +20.8%;
• Total operating costs: €3141 million, +21.5%;
• Fuel: €1227 million, +37.3%;
• Airport & handling charges: €491.8 million, +7.1%;
• Route charges: €410.6 million, +22.1%;
• Labour: €376.1 million, +12.3%;
• Operating profit: €488.2 million, +21.4%;
• Profit before tax: €420.9 million, +23.4%;
• Total assets: €8,596 million, +13.7%;
• Cash and cash equivalents: €2,028 million, +37.2%;
• Total liabilities: €5,642 million, +19.7%;
• Passenger numbers: 72.1 million, +8%;
• Load factor: 83%, +1 ppt;
• Average fare: €39, +12%;

Ryanair's forecast for 2012 (April 2011-March 2012) is mixed with a 10% growth in the first and then a reduction of 4% in the second giving an overall 4% growth to 75 million passengers. The first half figures (April-September) will be boosted by the late Easter and modest prior year comparables due to volcanic ash disruptions last April/May, but will be impacted by a 40% increase in first quarter fuel costs due to volume increases and favourable hedges in last year' first quarter. Due to higher oil prices they expect operating cost per passenger to rise by 13% in the 2012 financial year. Excluding fuel, sector length adjusted unit costs will rise by just 2% due mainly to Eurocontrol and Staff cost increases. Ryanair say that due to "limited visibility on bookings" they "remain concerned at the impact of the recession, austerity measures, and falling consumer confidence on fares". They expect that their average fares will rise by up to 12% this year due to a better mix of new routes and bases, slower traffic growth, and higher competitor fuel surcharges. However, these higher fares will only help to finance higher fuel and rising sector length related costs, and accordingly, they expect profit after tax for FY12 to be similar to the FY11 result of €400 million.

Despite the strong result, Ryanair shares fell 5% in Europe although this was in line with other airlines on the date mainly due to the highly conservative outlook and Michael O'Leary warning of difficult trading conditions in the current year. Nevertheless, revenue growth outpaced growth in operating expenses albeit slightly and for a second consecutive year by any standards a notable achievement.

The underling concern amongst analysis and indeed Ryanair itself is the effects on rising average passenger revenues (made up of fares and various 'extras') and how this and higher fuel prices will impact on growth. Ryanair has increased its fees for checked-in baggage during the summer months from £15/€15 to £20/€20 per bag and extended the period the increased charges apply by almost two months. Last year the airline increased the charges associated with checking in bags in July and August by the same amount but this year the period covered by the higher charges runs from 1st June to 21st September and from 21st December to 4th January.

Ryanair believe higher oil prices will force competitors to continue to increase fares and fuel surcharges which makes their own fares more attractive. Higher oil prices could lead to further consolidations, increased competitor losses, and more airlines going broke. This they believe creates further growth opportunities for Ryanair and so they expect to increase market share and expand into new markets. This in itself is a risky strategy as it presupposes that airlines that fail have business that Ryanair can pick up or it is at levels that support the large aircraft they operate. Ryanair is 90% hedged for FY12 at $820 per tonne (approx. $82 per barrel), a 12% price increase on last year. While this is significantly below current prices, Ryanair have suffered in the past from bad fuel hedging policies and this and the rate of exchange could cause them difficulties in the future.

With some airports refusing to offer lower charges and the number of potential high volume routes diminishing Ryanair believe it is more profitable to tactically ground up to 80 aircraft (double that of last winter) rather than suffer losses operating them at low winter yields. This is also reflected in the paucity of new route announcements with just two route announcements since our last report. Both of these concerned Leeds Bradford. There are also weekly spats with various airports threatening reductions or pull outs. Local press are also speculating that Ryanair may be planning to wind down its operation at Reus where a contract with the airport and the regional government gives it €3.5 million per year up to the end of 2014 on condition of a minimum 28 summer destinations. Ryanair is believed to be looking for reduced charges or an extra €12 million. With airports increasingly playing hardball Ryanair's very business model of high volume low costs flights may become unsustainable. O'Leary himself has said that it is "likely" Ryanair is changing from an airline that increases earnings by adding volume to a "slower-growing" airline that increases earning through higher yields. He warned in 2010 the airline's "pile it high and sell it cheap" approach would inevitably change because slower rates of growth will need to be balanced with higher fare revenue. If the fundamental business model is to change where to then?

At the moment things look OK with Ryanair reporting booked passengers in May up 11% to 7.15 million, however there are obvious distortions due to passengers who were booked and whose travel was disrupted by the volcano in Iceland. Booked seat factor was up 1% to 82% and passengers for the last 12 months were 74.9 million. As noted above numbers of aircraft remain unchanged at 272 aircraft in the active fleet (out of a total of 308 delivered). The last aircraft, EI-EPH was delivered on 1st April. Michael O'Leary has stated that after Ryanair takes delivery of its final Boeing in 2013, it will not be taking on new aircraft until 2016 "at the earliest". He has said that the airline is in talks with Russian and Chinese aircraft manufacturers, as he isn't "getting anywhere with Boeing". As we closed for print there were reports quoting a Comac (Commercial Aircraft Corporation of China Ltd) official that Ryanair will sign a memorandum of understanding with Comac on 21st June to co-operate on the Chinese C919 narrowbody scheduled to enter service in 2016. The agreement is scheduled to be signed at Comac's new European office in Paris due to be officially established on 19th June and would see both parties collaborate on the design and configuration of the C919. What this means in terms of future orders is unclear.

In other news a jury at the High Court has awarded former Miss World Rosanna Davison €80,000 in damages after finding that she was defamed by Ryanair in a press release issued by Ryanair in November 2008, which described her comments about the airlines charity calendar as bordering on racism. It awarded her €40,000 in compensatory damages and a further €40,000 in aggravated damages. Aggravated damages relate to how the airline defended the claim. In a statement Ryanair said 'the jury award damages is less than the cost of an appeal to the Supreme Court we have decided not to bother appealing as we are very happy with this outcome.' The case took five days, so the legal costs will be already be high. Outside of court Ryanair was more successful in its appeal to the UK Civil Aviation Authority (CAA) which found that Gatwick Airport was failing to comply with its obligations under the Transparency Condition by not providing airport users with sufficient information to show how the airport determined its charges for check-in desks and associated baggage facilities. The ruling follows Ryanair's successful 2009 complaint against Gatwick Airport's opaque pricing system. This latest decision of the CAA comes just two weeks after the CAA ruled that Gatwick Airport has applied discriminatory charges for check-in facilities. In a comment Ryanair's Stephen McNamara said "We welcome another enlightened decision from the CAA which recognises that passengers and airlines must not be forced to pay for facilities and infrastructure they do not use.

Finally, Ryanair was forced to issue a press release on the 13th June warning job seekers about a 'Ryanair jobs' email scam which tries to dupe people into paying for visa applications in order to apply for a job with Ryanair. While Ryanair is recruiting up to 1,500 additional pilots and cabin crew this year, the majority of these jobs will be filled by those who train with one of Ryanair's approved recruitment partners, which are listed on www.ryanair.com/ie/careers/job. Ryanair has advised anyone receiving an email from " This e-mail address is being protected from spambots. You need JavaScript enabled to view it " not to reply. This is the second time in a month that Ryanair has been targeted by scammers. On 9th May it warned of a fraudulent email scam which attempted to dupe people into paying £500 (€565.92) for delivery of a 'Ryanair car promo' claiming the email recipient has won a car in a Ryanair scratchcard draw. This followed the high profile incident in which three Ryanair passengers on one flight, from Milan to Madrid, each winning a €13,000 car after buying a €2 Ryanair scratchcard as a result of a printing error.