|Ryanair again post excellent results based on improved yields (December 2011)|
|Thursday, 01 December 2011 00:00|
Ryanair has again announced excellent results, this time a 20% increase in half year profits to end of September 2011. The figures released on 7th November show profits grew to €544 million on the back of increased revenues of 24% to €2.7 billion although traffic grew by only half of that at 12%. Average fares increased 13%, the same unit costs which rose mainly to longer sectors and a 37% increase in fuel costs. According to Ryanair excluding fuel (and we would all love to), sector length adjusted unit costs did not increase at all! Not surprisingly and based on these figures Ryanair raised their full year net profit guidance by 10% from €400 million to €440 million, subject to the final outturn of Q4 yields. Ryanair’s capacity cuts will mean that traffic in second half of the year (H2) will fall by 4%. It could be even higher as for November they expect to report a traffic decline of 10% or almost 500,000 passengers as they ground up to 80 aircraft “due to higher oil prices”. While this trend could continue over the winter, Ryanair still expect H2 yields to rise by up to 14%, better than the 12% previously guided. In summary, Ryanair delivered robust traffic and profit growth despite, significantly higher oil prices, and an economic downturn in
Ryanair’s CEO, Michael O’Leary of course attributes the 20% increase in the half year net profits to “the strength of Ryanair’s lowest fare/lowest cost model” when of course it is the higher yields and the better capacity management of its routes and bases reflecting the seasonality that is part of any European airline. Ryanair explains the 13% rise in average fares from €44 to €50 as “due to slower growth .... as well as rising competitor fares/fuel surcharges”. This figure “which includes optional baggage fees” is in fact being increased because Ryanair believes the market can bear it. Revenue per passenger increased 11% from €54 to €61. Ancillary sales rose 15% to €487 million, again faster than traffic growth. In order to maintain ancillary revenue, they extended their reserved seating trial from 40 to 80 routes, and will continue to expand it if it remains successful. They also launched their somewhat controversial ‘Cash Passport’ Mastercard prepaid card in the
On the cost side, unit costs increased by 13% primarily although total operating expenses increased significantly more than that from €1.67 billion to just over €2 7 billion. There was a 37% rise in fuel costs but excluding fuel sector length adjusted unit costs were flat. Ryanair say that they continued to rigorously control costs despite a 2% pay increase, higher Eurocontrol fees, and “substantially higher charges at
Some thoughts from the Analyst briefing and Conference Call
Ryanair held their Analyst briefing and Conference Call on the day the results were released and the discussion sessions showed an enthusiasm for fare increases, while there was much talk about the fleet routes and airport charges. The new route/base focus has shifted a bit from
Route growth “will be driven by exceptional airport deals”
While its new routes and bases continue to perform well, Ryanair have said that growth “will be driven by exceptional airport deals”. Its 45th base in
In summer 2013/4 Ryanair, Michael O’Leary has said they will begin to 'churn' bases and routes to cut underperformance and to free up capacity for opportunistic deals. 2013 summer schedule work in now in progress but there will be no agreements with airports until February 2013. ‘Churning’ is already underway in
“No new Ryanair aircraft order for a year or two”
In spite of all the hype, Ryanair have finally confirmed that there will be no new aircraft orders for a year or two. This is because the aircraft market locked up to 2015 by Airbus/Boeing although there are questions regarding the viability of the manufacturer order books as customer financing is drying up. There has been a “step change” in the aircraft value cycle and the value of second hand aircraft remains very weak. In spite of this Ryanair believes that there will be no new EU airline start-ups in the next 12-18 months due to the lack of finance.
The fleet at end of September was 277 aircraft with 35 on firm order up to end March 2013 when the fleet size will be 305 units net of lease hand-backs. This is an increase on previous numbers, with sales of six aircraft in 2012/13 no longer included. These could be used for “opportunistic deals” with airports should these emerge as Ryanair has said it will not use leasing companies to add to capacity. Ryanair is still enthusiastic that state-backed Commercial Aircraft Corporation of
The delivery of the five aircraft leased from Avolon (EI-ESL/M/N/O/P) brought total deliveries to 313 and taking disposals of 36 into account, this gave the total of 277 at end of September. Two further aircraft have since been disposed off. EI-DCT which was registered as N840AC on 7th September before becoming HS-DBA with Nok Air. She was ferried Shannon-Cairo on 27th October as the NOK6904 on delivery to Nok Air arriving in Utapao on the 28th. EI-DCV which became N845AC on 19th October was rolled out in
Strong balance sheet
Ryanair’s balance sheet remains one of the strongest in the industry with €3.1 billion in cash despite returning €931 million to shareholders over the past three years. They have significantly reduced net debt during H1 from €709 million to €372 million despite another €85 million share buyback. Ryanair has taken advantage of lower interest rates to fix almost 60% of its existing debt for the next 7 years at “all in” rates of just over 3.7%. In addition their long term dollar hedging programme will ensure that all 35 Boeing deliveries in calendar 2011 and 2012 are funded at €/$ exchange rates of 1.43, significantly better than current rates.
Ryanair carried 7.27 million passengers in October, up 4% from 7.02 million a year earlier. Its load factor slipped by one percentage point to 84%. In the year to October, it carried 77.1 million passengers, with an average load factor of 82%.
Raising more revenue
Ryanair is always looking at ways to earn extra revenue. it is looking to fit its aircraft with wireless technology, which is already offered on some domestic
Four heads are better than one!
Michael O’Leary was one of four leading airline chief executives who came together to call on George Osborne to scrap the Air Passenger Duty arguing that its negative impact on the UK economy is outweighing any benefit from the revenue raised. Together with Carolyn McCall from easyJet, Willie Walsh from IAG, Michael O'Leary from Ryanair and Steve Ridgway from Virgin Atlantic they have written to the Chancellor highlighting that passenger numbers at UK airports have fallen consecutively for the last three years to a level lower than 2004. In 2010, there were 7.4 million fewer passengers in the
Ryanair’s cabin crew have again stripped off for the airline’s fifth charity calendar which was fortunately shot in Lanzarote given the scantily-clad female cabin crew. . Proceeds from this year's ‘Girls of Ryanair’ calendar, will go to DEBRA, chosen from nearly 400 applicants, which provides support for patients suffering from epidermolysis bullosa (EB), a genetic skin condition. Ryanair hopes to raise around £85,000 for it through sales of the calendar, which costs £8.50 and can be purchased on board Ryanair flights, from DEBRA’s charity shops in
on 02-06-2013 at 09:00
at Ballyboy Airfield - (EIMH)
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