Ryanair shares fall despite airline raising profit guidance

RYANAIR’S SHARE price fell by 3.8 per cent in Dublin yesterday in spite of the airline increasing its profit guidance for the current financial year.

Ryanair said better winter yield forecasts meant it now believed its net profit for the year to the end of March 2011 would be in the range of €380 million to €400 million. Its previous forecast was €350 million to €375 million.

The update came as Ryanair published its half-year and second-quarter results.

Revenues rose by 23 per cent to €2.18 billion in the first half, while after-tax profit was up 17 per cent to €451.9 million.

This indicates that Ryanair expects to make a loss of at least €52 million in the second half of its financial year.

These were strong results in light of disruptions from the volcanic ash from Iceland and strikes by air traffic controllers in Belgium, France and Spain.

However, the airline’s net profit in the second quarter – €330.3 million – was slightly lower than consensus analyst expectations, with the result that the airline’s share price softened yesterday.

Passenger numbers rose by 10 per cent in the first half of the year to 40.1 million, while its load factor was flat at 85 per cent.

Its average fare – which includes a fee for checked-in luggage – rose by 12 per cent to €44, which the airline said was largely attributable to increased sector lengths as a result of adding flights to Malaga, Faro, the Canary Islands and Malta.

Its average revenue per passenger – which includes on board sales, car hire and other ancillary charges – also rose by 12 per cent to €54.

A number of cost pressures were evident in the results. Its fuel bill rose by 44 per cent to €660 million due to higher prices and increased activity. Staff costs increased by 13 per cent to €190.7 million.

This was the result of a 13 per cent rise in its average headcount to 8,007.

Its route charges were up 28 per cent at €221.7 million.

In a conference call with analysts in London yesterday, Ryanair chief executive Michael O’Leary said the airline’s pay freeze was unlikely to be extended into a third year.

“I think we will have to commit to a very modest pay increase next April, but it will be of the order of 1 to 2 per cent,” he said.

“It won’t be 4 or 5 per cent. To be fair to most of our people, job security at this point in time is more important to them than a pay increase.”

On a positive note, Ryanair has reduced the expected financial hit from the volcanic ash crisis from €50 million to €31.7 million.

Ryanair also had strong cash balances at the end of the half year – just more than €3 billion.

This has since been diluted somewhat with the payment of a €500 million dividend to shareholders on October 1st.

Mr O’Leary said the half-year results “demonstrate the robustness” of Ryanair’s business model.

However, he “remains cautious” about the outlook for the remainder of its financial year as “we have little visibility on Q4 [fourth quarter] yields”.

Mr O’Leary once again called for the “crazy” €10 air travel tax in Ireland to be scrapped to help boost tourism here.