Ryanair cautious in run-up to expansion

Ryanair is leaving guidance for its full-year profits unchanged at somewhere between €570 million and €600 million, and is being cautious about traffic growth, pitching the figure at 3 per cent for a total of 81.5 million passengers.

The current quarter – which began this month – could suffer by comparison with last year as there is no London Olympics. At the same time, the heatwave in northern Europe led to a softening in bookings from Ireland and Britain, although they remained in a healthy state everywhere else.

The first quarter, for which it reported results yesterday, suffered because of the lack of Easter, which fell in the last weekend of March, the end of Ryanair’s previous financial year. Fuel costs were also up, by 18 per cent at €577 million, while overall the airline expects to pay €200 million more for fuel this year. At the same time, it says it has no visibility on its likely earnings from its winter bookings.

None of this is particularly bad news. Nor is it unexpected, the airline flagged up most of these issues in a trading statement last month. The issues are much more related to the ups and downs of its business than anything else.

It has no control over the timing of Easter or where the Olympics will be held. It has hedged its fuel risk, at $98 a barrel for 96 per cent of this year’s needs and $93.50 for 70 per cent of its likely 2014/15 consumption.

Ryanair tends to err on the side of caution when giving full-year guidance, but it may be that the airline is heading into a period of modest growth ahead of the expansion that is likely to follow when its new Boeing craft arrive.

It will begin taking delivery of the first of the 175 Boeing 737-800s that it recently ordered from the US manufacturer in September 2014. The impact of this is likely to start feeding through in the following financial year.

The order will leave it with 410 craft in service and a target of carrying 110 million passengers in its 2019 full year. The extra aircraft and the intention to grow traffic past 100 million will require additional services, routes and airports. Ryanair appears to be preparing for all of this.