Profits rise but Ryanair shares fall

SHARES in Ryanair slid by nearly 3% yesterday despite the airline announcing a 6% rise in third-quarter profits.

The airline, Europe’s largest low cost carrier, said net profits in the three months to end December 2005 were €36.8 million, compared with €34.8m in the previous year.

However, the shares fell as the airline reiterated that it is sticking with its forecast of full year profits of around €295m, despite some analysts expecting the airline to exceed €300m. The shares fells as much as 37 cent, or 4.8%, at one point yesterday. They ended the day down 20 cent at €7.52.

Morgan Stanley analyst Menno Sanderse said: “The numbers are in line with expectations but the market may be disappointed by the lack of an upgrade for full-year forecasts.”

In the third quarter, the airline carried 8.6 million passengers, 26% more than in the comparable period a year earlier. The increases led to revenues rising 27% to €370m.

The airline said it had seen strong growth across its route network, though it was disappointed with the performance of some destinations served from Shannon Airport. It expects to carry around 35 million passengers by its financial year end in March, but growth will be pegged back by the late delivery of new Boeing aircraft which had delayed the opening of new routes.

“As anticipated, yields were flat during the quarter despite a 27% increase in seat capacity and continued intense price competition across the route network,” Ryanair chief executive Michael O’Leary said. “The multiple fuel surcharges imposed by European flag carriers remain and have maintained the wide gap between their high prices and Ryanair’s low fares.

“Our ‘no fuel surcharges’ guarantee to our passengers has enabled us to launch more new routes, deliver significant traffic growth and higher profits,” he said.

Oil prices remain a concern for Ryanair, but no decision has been made on whether to hedge out fuel for the next 12 months. The company’s fuel bill in the third quarter soared by 59% to almost €115m.

Excluding fuel, Ryanair’s cost base fell 3% in the quarter and the airline said it will continue to reduce costs. The introduction of charges for carry-on luggage should result in lower costs, it said.

“These are a solid set of results, with impressive volume growth and cost control. Guidance remains cautious and assumes a final quarter profit of €21m compared with €31m in 2005,” NCB Stockbrokers analyst John Sheehan said.

“Fuel poses a major challenge entering 2006/2007, but recent moves to save €30m in baggage handling costs, etc, should partly mitigate this increase.”