Ryanair profits reach new heights

RYANAIR profits are expected to jump by more than 42% when the low cost carrier announced first quarter returns next Tuesday.

The harp as opposed to flag-carrier seems certain to build on its phenomenal growth of recent years. Analysts are forecasting a 42% increase in after tax profit to 33 million compared with 23.2 million for the same period last year.

The no-frills carrier is the most profitable airline in Europe but is no longer the biggest budget airline after Easyjet’s buyout of Go earlier this year. Always master of its own PR, the airline has said it will carry 365,000 passengers this bank holiday weekend, a jump of 45% over last year’s figures.

With the announcement that a second terminal will go ahead at Dublin Airport, Ryanair could enter a new phase and analysts and investors are eagerly waiting to see what input the airline might have in some part of owning or operating the independent facility. Although the terminal is a long time away yet, the new low-cost Pier D is due to be completed by end 2003.

Chief Executive Michael O’Leary welcomed the announcement but added that Irish tourism had suffered as a result of five years of monopoly protectionism in a direct jibe at Mary O’Rourke’s tenure as Minister.

The airline headed up by the flamboyant O’Leary is expanding further in the next year. Its third European hub has opened at Frankfurt-Hahn and Ryanair is now in talks with six other European airports with a view to establishing a base there next February.

While a flood of discounted fares which were issued to encourage passengers to use Frankfurt-Hahn will dilute revenues, analysts point out that the load factor which measures the capacity of a flight has risen substantially.

The current quarter runs from July to September and is perennially the busiest time of the year for airlines. Last year, Ryanair made 44% of its profits in this period and investors are anticipating a trading statement along with next week’s figures which will give an indication of how this year’s downturn in the tourism industry is affecting Ryanair. The key issue will be the rate of the declines in fares in this crucial second quarter according to Goodbody Stockbrokers.

Next week, Ryanair is holding an egm to vote on purchase of as many as 150 Boeing planes. John Mattimoe, analyst with Merrion Capital says this is a very positive deal for the company as it locks in the physical capacity for Ryanair to deliver its expected growth at a continued low cost.

“The reason it’s such a highly rated stock is because it’s expected to grow at 20 to 25% per annum for the next ten years.”

Ryanair’s share price has not escaped the volatility of the past two months and it is currently at 5.90, compared to 5.99 in June and 6.95 at the beginning of the year. While its market cap has fallen as a result of this slide, it has not suffered as badly as some of the other Irish stocks particularly the financials and in fact, its share of the Iseq has increased from 6.31% on January 2 to 7.72% today.