Ryanair’s profits rise by 16%
The low fares airline said after-tax profits for the six months to end September were €175.5 million, ahead of expectations even though some routes out of Scandinavia and France had fewer than anticipated passengers and average fares, or yields, were down 12%.
Part of this reduction was due to the weakness of sterling against the euro and from the aggressive price-cutting to sell seats on the new routes.
However, Ryanair’s commercial director Michael Cawley said yesterday that the airline was in discussions to pull out of Aarhus, Oslo and Tampere and two French destinations if passenger traffic does not pick up. These would be replaced by new routes.
“Each year for the next number of years we are going to take two or three of the worst-performing routes and stop them.”
Revenues for the six months was ahead by 28% at €596.4 million with passenger numbers up 45% at €11.3 million.
Full-year yields will drop between 10% and 15%, though profit and passenger growth will outstrip this decline. The airline is on course to fly 24 million passengers this year.
Operating costs increased 32% in the six months, causing net margins to decrease 3% points to 29%, though this figure is still well ahead of any other airline in Europe.
Mr Cawlay said fears that the load factor (the amount of seats per flight its fills) was dropping too quickly is not a major concern as it was associated with the aggressive growth of Ryanair in the past two years. The load factor fell 5% to 83% at the half-year stage, though it was expected to improve.
"The emphasis on this fall of 5% is completely misplaced. And we will fix it anyway in the next six to seven months when these routes mature."
Ryanair is also planning another major European base, in either Spain, France, Germany or Britain as part of its continuing route expansion plan.
“We have four continental bases and we will be announcing another one in five or six weeks which will open in February or March next year,” Mr Cawley said.
Ryanair also said that it is in final discussions with banks to secure cheaper financing for some of the 40 or so new Boeing 737-800 aircraft to be delivered over the next 18 months.
"(In 2006 or 2007) we think we will own two thirds of the aircraft and lease a third of the aircraft," said chief executive Michael O'Leary at a press conference in London.
Following the result yesterday Davy Stockbrokers raised its full year profit forecast to €270 million.
