Ryanair raises forecast for earnings after strong start
The low fares carrier had expected profits in the current financial year, which ends on March 2008, to be about 5% up. But it has upgraded the forecast to growth of 10% following after a strong start to the year.
The positive trading outlook saw Ryanair shares gain as much as 15% yesterday.
The airline said yields, or average ticket prices, in the quarter were roughly the same as a year ago. The airline had expected a fall of up to 5% but yields held up, partly due to the Easter holidays falling during the quarter this year.
Ryanair’s finance director Neil Sorohan said while the yield performance in the quarter was strong, the airline was not expecting a similar outturn for the rest of the year.
“Yields will probably drop back a bit in the second quarter but what will happen in the third and fourth quarter is anybody’s guess. It could be horrible for all we know. We could see fares discounts from all airlines, which means yield could drop 10%,” he said.
The airline said delivering the rise in profits was dependent on the “accuracy” of its forecast for a decline in yields in the second half of the year.
After-tax profits in the three months to end June were 20% ahead at €138.9 million.
The rise in profits was led by an 18% rise in the number of passengers to €12.6 million and higher revenues ancillary revenues.
Revenues in the three months were 22% higher at €693m. Of this €117.1m came from the sale of ancillary revenues, including insurance, car hire, onboard sales, baggage charges and online check-in fees.
Ancillary revenues were up 53% compared to the first quarter of last year. Ryanair hopes to grow ancillary revenues to 20% of the total from 17%.
Analysts at Citigroup attributed part of the strong revenue performance from the increase in cost of checking in baggage from €3.50 to €6.
The airline said cost growth for the rest of the year will be lower than expected as it cuts back on non-profitable flights over the winter months.
It has also hedged out its fuel bill over the winter at discount to the market rate and will benefit from the weak dollar.
Earnings per share in the first quarter were up 20% to 8.98 cent.
Ryanair shares closed up 58 cent at €5.29, a gain of 12.4%.
