€1bn payout for Ryanair shareholders

RYANAIR shareholders are in line for a €1 billion payout as the airline rules out a further Aer Lingus bid and hints it could slightly raise its full-year earnings forecast.

The airline, which first sold stock 13 years ago, has never paid a dividend, but it intends to make a one-time payment starting at the end of its fiscal year in March 2013.

Chief executive Micheal O’Leary said: “We expect our current cash reserves of €2.5bn to grow substantially by March 2013 and we plan to distribute surplus cash to shareholders from that date.

“We expect the distribution to be lumpy and irregular. What I don’t want people to do is to start putting in an annual dividend stream.”

The move follows the collapse of negotiations with planemaker Boeing regarding an order for 200 aircraft that would have been delivered from 2013 until 2016.

Annual capital spending in fiscal 2013 will fall to €100m a year from €1.2bn as spending on aircraft falls.

Analyst Howard Wheeldon of BGC Partners believes that Ryanair has “got the market wrong” and overexpanded, so it no longer needs the proposed big order from Boeing.

He also said given Ryanair has not paid a dividend before he questions why shareholders should believe that this promise of cash would actually materialise in three years’ time.

A Dublin-based equities trader also told Reuters that Mr O’Leary could still be trying to exert pressure on Boeing and he could also reevaluate his position on Aer Lingus.

“It’s really hard to judge the guy or to work him out; he’s a good card player,” the trader said.

In an investor update yesterday Ryanair also said a third bid for Aer Lingus is “highly unlikely” as long as the Government continues to control 25% of the former state airline.

“We have twice made an offer to the Government at ludicrously generous pricing terms to acquire their share in Aer Lingus,” Mr O’Leary said.

“We’re not going to try and persuade them for a third time.”

Mr O’Leary also reiterated that he’s likely to step down as chief executive in two or three years.

Ryanair said it could slightly raise its full-year earnings forecast after a strong third quarter.

Its passenger traffic in December was up 12% from a year ago. The 2009 total was up 13% at 65.3 million passengers. The load factor, a measure of average seats filled, rose 2 percentage points to 82%.

Ryanair also announced it had hedged 50% of its fuel requirement for the year ending March 2011.

The airline also backed down yesterday from a threat to ground its domestic flights in Italy after aviation officials agreed to limit the types of ID documents passengers can show at airport gates.

Under a deal with Italy’s civil aviation authority passengers flying Ryanair will still be required to show a passport or a national identity card when boarding domestic flights, the carrier said.

Ryanair shares fell 2% to €3.46 yesterday.