Ryanair fares to rise 10% after profits dive over ash cloud disruption

RYANAIR expects fares to rise by up to 10% this year, as first quarter profits fall 24% due to the volcanic ash crisis.

The airline said it is launching a court case in the next couple of weeks in Ireland challenging regulations where airlines have to pay compensation to passengers due to an act of God disaster. The airline said it will argue travel insurance companies paid nothing as a result of the volcanic ash crisis but the airlines were made the insurers of last resort.

Ryanair said it had already paid out on more than a million ticket refunds. It still has up to 120,000 claims for food and accommodation to deal with, it said.

Research from the BBC found claims to airlines as a result of the ash crisis included a week of lobster dinners and the hire of a private jet. Ryanair’s shares closed up 1.3% in Dublin yesterday at €3.83.

When reporting its quarter one results yesterday it said summer fares are up by as much as 15% and fares rose by 5% in the first quarter. The airline said a €50m hit from the ash crisis meant pre-tax profits for the company’s first quarter to June 30 fell to €104.6m from €134.6m a year earlier. Sales however gained 16% to €896.8m.

Ryanair cancelled 9,400 flights for 1.5m passengers after the volcanic eruption.

Bloxham economist, Joe Gill said: “The second quarter is the bumper quarter, and if you can raise fares by that much it gives you a huge tailwind going into the year end. It says something when you’re able to put up fares aggressively when you’re putting in extra seats.”

Ryanair maintained its forecast for the full year, predicting net income will rise as much as 15% to a range of €350m to €375m. The carrier estimates it will carry 73.5 million passengers this year, excluding the impact of the disruption caused by volcanic ash.

Chief executive Michael O’Leary said he continues to see “enormous opportunities” to grow the business across Europe.

First-quarter fuel costs rose 34% to €286.6m after the price of oil rebounded as the global economy pulled out of recession.

The carrier has hedged 90% of its fuel needs for this fiscal year at an average price of $730 per ton, and 90% for the fiscal year ending in 2012 at an average price of $755 a ton.

The rise in fuel costs were in part offset by lower airport charges as competition for business increased amongst European terminals following the recession, Ryanair said. The carrier’s airport and handling fees fell to €116.2m from €116.7m, even as it expanded its fleet.

Ryanair said plans are still in place to a pay a €500m dividend this October after scrapping a plan to expand its fleet by buying more planes from Boeing.


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