Ryanair profit to rise as Lufthansa counts costs

Ryanair is expected to post after-tax profits of €320m when it publishes first quarter results early next week.

The figure, forecasted by Goodbody Stockbrokers, would represent a 25% increase on the same period last year. Ryanair publishes results for the three months to the end of June on Monday.

In May the airline posted strong full-year figures for the 12 months to the end of March showing a 6% rise in post-tax profits to nearly €1.32bn; a 2% rise in revenue to €6.65bn; a 14% increase in earnings per share and a 13% improvement in passenger numbers to 120m.

Ryanair has already guided for weak yields for its current financial year — down 5% for the first half and falling 8% in the second half. However, analysts are now expecting better-than-expected figures next week.

“Recent market commentary suggested that the company has, in fact, been talking about first quarter yields actually being up year-on-year, in part helped by the timing of Easter this year. As such, we think there is upside to Ryanair’s previous guidance and would be disappointed if the release didn’t report as such,” said Goodbody aviation analyst Mark Simpson.

Goodbody also said it expects EasyJet to post a 2.3% annualised fall in third quarter yields (on a constant currency basis) when it reports tomorrow. It added the pending exit of chief executive Carolyn McCall, who is leaving at the end of the year to take over as ITV chief executive, will bring “the possibility of a new focus on costs”.

“With passenger statistics for the three months to June providing the solid demand backdrop for Wizz Air, EasyJet and Ryanair, we await to hear the outrun on yields for the quarter from upcoming results. Wizz Air and EasyJet guided for an improvement in reported yields while Ryanair suggested a -5% for the first half to the end of September. A positive release by all will lead to forecast revisions to the upside and, in our opinion, further positive price moves,” said Mr Simpson.

Ryanair shares were up marginally in Dublin yesterday.

However, elsewhere, Lufthansa’s share price fell from nine-year highs as the German airline looked poised for a difficult second half with pressure on fares set to intensify amid a struggle to rein in costs.

Lufthansa shares fell as much as 4.3%, the steepest intraday drop since April 27, even after the carrier raised its 2017 operating profit forecast. While first-half earnings almost doubled on stronger traffic, investors focused on the airline’s lingering need to confront lower-cost rivals. Lufthansa’s last two monthly traffic reports showed fare growth was “positive”. Those gains are coming to a halt, with the second-half trend for unit revenue, a measure of pricing per seat, set to be “negative,” the airline said.

First-half earnings surged to €1.04bn from €529m a year earlier, prompting Lufthansa to forecast profit will rise this year instead of an earlier prediction of a decline. Unit costs, or operating spending per seat excluding fuel and currency effects, fell 1.2% in the period and will continue declining in the second half.

Even if the carrier succeeds in reducing unit costs at its Eurowings subsidiary, the division’s spending per seat will still be far higher than at budget competitors.

Additional reporting Bloomberg

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