Ryanair shares climb 7% as it pegs fiasco costs

Ryanair shares jumped more than 7% as the airline pegged back the costs of its pilot-rostering fiasco and said it would still reach full-year earnings targets.

The shares have still slumped by a significant amount and have underperformed rivals, including Easyjet and IAG, which owns British Airways and Aer Lingus, since the rostering fiasco started over a month ago. The airline posted an after-tax profit of €1.29bn for the six months to the end of September which was up 11% on the same period last year.

First-half revenues were ahead by 7% year-on-year, at €4.42bn.

Ryanair carried 72.1 million passengers in its first half, up 11% year-on-year and still sees it being well on course to meet its targets of 200 million annual passengers by 2024.

However, passenger growth is expected to slow in the short-term. Management now expects to carry 129 million passengers in the current financial year to the end of March, down 1.5% on previous guidance, and 138 million the following year.

The company doesn’t see its full-year earnings being affected by the recent rostering and cancellations fiasco — although costs will rise — with management maintaining its guidance for an after-tax profit, for the 12 months to the end of March, of somewhere between €1.4bn and €1.45bn.

That helped boost the airline’s shares yesterday, but there was an element of caution amongst analysts.

“Ryanair’s rostering failure is not without cost. Our forecasts are likely to go to the bottom end of the range for 2018 and we expect broadly flattish net earnings for financial year 2019, given fuel headwinds,” said Davy despite maintaining its own ‘outperform’ rating on the Ryanair stock.

Ryanair chief Michael O’Leary said the airline is not short of crews with 4,200 pilots on its books. It has hired more than 900 new pilots since January.

He said management “deeply regrets” September’s flight cancellations and changes to the winter schedule which affected around 700,000 customers.

However, he said much of the damage caused has since been repaired through refunds or offering customers rebookings.

Mr O’Leary said the rostering failure has challenged management to address its competitiveness in terms of what it pays and how it treats its pilots.

He said Ryanair will move from being competitive to offering materially higher pay “with better career prospects, superior rosters, and much better job security than Norwegian, among others, can offer”.

“We expect these measures — if and when accepted by all our pilot bases — will add some €45m to our financial year 2018 crew costs, and up to €100m in a full year, but will not significantly alter the substantial unit cost advantage we have over all other EU airline competitors,” he said.

The rise in costs which will also include €25m related to recent flight cancellations will be offset, to some degree, by fare reductions likely to be less than anticipated.

Ryanair now expects a 4%-6% fall for the current financial year, as opposed to 5%-7% as previously guided.

Ancillary revenues were also stronger than expected in the first half rising by 14% to just over €1m.

It generated net cash of €937.3m in the first half and had €599.6m net debt.


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