Ryanair Q3 Loss Reduced From €102m To €11m
FARES FALL 12%, TRAFFIC GROWS 14% TO 16m PASSENGERS,
RAISES FULL YEAR NET PROFIT GUIDANCE TO €275m
Ryanair, Europe’s largest low fare airline today (1 Feb) announced a Q3 loss of €11m down from a loss of €102m in Q3 last year. Revenues rose by 1% to €612m, as 14% traffic growth was largely offset by a 12% decline in average fare. Unit costs fell by 23% (excluding fuel they fell by 4%) despite a 3% increase in sector length.
Summary Table of Results (IFRS) - in euro
Announcing these results Ryanair’s CEO, Michael O’Leary, said:
“Our Q3 loss of €11m is disappointing although better than expected, and a significant improvement on last year’s Q3. These numbers are distorted by a 37% fall in fuel costs which offset a 12% decline in average fares. Yields fell by 12% which was better than anticipated due to an improved mix of new routes and bases this winter and deep cuts in loss making winter capacity at high cost airports such as Dublin and Stansted. Ancillary revenues grew by 6%, slower than the growth of passenger volumes due to changes in consumer behaviour.
Over the past few months we have witnessed the demise of Blue Wings (GER), Flyglobespan (UK), Sky Europe & Seagle Air (Slovakia), and My Air (Italy) and we expect further casualties this winter. We are increasing market share particularly where we compete with the big three high fare flag carrier groups led by Air France, BA and Lufthansa. Market conditions remain difficult, although the increasing pace of consolidation and closures among our competitors allied to Ryanair’s continuing fleet expansion will lead to further market share gains this year in particular in Italy, Scandinavia, Spain, and the UK.
Our passion to lower costs has resulted in unit costs excluding fuel falling by 4% despite a 3% increase in ave. sector length. Fuel costs fell by 37% to €207m reflecting the benefit of lower oil prices and we recently extended our hedging for fiscal 2011 with 90% of the first 3 quarters and 25% of Q4 now hedged at $720 per tonne.
Capacity cuts by many of Europe’s flag carriers have led to traffic falls at most European airports. This has created opportunities for Ryanair to grow as many airports are vigorously competing against each other to win Ryanair’s growth. This aggressive competition has resulted in our airport and handling costs per passenger falling by 11% (despite increases in Stansted and Dublin) and we will continue to launch more of these new low cost routes and bases in the coming year.
Despite the recession airport monopolies like the BAA and DAA continue to abuse their monopoly position. The sale of Gatwick will lead to much needed competition in the London market; however, the recent decision of the Competition Appeals Tribunal will regrettably delay the sale of Stansted and a Scottish airport. These disposals as recommended by the Competition Commission are necessary and urgent in order to increase competition and ensure a better deal for consumers by lowering costs and
delivering more efficient airport facilities which the BAA monopoly and the hopeless CAA regulator have repeatedly failed to deliver.
In Dublin the abject failure of the Irish Govt’s transport policy (which involves protecting the DAA monopoly at all costs), is now being exposed. Last April the Govt imposed a €10 tourist tax on all flights from Ireland. Traffic at Dublin Airport promptly collapsed by over 3m passengers (-13%) during a year when Ryanair’s total traffic grew by 7m. Instead of responding to this collapse by scrapping tourist taxes and lowering airport costs as other EU Govt’s have, the Irish Dept of Transport have responded by ordering – yes ordering – the supposedly independent Aviation Regulator to approve 40% increases in Dublin Airport’s price cap over the coming 12 months. The Dept seems to believe this cost increase (during a deep recession) will compensate Dublin Airport for its 13% traffic loss last year, and allow the DAA to recover the €1.2bn they have wasted on T2 (and its associated facilities) which the DAA originally promised to deliver for between “€170m to €200m”. This crazy policy of a tourist tax and a 40% increase in airport fees will inevitably lead to another year of double digit traffic collapse at Irish airports in 2010, as Ireland’s tourism industry is devastated by this Govt’s policy of raising taxes and costs to protect a bankrupt airport monopoly. The combined capacity of T1 and T2 (when opened in late 2010) will exceed 50m ppa, which gives rise to excess capacity at Dublin of over 60% based on the DAA’s own traffic forecast. We call for the immediate mothballing of this T2 white elephant which will at least eliminate the operating costs associated with its opening. The Irish Govt’s crazy tourist tax must also be scrapped if Ireland ever wants to return to an era of tourism growth and low access costs.
We confirmed in December that we were terminating our discussion with Boeing for an order of up to 200 aircraft. Although we had agreed pricing and delivery dates (between 2013 and 2016), Boeing regrettably insisted on changing our delivery terms and conditions which were not acceptable to Ryanair. We have no plan to re-open these discussions. If there is to be any future agreement on aircraft then it will have to be on materially improved terms. We will instead proceed with our confirmed 112 aircraft deliveries up to the end of 2012 which will allow us to grow traffic to some 85m ppa. Gross capex as a result will fall annually from €1.2bn in fiscal 2010 to approx. €0.1bn by fiscal 2014. We expect to generate up to €1bn of surplus cash by the end of 2013 which would be available to return to shareholders.
Our Q3 results were marginally ahead of expectations as a better mix of new routes and bases meant that yields fell by 12% rather than the up to 20% fall we previously guided. We expect this slightly better yield performance to continue into Q4 and accordingly we now believe the full year yield decline will be closer to 15% rather than the 20% previously guided. As a consequence, we have now increased our full year net profit guidance to €275m from the lower end of the range of €200m to €300m previously guided.
Ryanair remains uniquely positioned to benefit from the accelerating pace of airline consolidation and closures in Europe which has led to significant capacity reductions. We have announced an impressive array of new routes and bases for fiscal 2011 and expect to grow traffic by approx. 10% to 73m as airports more and more recognise Ryanair’s unique ability to deliver substantial and sustained traffic growth even during a downturn. Despite the depth of the current recession Ryanair will continue to grow traffic and profits (while most other airlines lose money) for the benefit of our passengers, our people, and our shareholders.