Ryanair News

News Release

05.11.12

Half Year Results 2013

Ryanair, Europe’s only ultra-low cost airline today (Nov 5) announced strong H1 profits up 10% to €596m as revenues increased 15% to €3.11bn, traffic grew 7% to 48m passengers, while ave. fares rose 6%. Unit costs were up 8% mainly due to a 24% (€218m) increase in fuel. Excluding fuel adjusted unit costs rose by 2%.

Summary H1 Results (IFRS) in Euro.

H1 Results (IFRS) €	Sep 30, 2011	Sep 30, 2012	% Change
Passengers	44.7m	48.0m	+7%
Revenue	€2,712m	€3,106m	+15%
Profit after Tax	€544m	€596m	+10%
Basic EPS(euro cent)	36.62	41.34	+13%

Ryanair’s CEO Michael O’Leary said:

“The highlights of the half year include;

Profits up 10% to €596m.
Traffic grew 7% to 48m, a six month record.
The fleet grew to 298 Boeing 737-800s, an all time high.
2 new bases Paphos (Cyprus) & Maastricht (Holland) were announced.
158 new routes launched (now operating over 1,500 daily flights).
A one-off dividend of €489m was approved, payable on November 30.
Gross cash exceeds €3.9bn, an all-time record.

Our 10% profit increase in H1 combined with traffic growth of 7% during a period of high oil prices and continuing recession\austerity in Europe was another robust result. Profits exceeded our expectations driven by a combination of strong summer bookings, particularly post the Olympics, a 6% rise in ave. fares, and lower than forecast fuel bill due to the successful implementation of our fuel savings programme. Our fuel costs rose by €218m (+24%) as oil costs increased 18% from $83pbl to $98pbl. Excluding fuel, unit costs rose 2% during the summer period due to tight cost control despite excessive increases in Italian ATC costs and airport charges in Spain. Ancillary revenue rose by 12% to approx. €12 per pax.

EU short-haul market

The combination of higher oil prices and EU wide recession continues to drive significant change in European aviation. A number of EU airlines have closed this summer including Windjet (Sicily), OLT Express (Poland), and bmibaby (UK). These follow earlier collapses of both Malev (Hungary) and Spanair (Spain) in 2012. Legacy carriers including AF\KLM, IAG, Lufthansa, SAS, and Air Berlin have all announced restructurings that include significant contraction of their short-haul operations. Charter airlines such as Thomas Cook are also cutting fleet sizes. In contrast Ryanair continues to find profitable opportunities for growth across Europe as higher cost and less efficient competitors struggle to survive. Our new bases in Budapest and Warsaw have stimulated strong demand at Ryanair’s very low fares while expansion of existing bases in Spain, the UK and Germany has delivered impressive volume and profit growth.

We expect market conditions in Europe to remain tough as recession, austerity, high fuel costs, and excessive Government taxes dampen air travel demand. Further airline failures and consolidations are inevitable given the fragmentation among European airlines and the existence of so many high cost, high fare airlines with poor punctuality records. In this environment Ryanair sees substantial opportunities to grow by deploying our industry leading low costs, low fares and on-time flights with our youngest, largest and safest fleet of Boeing 737s in Europe.

Growth opportunity

Ryanair carried 48m passengers during H1 (79m on a 12m rolling basis), and now accounts for approx. 12% of Europe’s short-haul air travel market. Analysis of that market shows an industry dominated by loss-making, unreliable and inefficient airlines producing substantial revenues but unsustainable aggregate losses. Ryanair estimates about 580m short-haul passengers are travelling at substantially higher fares with intra EU airlines that are either loss-making or producing meagre profit margins. This represents a major opportunity for Ryanair’s lowest fares model- given our substantial unit cost advantage -to grow profitably to 120m passengers per annum over the next 10 years.

Regulatory obstacles to growth

European Governments and the EU Commission are limiting the potential for air travel to stimulate economic activity. Regressive air passenger taxes (UK & Germany), excessive airport charge increases (Spain, Italy and Ireland), a discredited EU emissions tax scheme and regulatory resistance to regional airport expansion are all symptoms of an anti-consumer and anti-aviation bias in policymaking. Aside from inhibiting economic growth, Europe’s bureaucratic tendency towards re-regulation is giving Gulf and Asian carrier’s in particular a competitive advantage over EU based airlines. A more expansive series of policy changes, to include cuts in air taxes, a suspension of the discredited ETS scheme and other regulatory failures, and the promotion of competition from underutilised regional airport capacity across Europe is urgently needed to stimulate tourism, jobs, and economic growth. Ryanair continues to campaign in favour of pro-growth, pro-consumer, lower fare policies across the EU airline sector.

Aer Lingus Update.

Under Irish Takeover Panel rules we are unable in these results to update on our offer to acquire Aer Lingus. Accordingly we are issuing a separate announcement on this matter today.

Stansted Airport Sale.

Ryanair withdrew from the sale process for Stansted in October after we were (remarkably) excluded from the transaction by the airport’s owner Ferrovial. The exclusion of Stansted’s largest customer from this “customer focussed” sale process again highlights the abject failure of both the CAA and the UK Competition Commission to defend the interests of customers from monopoly abuse by Ferrovial\BAA. Ryanair believes significant traffic growth is possible at Stansted but only if the doubling of prices which occurred in 2007 (which directly led to a 25% traffic decline) is reversed. Ryanair is strongly opposed to Stansted’s unjustly inflated RAB and encourages all bidders to forensically examine the true asset base (which Ryanair estimates at £640m) before making any bid for these inflated assets. The optimal future for Stansted is to increase passenger volume through a mixture of disciplined capex and highly competitive (i.e. reduced) charges that encourage sustainable long-term traffic growth. Ryanair will support any such growth plan. However, if the new owners of Stansted do not immediately and significantly cut the BAA’s high and uncompetitive charges, then it is inevitable that traffic at Stansted will continue to decline as it has for 6 years in a row under the BAA’s mismanagement and the CAA’s failed regulatory regime, which even the UK Competition Commission has admitted is “inadequate”.

Ryanair strengths

Ryanair ex fuel passenger cost of €26 during H1 is the lowest of any carrier in Europe. Our average fare of €53 is (by some distance) the lowest price available to EU consumers. Through disciplined management of costs, and by operating a modern, fuel efficient fleet, Ryanair can not only maintain but can further expand its cost advantage over all other competitors across Europe. The combination of Ryanair’s industry leading cost base, high cash flows and strong balance sheet, gives Ryanair the platform to embark upon its next decade of growth. Ryanair believes it is legitimate to target an 18% + share of the EU short-haul market and in the process grow its traffic by up to 50% to approx. 120m per annum over the next decade.

Balance Sheet and hedging.

Ryanair’s balance sheet is among the strongest in the global airline industry. Bloomberg recently described Ryanair as “the world’s least indebted airline”. At the end of H1 Ryanair had gross cash of €3.9bn, up €417m since March while free cash flow in the period was €610m. The financial strength of the business is evidenced by our recent aircraft bond issue which carried an interest cost of just under 1.7%. Ryanair has availed of historically low interest rates to secure almost 70% of our fleet financing at an all-in rate of just over 3%.

We have recently extended our FY 14 fuel hedges to almost 50% of FY 14 at $97pbl and hedged our Q1 FY14 €/$ exchange rate on our fuel exposures at 1.30. This implies our euro fuel costs per passenger in summer ’13 at current rates will rise by approx. 5%, compared to 9% in summer ’12.

2^nd Special dividend and shareholder returns.

A 2^nd special dividend of €489m (€0.34 per share) was approved at our September AGM and will be paid to shareholders on November 30. Ryanair has returned €1.53bn (via dividends and share buybacks) to shareholders over the past 5 years, and this compares with a total equity raised of just €585m since Ryanair joined the stock market in 1997. Over that period we have grown passenger volume from 3m to 79m p.a. while the fleet has expanded from 12 to 298 aircraft, and our balance sheet is in a strong net cash position.

Outlook.

Our Q2 yield and fuel cost performance was better than we originally anticipated which has boosted our profitability. We are on target to grow traffic in FY13 by 4% to over 79m passengers. H2 traffic will be broadly flat as we ground up to 80 aircraft to limit the impact of high oil prices, high airport fees at Stansted and Dublin, and seasonally weaker demand and yields upon the business. We remain cautious about winter trading as we have little visibility on Q4 bookings or yields. Recession, competition and very low fare competition at new bases will constrain profitability during H2, although we now expect full year yields to rise by up to 4%. Notwithstanding these concerns, and given our H1 performance we feel it would be appropriate to raise our FY profit guidance from its previous range of €400m to €440m to a new range of €490m to €520m.