Ryanair shares close 2.5% up

Tue, Jul 31, 2012, 01:00

Shares in Ryanair closed up 2.5 per cent at just under €4.00 in Dublin yesterday evening despite the low-cost carrier reporting a sharp drop in profits for the first quarter, mainly due to higher fuel costs.

After-tax profits fell by 29 per cent to €99 million for the three-month period ended June 30th, compared to €139 million the previous year.

Fuel costs, which represented 47 per cent of the group’s operating costs, increased by 27 per cent, or €117 million, to €544 million during the first quarter.

The company said the increase in fuel costs would be lower than this in the final three-quarters of the year fuel as a result of hedging measures.

“Quarter one will suffer the largest fuel cost rise in the 2013 full year as the pricing differential narrows significantly over the remaining three quarters of the year,” it said, noting the impact of higher fuel prices on quarter one profits had been previously guided.

Ryanair, which last month launched a takeover bid for Aer Lingus, saw its total revenue increase to €1.284 billion in the first quarter, 11 per cent higher than the same period the previous year. Ancillary revenue continued to increase, growing by 15 per cent to €286 million. It now accounts for 22 per cent of the airline’s overall revenues.

While the number of passengers carried by the European airline increased by 6 per cent to €22.5 million, fares also increased, rising on average by 4 per cent during the last quarter.

As the airline prepares for its busy summer season, chief financial officer Howard Millar said yesterday pricing could improve further, with fares up as much as 7 per cent in the current quarter.

Speaking in London yesterday, Mr Millar said Ryanair was keen to take a 25 per cent equity stake in London’s Stansted Airport by participating in one of a number of groups that may bid for the British Airports Authority ( BAA).

Last week the UK court of appeal overturned the BAA’s appeal against a 2008 competition commission’s recommendation that Stansted be sold to promote competition and the consumer interest. Ryanair is prepared to make “a modest commitment” as “anchor tenant” at the airport, Mr Millar said yesterday, and the airline has examined proposals from five or six groups.

In terms of outlook, the company maintained its guidance of of €400 million to €440 million, noting it does not yet have visibility on yields in the second half of its fiscal year.

The airline expects full-year traffic to grow by 4 per cent to 7 per cent in the first half of the year, and 1 per cent in the second half when it cuts capacity in winter. “Until we get some second-half yield visibility, our guidance for the 2013 full year remains unchanged,” the company said, noting that its outlook remains cautious for the year.

Ryanair is hedged at $94 a barrel on 50 per cent of its fuel requirement for the first half of the fiscal 2014, versus $100 this year.

“However these lower fuel prices will be more than offset by lower euro to dollar exchange rates,” the company said. – (Additional Reporting: Bloomberg)