Ryanair worried by weakness of sterling

Low-cost airline Ryanair has expressed concern at the recent weakness of sterling and the impact on air travel from the lack of consumer confidence in the UK.

About 60 per cent of Ryanair's revenues and operating profit come from the UK, but its chief executive, Mr Michael O'Leary, has said that even if there is a recession in the UK, Ryanair is well placed to cope with such a downturn.

"Even if there is to be a recession, Ryanair is well-positioned with substantial cash, a strong balance sheet and the lowest cost base which will enable it to withstand any short-term downturns."

Sterling is currently trading at around 89p to the pound and Ryanair's chief financial officer, Mr Michael Cawley, said: "We wouldn't like to see it go much weaker than that." He added that the airline expects the sterling share of sales to fall from 60 per cent to 55 per cent within the next year or two.

Ryanair's half-year results were in line with forecasts with pre-tax profits up 23.5 per cent to £29.4 million with sales up 35 per cent to £130.5 million. Operating expenses rose 43 per cent in the period to £103.4 million, mainly due to higher maintenance and depreciation costs associated with the fleet expansion and the cost of launching six new routes.

Ryanair's balance sheet remains in good shape despite paying £27 million in deposits for new aircraft. The group had net cash of £105 million at the end of the half-year, mainly as a result of the £50 million earlier this year. Mr Cawley said: "We always like to have £60 million to £70 million on the balance sheet. We have enough cash to cover the first two or three new aircraft and then can draw down 12-year money at around five per cent. That package is in place."

Ryanair has introduced six new routes from London to France, Italy and Scandinavia. Mr Cawley said: "We have achieved load factors of over 70 per cent and these routes have been profitable since their launch." He added that Ryanair will initiate a once-daily Prestwick-Paris-Beauvais service next week, but that further expansion of its route network in Europe will not take place until the delivery of new aircraft next year.

He indicated that Germany will probably be the next target for expansion. "We would like to open one new market next year. If I were a betting man I'd say it is likely to be Germany. There's not a low fare to be had there. They don't know what competition is."

He added that Ryanair is in discussions with more than 10 low-cost airports in Germany as well as with airports in Spain, Finland, Denmark and Austria.