Ryanair lodges bid for Alitalia as quarterly profits rise 55%

Ryanair would only be interested in buying troubled Italian airline Alitalia if it were "radically restructured", its chief financial officer Neil Sorahan has said.

The Irish airline confirmed that it was bidding for its rival after announcing on Monday that profits after tax in the three months to June 30th – the first quarter of its financial year – were up 55 per cent at €397 million.

Ryanair is one of 10 groups that have made non-binding offers to buy or invest in Alitalia, which is under special administration with an estimated €3 billion in debts.

Ryanair shares closed down 1.08 per cent at €17.85 in Dublin. Its stock fell more than 4.5 per cent in early trading, immediately after its announced its profits and confirmed its Alitalia bid, but made much of that ground back later.

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“We would only be interested if the company were radically restructured,” Mr Sorahan said.

Ryanair chief executive Michael O’Leary told a press conference that there would need to be an “absence of Italian government interference” as well as an overhaul of the business.

Mr Sorahan confirmed that Ryanair would be interested in Alitalia’s long-haul business as it is one of the company’s better performing elements. “We are already transferring passengers to other airlines’ long-haul operations, so why not Alitalia’s?”

Ryanair signalled its interest in Alitalia earlier this year. Gulf carrier Etihad, which already owns 49 per cent of the Italian airline, was the only other bidder named on Monday.

However, Brussels would have to change a rule limiting non-EU shareholders from owning more than 49 per cent of any airline based in the bloc before Etihad's offer could succeed.

Short-haul market

Ryanair has around one third of Italy’s short-haul market, and is one of the biggest airline’s operating in the country.

The carrier reported earlier that it earned €1.9 billion in revenues in its first quarter, 13 per cent more than during the same time in 2016.

Passenger numbers grew 12 per cent to 35 million from 31.2 million in the first quarter last year.

Mr O’Leary said Ryanair was pleased by the 55 per cent increase in profits, but cautioned that Easter’s absence last year distorted the outcome. The holiday fell in April this year rather than at the end of March as it did in 2016.

Mr O’Leary predicted that summer air fares would fall 5 per cent this year, but noted that Ryanair expected to carry 131 million passengers over the 12 months to the end of March 2018, one million more than it originally forecast.

Based on that and a number of other factors, Ryanair’s chief executive said: “We continue to guide full-year 2018 profit after tax in a range of €1.4 billion to €1.45 billion.”

He added that this depended on summer bookings, the absence of terrorist attacks or other similar events, air-traffic control strikes and negative Brexit developments.

Investors

Ryanair returned €204 million to investors through share buy-backs during the quarter. It also cut net debt to €94 million from €244 million on the back of strong cash generation.

Unit costs fell 6 per cent as the airline’s fuel bill came down. Excluding the impact of lower fuel, they dropped 3 per cent.

Mr O’Leary said the carrier was on track to deliver a 1 per cent reduction in unit costs through the 12 months to the end of March, its full financial year.

“After a difficult winter last year we expect the pricing environment to remain very competitive into the second half, where we will grow traffic by approximately 7 per cent.”

The airline chief executive added that the company saw no reason to change its prediction that winter fares would fall 8 per cent.