Ryanair beats profit forecasts

Ryanair expects to cut fares by around €3 each on the back of fuel savings from 2016 as the benefit of its latest round of hedging kicks in.

The airline has hedged most of its fuel demand for its next fiscal year, which begins on April 1st, at $92 a-barrel, well above current prices. It says this will deliver savings of €1.81 per passenger.

The airline confirmed in a quarterly results statement on Monday that it has begun ordering fuel for the financial year, which begins on April 1st next year, at $68 a-barrel.

Its chief executive, Michael O’Leary, said that would deliver savings of €300 million or €3 a-passenger. “We would expect to give away most of that in the form of lower fares,” he added.

Lower oil prices and improved traffic saw airline Ryanair announce pre-tax profits of €49 million for its third quarter, which ended on December 31st, reversing a loss of €35m for the same period in 2013.

Traffic at the airline grew 14 per cent to 21 million customers as average fare rose 2 per cent to € 40. Revenues advanced by 17 per cent to € 1.13 billion while unit costs fell 6 per cent.

Mr O’Leary, said that the results reflect the company’s increased focus on customer service and its move into business travel.

“ These strong results confirm that our “Always Getting Better” customer programme and our expanded business schedules, coupled with our substantial fare and cost advantage over competitor airlines is drawing millions of new customers to Ryanair,” he said.

Ryanair has retained “one of the strongest” balance sheets in the industry, with gross cash of € 4.1 billion and a net cash balance of € 447 million.

As such, a €520 million special dividend (€ 0.375 per share) will be paid on February 27th, and the airline has also approved a € 400 million share buy-back programme to commence on February 12th.

“This systemic programme will, subject to market conditions, be executed over a six month period from February to August 2015” the airline said.

With respect to IAG's proposed takeover of Aer Lingus, Ryanair said that as it has received "no formal approach", it will not engage in any speculation about the proposal, "other than to restate our position which is that the board of Ryanair will carefully consider any such offer, should one be received, from IAG or any other party, in due course".

Looking to the full year, the airline has raised its net profit guidance for the fifth time, up from € 810 million to € 830 million to a range of between €840 million and € 850 million, on the back of lower oil prices and stronger traffic.

“Q4 traffic is expected to grow approx. 25 per cent but average fares will fall by 6 per cent to 8 per cent as we use lower fares to expand our network and develop our business schedules,” the airline said, pointing to a “softening in prices” during the first weeks of January.