Ryanair shares slip despite £1.3m increase in first-quarter profits

Ryanair shares slipped back in Dublin and New York after the airline announced first-quarter pre-tax profits of £5.7 million, up from £4.4 million. Analysts said the share price slip - down 20p to 370p in Dublin - reflected what the market regarded as "a negative tone" in the company's statement.

But Ryanair chief executive Mr Michael O'Leary said that comments in the statement should not be seen as a profits warning.

"We provided information on the seasonal factors that affect our quarterly results. We are comfortable with the analysts forecasts for full year profits," he said. Analysts are forecasting full year pre-tax profits of £35 million to £40 million and after tax profits in a £25 million to £27 million range.

Good growth in passenger numbers and a strong start on its new European routes helped Ryanair generate pre-tax profits of £5.7 million for the three months to end June. Profits after tax increased to £4.3 million from £2.8 million, a rise of 30 per cent when non-recurring bonus payments to staff and directors are excluded.

In its statement the company said it did not expect "this level of increase to continue consistently through each quarter" because of seasonal factors and the addition of five more aircraft to the fleet later this year.

It said trading conditions "continue to be tough" and that in coming months it will "shoulder further challenges by increasing the size of our fleet by one third, and opening up new routes, despite facing continued intense price competition throughout our network".

Stressing that he was comfortable with profits forecasts for the current year, Mr O'Leary said: "We have a business to run and we are focusing on growing revenue and reducing costs. We have a job to do and it is never easy making a living flying people for £59."

Total operating revenue was 34 per cent higher at £41.3 million boosted by higher than expected passenger numbers on the airlines three new European routes, according to the company. The average load factor - the percentage of seats occupied on each flight - on the new routes to Dublin/Paris (Beauvais) and Brussels (Charleroi) and London/Stockholm - is currently over 75 per cent, according to Ryanair.

Passenger numbers increased to just under one million, with the 36 per cent increase marginally ahead of the rise in operating revenue, reflecting the impact of special promotional fares on revenue.

"We are growing ambitiously and have managed to keep revenue rock steady on a per passenger basis, keeping the yield well in line," Mr O'Leary commented.

Operating expenses were 33 per cent higher at £35.9 million, boosted by higher depreciation and maintenance costs because the airline's fleet had increased to 14 aircraft from 11 and higher staff costs.

Depreciation charges were 78 per cent higher at £2.7 million while maintenance costs were 59 per cent higher at £4.6 million. Staff costs were 32 per cent higher when non-recurring bonuses are excluded, reflecting an increase in staff numbers from 660 to 791 people.

Other cost increases included a 40 per cent rose in marketing and distribution costs to £4.6 million, a 54 per cent rise in fuel costs to £4.7 million and a 16 per cent rise in airport charges to £4.6 million. Overall operating profits rose to £5.5 million, a 17 per cent rise when non-recurring factors are stripped out.

Ryanair is focussed on reducing costs by adding routes to airports where costs are lower, by making agreements giving the company lower charges in return for bringing new traffic to airports, Mr O'Leary said.

"We want to increase our business by 25 per cent to 30 per cent a year and to keep cutting out costs," he said. In the first quarter the company added five new routes, increased employment and broadened it fare structure, Mr O'Leary said.

"Given the volume of work we have done, I am fairly pleased with the performance and the underlying trends are quite positive," he said.