RYANAIR’S SHARE price tumbled 5 per cent yesterday after the low fares airline said net profits would be “static” in the year ahead, following growth of 26 per cent in the year to the end of March.
Ryanair also said its capacity will shrink this winter if oil prices remain high. It plans to ground up to 80 aircraft rather than sustain losses by operating at seasonally low yields.
The airline shrugged off the effects of last year’s Icelandic ash cloud, snow disruptions and the recession to grow after-tax profit to €401 million in its 2011 financial year to the end of last March, from €319 million a year earlier.
This 26 per cent profit growth came on the back of a 21 per cent rise in revenues to €3.63 billion. Ancillary revenues grew to €802 million, boosted by higher internet-related sales.
The airline’s overall revenues also benefited from an 8 per cent increase in traffic, with passenger numbers reaching 72.1 million.
During the year, Ryanair’s fares rose 12 per cent to an average rate of €39.
This was partly due to higher oil prices, with fuel costs increasing by 37 per cent. However, it also reflected a 10 per cent increase in the average length of Ryanair’s flights, as it began serving destinations such as Malta, Tenerife and Gran Canaria.
“We’re going to see the vast bulk of growth in those areas,” deputy chief executive Michael Cawley said yesterday in Dublin. “This is driving up the length of flights, and driving up the average fare.”
Though the airline unveiled 328 new routes last year, it also cancelled about 10 per cent of its routes as “commercially they didn’t work”, Mr Cawley said.
The carrier expects fares to rise by a further 12 per cent this year as competitors increase their fuel surcharges due to higher oil prices. “Our fares go up in their slipstream. Because customers are comparing prices, this drives up demand, [which] drives our prices,” Mr Cawley said.
Ryanair’s balance sheet strengthened during its 2011 financial year, and the airline had €3 billion in cash at year end after paying out €500 million in dividends.
Looking ahead, the airline said it expected to grow traffic by 10 per cent in the first half of its financial year. However, this will be followed by a 4 per cent contraction in the second half. This will result in overall traffic growth of 4 per cent to 75 million passengers.
Despite its planned winter capacity cuts, the airline expects its full year fuel bill to increase by about €350 million.
Mr Cawley said Ryanair doesn’t expect any problems from the recent eruption of Grimsvotn, Iceland’s most active volcano. “We’re not worried about the ash cloud,” he said. “We’re worried about an irrational response to the ash cloud.”
According to the airline’s results, last year’s Icelandic ash cloud cost Ryanair €29.7 million in expenses. In April, the airline announced the introduction of a €2 levy on each flight to cover the cost of future compensation claims.