Irish budget carrier Ryanair recorded an 85% plunge in net profit in the fiscal first quarter and has warned it could fall into the red for the full year.
Ryanair says in a stock exchange announcement that net profit fell to €21 million ($33 million) in the April-June quarter from €139 million in the same three months of last year. It was despite revenue growth of 12%, to €777 million from €693 million, as passenger numbers rose 19%, to 15 million from 12.6 million.
The carrier says the sharply lower profit came “as fuel costs almost doubled and yields fell due to the absence of Easter in this quarter and its presence in the prior year comparable”.
It now says that on the basis of existing fuel hedges, fourth-quarter oil prices at $130 per barrel and average fares falling by 5% for the full year “we expect to record a full-year result of between breakeven and a loss of €60 million”.
Ryanair says its fuel bill rose 93% in the quarter to €367 million and fuel now represents nearly 50% of total operating costs, up from 36% last year. Yields fell 8%.
The carrier says it is now hedged 90% for September at $129 per barrel and 80% for the third quarter at $124 per barrel. It is not hedged for the fourth quarter.
“We continue to believe that oil prices remain subject to irrational exuberance,” it says.
Looking forward, Ryanair says: “The outlook for the remainder of the fiscal year which is entirely dependent on fares and fuel prices remains poor. The emerging economic recession in the UK and Ireland caused by the global credit crisis and high oil prices means that consumer confidence is plummeting, and we believe this will have an adverse impact on fares for the rest of the year.”
It adds: “We will respond as always with lower fares and aggressive pricing to keep people flying and maintain our high load factors. We now believe that our average fares for the year may fall by as much as 5% if European airfares plunge this winter.
"Ryanair will lead this downward pricing at a time when most of our competitors are hoping to raise fares and fuel surcharges.
"The market this winter will be heavily impacted by the timing and scale of EU airline bankruptcies and consolidations which are inevitable at these higher oil prices. Ryanair’s better than anticipated savings which will flow from capacity and cost reductions already achieved will partly offset these lower yields.”
Source: flightglobal.com's sister premium news site Air Transport Intelligence news
Source: Flight International
