Ryanair posts a loss but predicts a profit

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The Independent Online

Ryanair posted third-quarter losses of €120m (£108m) yesterday, but immediately forecast a return to greater profitability than previously expected for the full year thanks to the falling oil price.

The budget carrier's revenues grew 6 per cent in the three months to December, helped by a 13 per cent rise in passenger numbers, taking total traffic to 14 million. But fuel costs rose by 71 per cent to €328m compared with the same period of 2007, pushing the airline into the red.

A failure to hedge against the rising oil price left Ryanair particularlyexposed to last summer's boom, which saw the oil price hit $147 per barrel, an all-time high. But as recession hit, oil has plummeted, bringing jet fuel costs down with it. The Irish group is now predicting full-year profits of between €50m and €80m, rather than the breakeven it was previously expecting. "We are doing better than expected because the fuel prices have halved in the last couple of months," said Howard Miller, the Ryanair deputy chief executive and chief financial officer.

The aviation sector is reeling from the effect of the economic downturn, hot on the heels of shock fuel prices. More than 30 carriers have gone out of business in the last 12 months, and more bankruptcies are expected. Ryanair said it was well placed to make the most of the situation. Although fares fell by 9 per cent to €34 in the third quarter, and are expected to drop by another 20 per cent in the three months to March, customer numbers are still rising. The group is targeting a further 14 per cent growth in passenger traffic in 2009 – the equivalent of 8 million people – and this month has been its strongest ever January for bookings.

"We are probably the only airline in Europe that is growing, but people want low fares and they are trading down," Mr Miller added. "You can see it with [budget supermarkets like] Aldi and Lidl, and with McDonald's – those at the bottom end of the pricing range do much better during periods of recession."

Not only does the low-cost carrier benefit from cash-strapped consumers' flight to low prices, but, learning from last year's oversights, the majority of its fuel requirements for 2009 are hedged at a $65 oil price. "We are heading into a very difficult year of bitingrecession, but we expect significant increases in profitability because our fuel bill will be so much less," Mr Miller said. Investors appear to share the upbeat analysis.

Airlines across the world are looking to consolidation to help weather the growing storm. British Airways hopes to merge with Iberia, and is hoping a partnership with American Airlines will get past regulators. Lufthansa has bought Brussels Airlines and is angling for Austrian. Air France/KLM has taken over the ailing Alitalia. But with its offer for Aer Lingus resoundingly rejected, Ryanair is not looking for other takeover targets. "It is most unlikely we would consider buying anyone else," Mr Miller said. "We just don't see any other carrier with value for us."