Ryanair soars as bag charges boost profits

Click to follow

Ryanair has lifted its profit forecast for a third time in nine months on the back of higher ticket prices and new charges for passengers carrying luggage on to its planes.

Shares in the Irish-based budget airline soared 6.4 per cent on the third-quarter results, with growth during the seasonally weak winter period exceeding even the most optimistic market expectations.

As a result Ryanair upped its annual net profit forecast to €390m (£257m), an 11 per cent increase on the €350m guidance it had previously given.

The bumper results highlighted the difficulties of its rival British Airways. The British operator said last week that pre-tax profit was down 32 per cent during the third quarter and warned of a significant slip in revenue as the industrial dispute with its trade unions has affected bookings.

In contrast, Ryanair said its pre-tax profit leapt 30 per cent to €47.7m during the same period, with revenue 33 per cent higher at €492.8m. The budget airline carried 10.3 million passengers during the quarter, a 19 per cent increase on last year, and flew a further 3.1 million passengers during January.

Chris Reid, an analyst at Deutsche Bank, said that the results were boosted by a one-off benefit of up to €20m due to the early termination of a relationship with a hotel-reservation partner, but still beat expectations stripping out that benefit.

Michael O'Leary, Ryanair's chief executive, described the performance as "exceptional" given intense competition over Christmas and high oil prices.

Michael Cawley, the deputy chief executive, said the airline had benefited from higher ticket prices boosted by the introduction of charges of up to €10 to carry on luggage. Mr Cawley said that fewer than 50 per cent of its passengers check in baggage. "Customers that cost us less should pay less," he said.

Mr Cawley said that Ryanair's decision not to attach a fuel surcharge to its fares had enabled it to edge its prices around 7 per cent higher without affecting passenger volumes. The airline has moved to take advantage of the recent slip in the oil price to extend its fuel hedging policy. While the company is hedged through to March at a rate equivalent to $73 (£37) a barrel, it expects to save €60m in fuel costs next year after taking out cheaper insurance against oil prices.

Mr Cawley also said that the company might renew its efforts to buy its Irish rival Aer Lingus in May if the European competition regulators clear its bid.

Comments