Ryanair profits take off as business customers grow

Ryanair raised its profit forecast for the third time in four months yesterday, but was cautious about the coming year’s growth because it has already bought most of its fuel at prices which are nearly double current levels.

The low-cost airline, which owns 29.8 per cent of British Airways bid target Aer Lingus, said it had hedged 90 per cent of 2015-16 fuel requirements at the equivalent of $92 a barrel against yesterday spot price of $54 a barrell.

Michael O’Leary, the chief executive, said: “We would counsel shareholders and analysts to temper expectations for the 2016 financial year.

“While we are still finalising our budget, we believe that any growth in profits will be modest, as our fuel is hedged at $92 per barrel, whereas some competitors (whose weak balance sheets rendered them unable to hedge forward) will be significant beneficiaries of lower oil prices and this may lead to downward pressure on air fares in 2015/16.”

But Mr O’Leary was upbeat about the airline’s final quarter and expects traffic to grow by 25 per cent and fares to fall by between 6 per cent and 8 per cent as he adds to flight schedules. “We have noticed a softening in prices for forward bookings during the first weeks of January,” he added.

Mr O’Leary’s shift of policy to try to make Ryanair more customer friendly and attract more business passengers is clearly paying off. Third-quarter revenues rose by 17 per cent to €1.13bn (£750m) with passenger numbers up 14 per cent to 20.8 million.

At the same time the load factor, or measure of how full planes are, rose by 6 per cent to 88 per cent, making each flight more profitable. This enabled it to raise its after-tax profit forecast range from €810m-€830m to €840m-€850m for the year to the end of March. Ryanair shares, which have risen from €7 in October following profit upgrades in November and December, yesterday fell 64 cents to €9.76.

Mr O’Leary played a straight bat over the €1.3bn bid for Aer Lingus, where Ryanair’s near-30 per cent stake will be crucial. He said: “Since Ryanair has received no formal approach or offer for our shares in Aer Lingus, we will not engage in any speculation about this proposal, other than to restate our position which is that the board of Ryanair will carefully consider any such offer.”

But elsewhere there is plenty of speculation that BA owner IAG’s latest proposed bid of €2.50 per share is enough to keep Mr O’Leary happy, while the real fight for control is around the Irish government’s 25 per cent stake.