Ryanair profit up 25% last year, but it might make significantly lower profits this year
Ryanair has warned of trouble this year that will hammer the aviation industry as rising fuel costs meet suppressed passenger demand. Ryanair has had growth of at least 25% every year since 2009, but has admitted its profit will fall by up to 20% in the coming year. Its profit last year was £406m. Michael O’Leary said: “We expect recession, austerity, currency concerns, and lower fares at new and growing bases in Hungary, Poland, provincial UK, and Spain to make it difficult to repeat this year’s results. We expect that any increase in fares will only partially offset higher fuel costs.” Ryanair said that higher oil prices next winter mean it will ground up to 80 aircraft – as it did for the first time last year – “rather than suffer losses flying at very low winter yields”. IATA has forecast that European airlines will collectively lose €600 million this year.
Ryanair falls on warning of austerity and fuel crisis
21 May 2012 (Evening Standard)
Ryanair today warned of an impending storm that will hammer the aviation industry as surging fuel costs meet suppressed passenger demand.
The budget carrier has posted profit growth of at least 25% every year since 2009, but today admitted its profit will fall by up to a fifth in the coming year.
“We expect recession, austerity, currency concerns, and lower fares at new and growing bases in Hungary, Poland, provincial UK, and Spain to make it difficult to repeat this year’s results,” chief executive Michael O’Leary said. “We expect that any increase in fares will only partially offset higher fuel costs.”
Despite the budget airline beating City forecasts to post a record annual profit – up 25% to €503 million (£406 million) for the year to April – the City focused on Ryanair’s warning about this winter and shares plunged. After hitting €4.49 at the start of April, shares were down at €3.86 today, off almost 5% or 19 cents. The rest of the airline industry was also hit, especially as Ryanair’s cost base is lower than most of its rivals. EasyJet shares were down 0.3p to 487.4p and Flybe fell a penny to 66p.
Ryanair said that higher oil prices next winter mean it will ground up to 80 aircraft – as it did for the first time last year – “rather than suffer losses flying at very low winter yields”.
O’Leary added: “Really the problem for us is that while the summer looks good with plenty of bookings, plenty of people switching to Ryanair to go on their holidays, next winter is much more difficult. We have no visibility, we have no bookings in the system yet and I think we’re right to be cautious at this point in time. Clearly there’s a lot of financial uncertainty, clearly there’s a lot of worry about currency, higher oil prices, austerity. But people will still keep flying.”
Ryanair’s confidence of that fact saw it hand shareholders €483 million in dividends today, only its second pay-out since its flotation in 1999. O’Leary will pocket €17.3 million from his 3.6% stake. But the Irishman condemned the Government’s lack of decision on the future of British aviation and expansion at Heathrow, plus its decision to raise air passenger duty, which O’Leary claimed had cut traffic by 6% since 2007. [There is absolutely no evidence for that].
“Despite a rising number of airline failures and record airline losses, many of Europe’s governments continue to treat aviation – and airline passengers – as a cash cow to fund their taxation and/or policy failures,” O’Leary said. “The UK Government’s ‘do nothing’ policy about runway capacity in the South-east is encouraging traffic and tourism to bypass high-cost London airports in favour of expanding airports in Spain, France, and Holland.”
The International Air Transport Association has forecast that European airlines will collectively lose €600 million this year.
Last month, European competition officials started their 18th investigation into whether Ryanair benefits from illegal state subsidies to airports. It is looking at deals struck by the airline with Nîmes airport in France. Ryanair has accused the EU’s competition authorities of pursuing a “misguided vendetta against Ryanair and our regional airports.”
Ryanair reports record €503m profit
Ryanair boss Michael O’Leary: ‘The demand for low fares is extraordinary’
Low-frills airline Ryanair has reported record profits as fare rises helped to offset a sharp rise in fuel costs.
Net profit for the year to March was 503m euros ($643m; £406m), up 25% on a year earlier. Revenue rose by 19% to 4.3bn euros.
The airline said traffic grew by 5% while fares rose by 16% on average, which helped to overcome a 30% rise in fuel costs.
However, it warned profits in the current financial year could be lower.
That warning hit the airline’s shares, knocking as much as 7% off their value in early trading.
“Recession, austerity, currency concerns and lower fares at new and growing bases in Hungary, Poland, provincial UK and Spain will make it difficult to repeat this year’s record results,” the company said in a statement.
It forecast annual profits of between 400m euros and 440m euros for the year to the end of March 2013.
However, Ryanair chief executive Michael O’Leary told the BBC that his airline could benefit in some respects from the gloomy economic outlook.
“People don’t stop going on holiday [altogether]. They just switch to lower cost carriers,” he said.
He also rejected claims that Ryanair was not upfront enough in its charging structure.
“We don’t have hidden charges, they are all out there [in the public domain]. We are the most upfront airline about charges,” he said.
He said charges for checking in bags were there to change customer behaviour and make flying quicker for everyone.
The airline described its record profits for the last financial year as “commendable”, particularly given the 360m euro increase in fuel costs. This was due to a 16% rise in the oil price, it said.
The company highlighted the fact that a number of European airlines had closed during the year, and said it had responded by opening a new base in Budapest and expanded bases in Spain, Scandinavia and the UK.
It also criticised the UK government’s decision to raise air passenger duty, which it said had cut traffic by 6% since 2007.
“Many of Europe’s governments continue to treat aviation (and airline passengers) as a cash cow to find their taxation and/or policy failures,” it said.
Comments from AirportWatch members:
“Last month, European competition officials started their 18th
investigation into whether Ryanair benefits from illegal state
subsidies to airports” link (FT) – at the same time O’Leary complains “Europe’s
governments continue to treat aviation – and airline passengers – as a
cash cow to fund their taxation and/or policy failures.” He wants it
Of course he wants it all ways – but it’s only normal for him to complain
not least because of the publicity he gets as a result – did you notice he
even mentioned the word ‘Heathrow’ to try to get in on that bandwagon.
Coming hot on the heels of the 25% rise in net profit announced by Ryanair
it reminds me of the farmers in France who once told me they have to
complain even when times are good otherwise the government won’t give them
as much when times are bad.