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Ryanair profits rise on growth

Row of Ryanair PlanesRyanair has published its financial results for the first half of its fiscal year, which ended on September 30.  Profits after tax increased 10% from €544 million to €596 million on the back of a 7% rise in traffic from 44.7 million to 48 million passengers, while revenues have jumped 15% from €2.71 billion to €3.11 billion on the back of a 6% increase in average fare prices.  Revenue from ancillary charges jumped 12% to about €12 per passenger.

The carrier said that profits exceeded their expectations and were driven by the combination of a lower than predicted fuel bill, strong bookings during the summer and a 6% increase in average fares.  Ryanair had the lowest fuel passenger cost in Europe during the six-month period, at €26; and its average fare was the lowest available to consumers in the European Union, at €53.  Fuel costs rose 24% (or €218 million) on the back of an 18% increase in oil costs from $83 per barrel to $98 per barrel.

Excluding fuel, unit costs climbed 2% over the summer because of tight cost control.  This came despite huge increases in Spanish airport charges and Italian ATC costs.  However, Ryanair can maintain and further expand its cost advantage over its European rivals through disciplined cost management and the operation of a fuel efficient and modern fleet.

With the airline’s rise in traffic, it now accounts for about 12% of the air travel market for short-haul services.  A study of the market shows that the industry is dominated by inefficient, loss-making and unreliable carriers producing significant revenues but unsustainable collective losses.  Ryanair estimates that about 580 million short-haul travellers are paying much higher fares with other European Union airlines that are either producing meagre profit margins or are loss-making.  This provides the airline with a big opportunity to grow over the next decade to carrying 120 million passengers a year.

Ryanair also said it expects European market conditions to be tough as air travel demand is hampered by the recession, excessive government taxes and the high cost of fuel.  More airline consolidations and failures are inevitable considering the fragmentation among carriers in Europe and the existence of so many high fare, high cost airlines with poor punctuality.  The company sees great opportunities to grow with the development of their industry leading low fares, low costs and punctual flights operated with the biggest, safest and youngest Boeing 737 fleet in Europe.

However, the carrier noted that governments in Europe and the European Union Commission are restricting the potential for air travel to give economic activity a boost.  Excessive increases to airport charges in Ireland, Spain and Italy, regressive air passenger duties in the UK and Germany, regulatory resistance to expansion at regional airports and a discredited European Union emissions tax initiative suggests an anti-aviation and anti-consumer bias in policymaking.  The growth of the economy, tourism and jobs urgently needs more policy changes and the promotion of competition from regional airport capacity throughout Europe.  The airline will continue to campaign for lower fare policies in the European Union.

Ryanair added that it’s on target to increase traffic 4% in the next fiscal year to more than 79 million passengers.  Traffic for the second half of this fiscal year will be flat as up to 80 planes will be grounded to limit the impact of fuel costs, seasonally weaker demand and yields, and high airport fees in Dublin and Stansted.  The company is still cautious about trading during the winter due to little visibility on bookings and yields in the fourth quarter.  Profitability over the period will be limited because of very low fare competition at new bases, the recession and other competition.  However, Ryanair expects full-year yields to increase 4%, and it has increased its full-year profit guidance to between €490 million and €520 million.

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