Ryanair Reveals Record Profits

Ryanair, the biggest budget carrier in Europe, has posted record profits for the year to March 31. Net income increased 25% to €502.6 million, but the airline has warned that this figure could drop to between €400 and €440 million in the coming year due to the rising cost of fuel and the slowing economy preventing it from raising fares sufficiently to bridge the gap. Annual revenue rose 19% to €4.32 billion as customer numbers jumped 5% to 76 million, and passenger traffic is expected to increase to 79 million this fiscal year.

Last winter, Ryanair grounded 80 planes to curb capacity and help boost average fares 16% as costs jumped 13%. The slump in the European economy means it will be even harder to increase prices enough in the coming year to fully offset an anticipated €320 million increase in its fuel bill. The fuel bill had risen €360 million last year, and this year’s increase will mostly be felt in the first half, resulting in a profit drop during the first quarter.

Despite cutting winter capacity for the first time year-to-year, Ryanair was delivered 25 more aircraft, added 330 routes and opened six new bases over the year – while it plans to add a further 200 services this year. The airline says it’s concerned about next winter – which has a zero yield visibility. They expect it to be a struggle to repeat the results from the past year, as ticket prices will only partially offset the fuel bill. At its new or growing bases in the UK, Spain, Hungary and Poland, the carrier expects fares to fall.

Ryanair chief executive Michael O’Leary said he’s cautious about the outlook for the current year. However, less efficient airlines are likely to suffer more, and the economic decline may benefit Ryanair for the longer term, he noted. Chief financial officer Howard Millar says the coming year will be more difficult as the recession strikes throughout Europe. Spain is much weaker, Italy is growing weak and fares can’t be raised forever with so much austerity, he added.

Ryanair shares fell as much as 6.6% and were trading at €3.82 during morning trading in London on Tuesday. This year, however, the stock has increased 5.3% to value the company at €5.5 billion. It has confirmed a second special dividend will be paid to shareholders of €483 million in November. This follows the carrier awarding shareholders with €500 million in 2010. Although there aren’t any plans for a payment next year, it’s possible another dividend may follow in two years. O’Leary says this will depend on the carrier’s aircraft-purchase commitments.

The chief executive also noted that they aren’t looking to acquire other carriers which may become available as governments sell their stakes. However, they are targeting markets where other airlines have collapsed. He noted that Aer Lingus, which Ryanair previously tried to buy before being rejected by regulators, is now most likely to be bought by a foreign bidder and divided.

Additionally, O’Leary said that they have had talks with Airbus and Boeing about adding planes but don’t have an immediate requirement. This is because planes are likely to become available through cancellations by other airlines. Any order for the C919 made by Commercial Aircraft Corp. in China will be slightly longer term, he said.

O’Leary added that it’s possible Ryanair could agree to take a small minority stake in Stansted Airport in London as part of a bid group. However, this will only be in return for guarantees regarding airport fees. This follows regulators ordering airport owner BAA to sell the airport.