Ryanair Sees Drop in First-quarter Profit of 21 Percent

Ryanair chief executive Michael O'Leary holding Model PlaneRyanair, which is currently the largest discount airline in all of Europe, is having some problems this year. In fact, the airline just reported that it saw a huge drop in profits of 21 percent. According to the airline, this has to do with not only an early Easter travel season but also rising fuel costs across the world.

The airline went on to report that its profits after tax, for the three months that ended on June 30, declined to €78 million. This is down from the €99 million of profit it posted a year earlier. The airline did say that its sales actually increased by 5 percent as most people started to travel more thanks to the recession coming to a close in many countries. However, a number of things hurt the airline’s profits, such as the air traffic controller strike in France.

Howard Millar, who is the current chief financial officer for Ryanair, was the first to report Ryanair’s first-quarter profits this week. Despite this gloomy report, Ryanair has high hopes for the future and is very encouraged by the fact that its sales actually increased.

The biggest problem that the airline had working against it was its growing fuel bill. The airline said that, despite the 5 percent increase in sales, its fuel bill increased by 6 percent. Not only that, but the average fare for its flights actually fell by 4 percent as well. This was due to the timing of Easter this year. So what Ryanair was left with was more sales of tickets that were priced cheaper than last year.

Either way, this has not changed Ryanair’s goal of trying to win a big 20 percent share of the European short-haul market. This is a goal that Ryanair wants to achieve by the year 2018. Ryanair does have a long way to go if it wants to reach this goal. The carrier is on track to reach this goal, however. In fact, Ryanair flew 5 percent more passengers on short-haul flights in Europe during the 2013 fiscal year. This is the same as flying close to 79.3 million more travellers.

Michael O’Leary, who is the chief executive officer of Ryanair, said that its outlook remains cautious for the rest of this year. This is because conditions are still tough with the effects of the recession still at play. Top that off with excessive government taxes and high fuel costs, and it is no wonder the airline made less money. There are just some things that the airline has no control over.

After making this announcement, shares at Ryanair dropped by 2.5 percent to €6.99. So far, stocks at Ryanair have jumped around 48 percent this year. This puts the value of the airline at close to €10 billion. Of course, Ryanair does expect stocks to bounce back in the second quarter. This has to do with the prediction that second-quarter profits are going to rise compared to last year. This is big since really helped to boost sales last year.



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