Transport Airlines

Ryanair profits up 10 percent as low-cost keeps them coming

Nov 05, 2012 6:09 am

Skift Take

The Ryanair juggernaut continues to roll as Michael O’Leary continues to spread the company’s tentacles, from future of Aer Lingus to future of Heathrow and London aviation hub.

— Rafat Ali

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Mikel Ortega  / Flickr.com

Mikel Ortega / Flickr.com


European airline Ryanair reported stronger-than-expected half-year profits Monday and raised its outlook for the full year as its cost-conscious business model continued to attract customers hit by the region’s economic crisis.

The Dublin-based airline said its net profit from April to September rose 10 percent to €596 million ($775 million) from the same period a year ago. Sales increased 15 percent to €3.11 billion as average fares rose 6 percent.

As a result, Ryanair said it would raise its full-year profit guidance to a range of €490 million to €520 million — about 20 percent higher than previous forecasts — because of strong sales during the key summer months, particularly after the August conclusion of the London Olympics.

Ryanair shares surged 7 percent to €4.90 ($6.37) in early trade on the Irish Stock Exchange.

The carrier said it still should record losses during the quieter second half of the fiscal year and would ground about 80 of its 298-aircraft fleet, chiefly in Britain and Ireland, to reduce fuel costs.

Passenger volume rose 7 percent to a new half-year record of 48 million. The airline said this represents 12 percent of all passengers on European routes.

And the airline, which has grown from a single British-Irish route in 1985 to become the biggest short-haul carrier in Europe, emphasized it expects to keep building market share at the expense of higher-priced rivals.

Chief executive Michael O’Leary said Ryanair was aiming to carry 120 million people annually by 2022 as competitors merge, contract and fail.

He noted this year’s shutdowns of Sicilian airline Windjet, Poland’s OLT Express, Britain’s bmibaby, Hungary’s Malev and Spain’s Spanair, all of them Ryanair hubs or growing destinations.

“Further airline failures and consolidations are inevitable given the fragmentation among European airlines and the existence of so many high-cost, high-fare airlines with poor punctuality records. In this environment Ryanair sees substantial opportunities to grow,” he said.

Ryanair offered no news on its efforts to acquire its main Irish rival, Aer Lingus. It has launched three hostile bids since Aer Lingus’ privatization in 2006 but has yet to win essential backing from the Irish government, Aer Lingus unions or European Union regulators.

O’Leary said he was confident this year’s offer would be accepted by all three parties, partly because Ireland’s government needs to sell assets as part of its efforts to emerge from an international emergency-loan program before those funds run out next year.

Ryanair is Aer Lingus’ biggest shareholder with a 30 percent stake, while the government has 25 percent and Aer Lingus employee-controlled trusts more than 10 percent.

“Ryanair is determined to explore all commercial options to address any competition concerns the EU may have in order to secure approval for its proposed merger,” O’Leary said.

Analysts, however, doubt that O’Leary can win over either the Irish government or EU competition authorities given a merged group would be likely to control around four-fifths of all flights in and out of Ireland.

Aer Lingus shares rose 2 percent Monday to €1.08 ($1.40), nowhere near Ryanair’s June offer of €1.30 per share.

Aer Lingus has been forced by Ryanair competition to pare its costs strongly but still is a substantially different business. Unlike Ryanair it struggles to post only moderate profits; recognizes unions in often-fractious negotiations; operates Airbus rather than Boeing aircraft; has strategic slots at London’s Heathrow Airport that other airlines covet; and is a trans-Atlantic as well as European carrier with several U.S. routes.

O’Leary says these differences do not matter, because Ryanair would run Aer Lingus as a separate company and keep all these operational differences intact.

Copyright (2012) Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. 

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