Ryanair Holdings Plc reported the first annual profit drop in five years amid mounting competition from other discount airlines and as fuel costs rose.
Profit after tax for the year ended March 31 fell 8 percent to 523 million euros ($717 million), Dublin-based Ryanair said today in a statement. Analysts had predicted a profit of 521 million euros, based on the average of 16 estimates. Sales climbed 3 percent to 5.04 billion euros.
Average fares on Ryanair routes dropped 4 percent last year, with the carrier also choosing to ground 70 jets over the winter period to pare capacity and drive up passenger numbers. The airline, which flew 81.7 million people last year, has pursued a variety of customer-friendly initiatives ranging from allocated seating to a new website aimed at drawing corporate passengers, groups and older travelers.
“Changing your customer experience takes some time,” Chief Financial Officer Howard Millar said in a telephone interview. “The feedback is very positive, particularly in relation to things like allocated seating, which is going well and hasn’t impacted turn-around times.”
Ryanair is targeting after tax profit in the range of 580 million euros and 620 million euros in fiscal 2015, though the company cautioned that the outlook depends on yields in the second half, on which it has ‘zero visibility’ at this stage.
The airline said it aims to fly 84.6 million passengers in fiscal year 2015, an increase of 4 percent, while boosting load factors 2 percent. Fares should rise about 2 percent, the airline said, adding that it aims to ground 20 fewer planes during the winter period this year.
Ryanair and discount rival EasyJet Plc are looking to expand their networks as former flag carriers undertake the latest revamps of their short-haul units. Deutsche Lufthansa AG and Air France-KLM Group have bolstered European offerings and British Airways-owner International Consolidated Airlines Group SA has bought new planes for its low-cost Spanish unit Vueling.
In pursuit of a target to fly 110 million passengers by 2019, Ryanair added 8 bases in fiscal year 2014, while also boosting its presence at primary airports in cities like Athens, Rome and Lisbon. It will base aircraft in Warsaw and Gdansk, Poland, as well as Cologne, Germany later this year.
The discount carrier agreed to buy five more Boeing Co. 737-800s last month, bringing its total order book to 180 jets valued at $16 billion at current list prices. Ryanair will take delivery of 21 jets, up from 17, between this September and July 2015.
The carrier is boosting its marketings spend and moved to fully-allocated seating in February in a push to draw business passengers and customers looking for higher service levels. Other refinements to the airline’s ultra-low-cost model include a de-cluttered website, reduced baggage fees and specialized products targeting corporate customers and groups.
Traffic gained 4 percent in the second half, with load factors rising 1 percent, Ryanair said.
The carrier is 13 percent hedged for fiscal-year 2016 at $94 per barrel on the back of the weak U.S. dollar. Fuel and currency hedging will deliver cost savings of about 70 million euros in 2015, Ryanair said.