3rd Feb 2014 08:42
LONDON (Alliance News) - Ryanair Holdings PLC Monday kept its full-year profit guidance unchanged after it moved to cut costs and ramp up seat offers in response to the downturn that it had reported last autumn, and it raised its passenger number guidance thanks to the recent launch of new bases.
Europe's largest low-cost carrier saw its shares rise strongly after it reported that passenger numbers grew 6% in its fiscal third quarter and forward bookings in the current quarter are running well ahead of last year, albeit at lower yields, a better performance than it has reported in its last two trading updates.
The re-iterated guidance comes after the Irish airline cut its guidance twice during the autumn after warning that it was seeing pressure on fares. It reacted by cutting costs and ramping up its use of promotions. It said fares are still under pressure, but it has managed to increase passenger numbers and cut fuel costs, partly offsetting the impact.
In its statement Monday, Ryanair said it still expects its full-year net profit to be between EUR500 million and EUR520 million, the same guidance it had given in November. The November guidance was a reduction from the guidance for a profit of between EUR570 million and EUR600 million it gave in September, which itself was a cut from previous guidance.
It said it expects its yields to fall by about 8% in the fourth quarter, slightly better than the 10% decline it had guided for previously.
Ryanair reported a net loss of EUR35.2 million for the three months to end-December, compared with a profit of EUR18.1 million a year earlier, its largest loss for the third quarter for five years. Revenues were flat at EUR964 million compared with EUR969 million, even though passenger numbers rose to 18.3 million from 17.3 million. It said the profit decline was due to a 9% fall in average fares and a weaker sterling.
"We responded to this weaker pricing environment last September with seat promotions and lower fares which stimulated traffic across all markets resulting in 6% growth in the third quarter, and a 1% rise in monthly load factors," Chief Executive Michael O'Leary said in a statement.
"Ancillary revenues grew by 13%, significantly faster than traffic growth due to strong customer uptake of reserved seating, priority boarding, and higher credit card fees," he added.
The airline's adjusted unit costs fell 9% in the quarter.
It said it is 90% hedged for its full-year fuel needs at a cost of USD980 per tonne, and it said it has taken advantage of recent oil price and dollar weakness to extend its hedge position to 90% for full-year 2015 at USD960 a tonne. It said the fuel hedging, combined with its euro/dollar hedging programme, will deliver fuel cost savings of about EUR80 million in 2015.
"Market pricing remains soft but is no longer declining. We reacted quickly to last autumn?s weakness with a range of lower fares, seat promotions, and recently increased advertising and marketing spend. As a result forward bookings in the fourth quarter and into fiscal 2015 are running significantly ahead of last year, albeit at weaker yields," the airline said in its outlook statement.
"We expect our strategy of lowering fares and increasing forward bookings will enable us
to better manage close in bookings and yields as we move into summer 2014," it added.
The airline expects full-year passenger numbers to rise to 81.5 million, slightly higher than it had previously guided, helped by the launch of new bases in Italy and Brussels and by higher load factor, which is a measure of how full its planes are.
"Advance bookings for the first quarter of fiscal 2015 are significantly higher than this year?s comparable, even allowing for the impact of Easter," it said.
Ryanair's shares were up 4.1% at EUR6.57 in London Monday morning.
In other airline news, Flybe Group PLC Monday said its trading in the fiscal third quarter had been in line with overall management expectations. The low-cost airline said UK scheduled revenue per seat was up 2.3%, while costs per seat, excluding fuel and restructuring costs, were down 5.2%. It said revenue from white label flying in Finland rose 23.7%.
Flybe is going through a major restructuring, and has targeted cost cuts of GBP40 million this year and further cost benefits of GBP7 million this year and GBP26 million next year. It had proposed cutting 500 jobs, but Monday said the figure will be about 450. However, it said it is still on track to meet its costs targets.
It said revenue under management was up 5% to GBP203.5 million in the third quarter, while group revenues was in line with the third quarter of its last financial year at GBP142.9 million. Sales revenues for the current fiscal fourth quarter are up about 3%, driven by higher passenger volumes partially offset by lower yields.
"In the short-term, Flybe's revenue will be affected as it discontinues unprofitable routes. However, the group's improved cost structure will, the board believes, provide Flybe with a firm foundation for future profitable growth," it said in a statement.
Flybe shares were up 2.6% at 108 pence early Monday.
By Steve McGrath; [email protected]; @SteveMcGrath1
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