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Recession bites Ryanair profits

July 30, 2012

DUBLIN: Ryanair, Europe’s biggest budget airline, undershot analyst forecasts with a profit slide of 29% in the three months to June as it grappled with a toxic mix of austerity, recession and stubbornly high fuel prices.

The Dublin-based airline, famous for its no-frills service, said the weak economic outlook for Europe would continue to restrain fare growth for the rest of the year, but maintained its forecast of a profit of between 400 million euros (US$494.80 million) and 440 million euros for the year to March.

“Austerity is biting. There is just less money around,” said chief financial officer Howard Millar. “There are no particular bright or black spots.”

Net profit for three months to June was 99 million euros, compared with a forecast of 123 million euros by four analysts polled by Thomson Reuters. Earnings per share were 6.9 euro cent in the
quarter, compared to an average analyst forecast of 9 cents.

The airline, which has a lower cost base than many of its competitors, said it had hedged 90% of its fuel needs for the year to March at approximately US$1,000 per tonne, up 21% on last year.

But it said the fuel price savings would be more than offset by a lower euro to dollar exchange rate.

Average fares were up 4%, in line with mid-single digit growth forecast by the airline in May, and were on track for average growth of around 3% in the year to March, Millar said.

The airline does not expect to change plans to ground 80 of its 270 planes over the winter due to high fuel costs, Millar said.

“With oil prices at US$100 per barrel it really doesn’t make sense to fly these aircraft,” Millar said. “The more you fly, the more you lose.”

Ryanair’s share price closed at 3.92 euros on Friday, up 7.5% since the start of the year, compared to a rise of 8.4% in the broader Irish market.

Poor weather in the United Kingdom boosted sales at budget rival easyJet Plc in the three months through June, pushing revenues up by 10.5%.

But European carriers, including Air France-KLM and Lufthansa, have seen recent results hit by high fuel costs, weak consumer confidence and the eurozone crisis.

Ryanair said it was involved in “an extensive process of engagement” with the European Commission in its bid for Irish rival Aer Lingus, but it said it would not comment further.

- Reuters


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