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Monday, July 27, 2015 6:53:12 AM
Source: Dow Jones News
By Robert Wall
LONDON--Ryanair Holdings PLC (RYA.DB) on Monday said a greater focus on primary airports and business passengers will lead it to carry more people this year than anticipated and should drive earnings near to the top end of guidance, as Europe's biggest budget airline reported first-quarter net profit rose 25%.
The Irish budget carrier said its profit for the financial year ending in March would be at the top end of its projected range of 940 million euros ($1.03 billion) to EUR970 million, since ticket prices during the key summer period were higher than anticipated. Prices, which had been expected to fall as much as 2% in the first six months through September, now are expected to be flat.
Ryanair said it would likely transport 103 million passengers in the current financial year versus 100 million previously forecast.
In the past two years, Ryanair has been shifting its operations to more primary airports and also sought to win business travelers. That will drive it to park fewer aircraft in the weak winter months, when it expects to idle 40 planes this year, compared with 50 of its Boeing Co. (BA) 737 jets in the previous winter.
Even so, Ryanair held off on raising full-year profit guidance, noting the second half faces some headwinds. Ryanair has a reputation for issuing guidance it can beat.
Faster capacity growth and lower oil prices should lead to "an aggressive pricing response from competitors who will try to defend their market share," Chief Executive Michael O'Leary said, adding, "We therefore remain very cautious about weaker prices and yields this winter."
Net profit in the first three months ended June 30 was EUR245 million ($270 million) compared with EUR197 million a year ago. Sales advanced 10% to EUR1.65 billion, the Irish carrier said, as it carried 28 million passengers, or 16% more that in the prior-year period.
Ryanair this month said it would exit its 29.8% stake in Aer Lingus Group PLC as part of a takeover bid for the Irish carrier by International Consolidated Airlines Group SA. Ryanair is poised to receive about EUR400 million for its stake. The airline said it expects to receive the money in September if the deal closes and will decide at its annual shareholder meeting how to use the funds.
Though falling oil prices have benefited Ryanair and rivals, the effect for the discount carrier has been mitigated somewhat by its fuel hedges that locked in prices at levels above the current market. Ryanair uses the financial instruments to have price certainty.
Mr. Sorahan said the carrier had taken advantage of low crude costs in just the last few weeks to lock in lower prices for next year, where it has 70% of costs now secured. At those prices, Ryanair forecasts savings of up to EUR250 million for the coming financial year.
In Greece, where Ryanair has dropped prices amid the country's financial woes, the airline's planes are almost full, Mr. Sorahan said. "The economy is clearly going to come back," he said, while acknowledging that profitability was a challenge on those routes.
Ryanair also said it had faced less disruption from a fire at Rome's Fiumicino airport than rival easyJet PLC (EZJ.LN). Rome operations "are performing very well" and are profitable, Mr. Sorahan said. EasyJet last month announced it was closing its base at Fiumicino.
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