Ryanair expects to benefit as steep oil prices put pressure on rival carriers to raise fares and surcharges or even go bust.
But the no frills giant’s chief executive Michael O’Leary warned: “Since we have limited visibility on bookings, we remain concerned at the impact of the recession, austerity measures, and falling consumer confidence on fares.”
Ryanair also plans to ground 80 aircraft in the winter – double the number last year – to offset high airports costs. The Irish airline revealed a 26% rise in profit to €401 million for the year to March and predicted a similar level for the current financial year.
The result came on the back of an 8% rise in passenger from 66.5 million to 72.1 million. A strong performance in in-flight sales saw ancillaries revenue grow by 21% to €802 million, amounting to 22% of total revenues.
The increase in profit came despite 14,000 flights being cancelled due to the Icelandic volcanic ash disruption, airport snow closures and repeated air traffic control strikes. Looking forward, O’Leary said: “Higher oil prices will force competitors to continue to increase fares and fuel surcharges which makes Ryanair’s lower fares even more attractive.
“In many cases competitor’s fuel surcharges are higher than Ryanair’s lead-in fares. Higher oil prices will lead to further consolidations, increased competitor losses, and more airlines going broke.
“This creates further growth opportunities for Ryanair because we operate the most fuel efficient aircraft, have the lowest operating costs, and the strongest balance sheet. We expect to increase market share and expand into new markets as high oil prices force competitors to further cut capacity or go bust this winter.”
Ryanair has its fuel 90% hedged for the current year at around $82 per barrel, a 12% price increase on last year, but “significantly below” current prices.
“Higher oil prices next winter, and the refusal of some airports to offer lower charges, makes it more profitable to tactically ground up to 80 aircraft (40 last winter) rather than suffer losses operating them to high cost airports at low winter yields,” said O’Leary.
“Although we expect to grow traffic in 2012 by 4% to over 75 million passengers, this will be characterised by strong growth of up to 10% in the first half, but these steeper winter capacity cuts will cause monthly traffic in the second half to fall by approximately 4%. Despite these winter capacity cuts we still expect our full year fuel bill to increase by approximately €350 million.”
He added: “Despite these concerns we cautiously expect that our average fares will rise by up to 12% this year due to a better mix of new routes and bases, slower traffic growth, and higher competitor fuel surcharges.
“However, these higher fares will only help us to finance higher fuel and rising sector length related costs, and accordingly, we expect profit after tax for 2012 to be similar to the 2011 result of €400 million.”