Ryanair today raised its full year profit guidance by as much as €100 million despite recession, competition and “very low fare competition” at new bases constraining profits in the second half.
The no-frills airline giant said that given its first half performance, it would be “appropriate” to raise full year profit guidance from €400 million to €440 million to a new range of €490 million to €520 million.
Profits for the first six months of the carrier’s financial year were up by 10% to €596 million as revenues grew by 15% to €3.11 billion and passenger numbers were up by 7% to 48 million.
Average fares rose by 6%, offset by an 8% rise in unit costs, mainly due to a 24% or €218 million increase in fuel. Ancillary revenue rose by 12% to about €12 per passenger.
The carrier is on target to grow traffic next year by 4% to over 79 million passengers.
Ryanair estimates about 580 million short-haul passengers are travelling at substantially higher fares with intra EU airlines that are either loss-making or producing meagre profit margins.
Chief executive Michael O’Leary said: “This represents a major opportunity for Ryanair’s lowest fares model – given our substantial unit cost advantage – to grow profitably to 120 million passengers per annum over the next 10 years.
But traffic in the second half of this year will be “broadly flat” as Ryanair grounds up to 80 aircraft to limit the impact of high oil prices, high airport fees at Stansted and Dublin, and seasonally weaker demand and yields upon the business.
“We remain cautious about winter trading as we have little visibility on Q4 bookings or yields,” O’Leary said.
Describing the first half results as “robust,” he said: “Profits exceeded our expectations driven by a combination of strong summer bookings, particularly post the Olympics, a 6% rise in average fares, and lower than forecast fuel bill due to the successful implementation of our fuel savings programme.”
Looking forward, O’Leary said: “We expect market conditions in Europe to remain tough as recession, austerity, high fuel costs, and excessive government taxes dampen air travel demand.
“Further airline failures and consolidations are inevitable given the fragmentation among European airlines and the existence of so many high cost, high fare airlines with poor punctuality records.
“In this environment Ryanair sees substantial opportunities to grow by deploying our industry leading low costs, low fares and on-time flights with our youngest, largest and safest fleet of Boeing 737s in Europe.”
He cited the closure of a number of EU airlines including Windjet of Sicily, OLT Express of Poland and Bmibaby as examples of the pressures on airlines in Europe. These followed the earlier collapses of both Malev and Spanair.
Meanwhile, legacy carriers including Air France/KLM, IAG, Lufthansa, SAS and Air Berlin have all announced restructurings that include significant contraction of their short-haul operations. Charter airlines such as Thomas Cook are also cutting fleet sizes.
“In contrast Ryanair continues to find profitable opportunities for growth across Europe as higher cost and less efficient competitors struggle to survive,” added O’Leary.
“Our new bases in Budapest and Warsaw have stimulated strong demand at Ryanair’s very low fares while expansion of existing bases in Spain, the UK and Germany has delivered impressive volume and profit growth.
He used the half-year results announcement to repeat a call for the new owner of Stansted to cut airline charges, warning traffic at the airport will continue to decline otherwise.