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Ryanair (NYSE:RYA) (NASDAQ:RYAAY), a European low fares airline today, has reported that its H1 profits have risen by 1% to €602m, as its traffic grew 2% to 49m passengers.
Highlights:
· Record H1 profit of €602m, in line with previous guidance.
· Traffic up 2% to 49m (load factor up 1% to 85%).
· Seven new bases and 116 new routes opened
· 175 new aircraft order agreed with Boeing.
· New 10 year growth deals at London (STN) and Warsaw (MOD) airports.
· Irish travel tax €3 scrapped from April 2014.
· €177m share buyback completed, H1 cash of €3.5bn.
Revenue per passenger increased 2% due to a 22% rise in ancillary revenues. Unit costs rose 3% largely due to a 7% increase in fuel prices. Average fares fell by 2% during the half year, and have continued to fall this winter, which will lead to a reduction in Ryanair’s full year profit guidance from €570m to approximately €510m.
Commenting on the results Ryanair’s CEO, Michael O’Leary, said that the company was “pleased to report slightly increased H1 profits, particularly against a backdrop of softer fares this summer”.
“Yields in Q3 have softened, which is good news for our customers and has led to strong growth in traffic (up 6% in Oct) and load factors (up 1%)”.
According to Mr O’Leary the 2% fall in fares during H1 was impacted by “one off events such as the timing of Easter (not in Q1), the summer heatwave in northern Europe, French ATC strikes in June, and weaker sterling. Ryanair has responded to these market conditions by stimulating traffic growth with aggressive fare promotions”. This will lay the foundation for traffic growth over the coming years, particularly as our new 175 aircraft deliver from September 2014.
While fares are falling, ancillary revenues “grew strongly by 22% to €713m, driven by the successful roll out of reserved seating, priority boarding and higher credit/debit card fees”.
Unit costs in H1 rose 3% mainly due to a 7% increase in fuel costs. Excluding fuel, sector length adjusted unit costs fell by 2% as the company “continued to deliver cost efficiencies, despite higher Eurocontrol charges and the impact of a 2% pay increase from April last”.
