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Published on Monday, November 2, 2009

Ryanair delivers 80% half year profit rise


Low fares airline Ryanair announced an 80% increase in half year net profits to €387 million. 
Revenues fell by 2% to €1.8 billion, as a 17% decline in average fares was largely offset by a 15% growth in traffic. 
Unit costs fell 27% due to lower fuel prices - excluding fuel, unit costs fell 5% - and “rigorous cost discipline”.
Ancillary revenues grew 8% to 20% of total revenues in the half year to September 30 while average fares were down to €39.
CEO Michael O’Leary admitted that the results were “heavily distorted” by a 42% fall in fuel costs, which masked a “significant” 17% decline in average fares. 
“We expect average fares to decline by up to 20% during Quarters 3 and 4, which will result in both these quarters being loss making,” he said 
The full year net profit guidance remains at the lower end of the €200 million to €300 million range, according to O’Leary.
The carrier will be “substantially profitable, at a time when many of our competitors are losing money, consolidating or going bust”. 
He predicted further airline casualties this winter following the recent failures of SkyEurope and Seagle Air in Slovakia, and MyAir in Italy. 
“We are winning substantial market share from the big three high fare flag carrier groups led by Air France, BA and Lufthansa and we expect this trend to continue,” O’Leary said.
“Market conditions in Ireland, the UK and Europe continue to be difficult, characterised by an absence of consumer confidence; and specific markets (i.e. Ireland and the UK) which have been damaged by misguided tourist taxes levied on air passengers but not on competing ferry or train journeys.” 
He reiterated calls on the UK and Irish governments to scrap “tourist taxes” such as Air Passenger Duty and lower airport charges.
“VAT receipts on visitor spend alone would be a multiple of the revenues generated from these tourist taxes,” O’Leary added. 
“We are switching a material proportion of Ryanair’s winter capacity and growth away from high tax, high cost countries like Britain and Ireland in favour of ‘no tax’, lower cost countries like Belgium, Holland, Italy and Spain. 
“Ryanair’s relentless focus on costs continues to deliver savings.  While fuel remains volatile, we have continued to reduce airport and handling costs, through our web check-in initiatives, and staff costs, with a pay freeze in both the current and coming year.  At a time when many competitors are cutting pay and jobs, Ryanair continues to provide secure employment without pay cuts for over 7,000 of the best professionals in the European airline industry.”
He revealed that discussions with Boeing for an order of 200 aircraft for delivery between 20-13 and 2016 has made little progress and warned: “We won’t continue these discussions indefinitely and have signalled to Boeing that if they are not completed before the year end, then Ryanair will end its relationship with Boeing and confirm a series of order deferrals and cancellations. 
“We see no point in continuing to grow rapidly in a declining yield environment, where our main aircraft partner is unwilling to play its part in our cost reduction programme by passing on some of the enormous savings which Boeing have enjoyed both from suppliers and more efficient manufacturing in recent years. 
“We would prefer to grow, but if Boeing doesn’t share our vision, then I believe that Ryanair should change course before the end of this fiscal year and manage the airline  over the next three years to maximise cash for distribution to shareholders.  If we cannot invest our surplus cash efficiently in new aircraft, then we should distribute it to shareholders.”
by Phil Davies 

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