Ryanair reports first annual loss
02.06.09
Ryanair has reported its first annual loss after it was hit by higher fuel costs and had to write down the value of its stake in rival Aer Lingus. The budget airline made a net loss of €169m (£146m) in the year to 31 March, larger than analysts had expected. Stripping out the impact of the Aer Lingus write down and other one-off factors, Ryanair made a profit of €105m, a 78% fall on the previous year (€481m) but slightly ahead of previous guidance.
Sales increased 8.4 percent to €2.94bn, but fuel costs rose 59 percent to €1.26bn euros from €791.3m a year before, as oil prices hit records last summer and the airline failed to put a hedging policy in place. The airline said it had been forced to write down the value of its 29.8% stake in Aer Lingus by a further €222m during the period, after its rivals share price fell.
Ryanair said it was now benefiting from lower fuel prices. The budget airline's chief executive Michael O'Leary said: ‘We intend to use reductions in both fuel and other costs to drive fares materially lower.' He said the airline expected to report profits of between €200m and €300m for its current financial year, as its continues to attract more passengers through lower ticket prices. He said, however, the profit forecast carried a ‘heavy health warning.’
Ryanair said its passenger numbers rose by 15 percent from 50.9m to 58.5m. Its average fares were reduced by 8 percent to €40. A spokesman forecast a 15 percent rise in passenger volumes in the 12 months to the end of March 2010 to 67m.
Mr O’Leary said the significantly lower oil prices in recent months had encouraged the group to restart hedging and it was now 90 percent hedged for the first three quarters of the coming year ‘at much lower prices than competitors.' If oil prices remained at current levels he forecast a €450m fall in the airline’s full year fuel bill. Ryanair also forecast a fall of around 5 per cent in non-fuel operating costs per passenger.
Ryanair has been successful in raising its ancillary revenues, from sources such as commission earnings on its website from hotel, car rental, airport parking and travel insurance bookings, as well as its various additional passenger charges. Ancillary earnings rose by 23 percent last year and for the first time accounted for 20 percent of total turnover.
Mr O’Leary said the lower fares would help the budget airline to expand its traffic and fill more seats, as its capacity continued to grow. Despite the deep recession the group was gaining market share from ‘high fare competitors.’ He said: ‘While we have limited visibility on bookings we expect that a combination of a deep recession, weaker sterling and our own capacity growth will cause average fares to fall by between 15 and 20 percent this year to as little as €32 per passenger.'
Last year Ryanair added 18 net new aircraft to its fleet, which totaled 181 at the end of March. It operates a single type fleet of 189-seat Boeing 737-800s. It added six new bases to a network of more than 30 at Alghero, Birmingham, Bologna, Bournemouth, Cagliari, and Edinburgh.
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