Ryanair Holdings Plc, Europe's biggest discount carrier, raised its full-year earnings forecast after Q3 profit unexpectedly increased 30% on higher fares and baggage charges.
Net income rose to €47.7 million ($61.7 million), or 6.12 cents a share, for the three months ended December 31 from €36.8 million, or 4.76 cents, a year earlier, the company said today in a statement. The figure was more than double the €21 million median estimate of nine analysts surveyed by Bloomberg.
The Dublin-based airline's stock rose the most in two years after CEO Michael O'Leary predicted a 25% increase in passengers in the current quarter and full-year profit of €390 million compared with an earlier forecast of €350 million. The introduction of baggage fees in March last year helped offset higher Q3 fuel costs. „Ryanair always surprises and they've surprised again,” said Howard Wheeldon, an analyst at BGC Partners LP. „People seem to have adapted to the baggage charge and more of them are taking advantage of the ability to use an airplane like a bus.”
The shares surged as much as 73 cents, or 6.5%, to a record €11.95, and were up 6.1% as of 10:34 a.m. in Dublin. The stock has gained 55% over the last 12 months, giving the company a market value of €9.2 billion. „This exceptional 30% increase in Q3 profits during a period of higher oil prices, intense competition, and 21% seat capacity growth demonstrates, yet again, the robustness of Ryanair's lowest fare model,” O'Leary said in the statement.
The airline, based on the low-cost model pioneered by Southwest Airlines Co. in the US, flew 10.25 million passengers in the quarter, up 19% from a year earlier. Revenue jumped 33% to €493 million. The load factor, or proportion of seats filled, averaged 82% in the period compared with 84% a year earlier. Average fares, including baggage fees, increased 7%. „It's not an issue of anything other than supply and demand,” said Deputy CEO Michael Cawley, in a television interview.
„What's driving the demand for our business is the fuel charges that are being levied unnecessarily,” by other airlines, he said. The airline carried 3.1 million passengers last month, an increase of 23% from the year earlier. The load factor fell 3 points to 71%. For the rolling 12-month period to January 31, Ryanair flew 41.1 million passengers. The load factor was 83% for the period, the company said in a separate statement.
Ryanair says it's the only airline in Europe that doesn't have a fuel surcharge. Fuel surcharges allow airlines to offset higher oil prices by passing the cost on to customers. Operating expenses increased 35%. Higher fuel costs cut into profit after the price of oil spiked in the summer, shortly before the airline hedged its fuel needs for the quarter. The airline spent €174.9 million on fuel in the period, 52% more than a year earlier.
Ryanair is now 90% hedged through March at $73 a barrel. „We took advantage of the recent oil price weakness to extend our hedging position,” the company said. The company's current position is expected to save it €60 million in fuel costs in the next fiscal-year. The airline was 90% hedged at $70 a barrel of oil in October and 90% at $73 for November and December. A year earlier it paid $49 a barrel for fuel. Oil prices reached $78 a barrel in July and are now at about $59.
„Unfortunately they hedged at a high price just before the fuel price started to go down,” said Geoff van Klaveren, an analyst at Exane BNP Paribas with a `neutral' rating on the stock, before the results. „The market will overlook that because it's a fairly short-term” factor. The company's cash position increased by €47 million to €2.02 billion, despite acquiring a 25.2% stake in Ireland's Aer Lingus Group Plc for €342 million.
Ryanair's hostile bid for its Irish rival has been referred to a Phase 2 competition review by the European Commission. „At a time when the European Union is encouraging airlines to consolidate, we remain confident that our offer for Aer Lingus will obtain EU Commission approval following this Phase 2 review,” O'Leary said in the statement. The carrier, which started in 1985 with one 15-seat plane, aims to fly 42 million people in the financial year ending March 31 and more than 50 million in the next.
British Airways Plc, the UK's largest airline, cut its full-year sales forecast because of a threatened flight attendants strike last week. The carrier posted a 12% drop in Q3 profit after terror alerts and weather disruptions at London airports. (Bloomberg)