Recession Bites Into Ryanair Profits

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Published: July 30, 2012

Ryanair, Europe’s biggest budget airline, announced a profit slide of 29 percent in the three months to June as it grappled with a toxic mix of austerity, recession and stubbornly high fuel prices.

The Dublin-based airline, famous for its no-frills service, said the weak economic outlook for Europe would continue to restrain fare growth for the rest of the year, but maintained its forecast of a profit of between EUR€400 million (USD$ 494.80 million) and EUR€440 million for the year to March.

“Austerity is biting. There is just less money around,” said chief financial officer Howard Millar. “There are no particular bright or black spots.”

Net profit for three months to June was EUR€99 million.

The airline, which has a lower cost base than many of its competitors, said it had hedged 90 percent of its fuel needs for the year to March at approximately USD$ 1,000 per tonne, up 21 percent on last year.

But it said the fuel price savings would be more than offset by a lower euro to dollar exchange rate.

Average fares were up 4 percent, in line with mid-single digit growth forecast by the airline in May, and were on track for average growth of around 3 percent in the year to March, Millar said.

The airline does not expect to change plans to ground 80 of its 270 planes over the winter due to high fuel costs, Millar said.

“With oil prices at USD$ 100 per barrel it really doesn’t makes sense to fly these aircraft,” Millar said. “The more you fly, the more you lose.”

Poor weather in the United Kingdom boosted sales at budget rival easyJet in the three months to June, pushing revenue up by 10.5 percent.

But European carriers, including Air France-KLM and Lufthansa, have seen recent results hit by high fuel costs, weak consumer confidence and the euro zone crisis.

Ryanair said it was involved in “an extensive process of engagement” with the European Commission in its bid for Irish rival Aer Lingus, but it said it would not comment further.

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