Ryanair Holdings Plc lifted its fiscal full-year profit goal as it rolls out more routes and reduces unit costs.
Profit after tax for the year through March 2015 should be in the range of €620 million to €650 million, compared with the €580 million to €620 million previously forecast, according to a statement.
Ryanair is seeking a return to annual profit growth after the first decline in five years in fiscal 2014 as it refines a no-frills approach to draw business passengers, older travelers and families. Profit for the first quarter ended June 30 more than doubled as Easter fell in the period, though a surge in additional seating could weigh on second-half fares.
“We are going to invest in our route network this winter,” chief financial officer Howard Millar said in a telephone interview. The boost in profit guidance “is due to a larger number of passengers, which reduces unit costs, so it’s a cost-driven increase,” he said.
Passenger numbers advanced 4 per cent to 24.3 million in the first three months and should gain about 5 per cent to 86 million in the full year, backing up the earnings upgrade, Ryanair said.
‘Irrational Exuberance’
First-quarter profit increased to €197 million from €78 million a year earlier, beating the €157 million predicted by analysts, based on five estimates. Average fares gained about 9 per cent and sales surged 11 per cent to almost €1.5 billion as the timing of Easter bolstered demand.
Ryanair began selling its summer schedule earlier and has been promoting forward bookings, helping to drive load factors, aided by measures including allocated seating, reduced baggage charges and a simplified website.
Still, the carrier cautioned against “irrational exuberance in what continues to be a difficult economic environment.” Pricing in the second-half is likely to be “much softer” as competitors lower fares and Ryanair itself boosts winter capacity by 8 per cent, it said.
Bigger Cushion
“We see the cost-benefits remaining, but fleet growth - a lower proportion of the fleet grounded to fund investment in frequency - may see temporary pressure on profitability,” Damian Brewer, an analyst at RBC Capital Markets in London, said of Ryanair, while adding that it has a “greater profit cushion for the year” than in fiscal 2014.
Ryanair will open four new bases during the traditional low season and plans to ground fewer jets, Millar said. The company is also adding frequencies to key destinations and will have at least two flights a day on more than 200 routes, compared with about 110 last year, he said.
Bloomberg News, edited by Hospitality Ireland
