Better than expected demand for flights helped low-cost airline Ryanair defy difficult trading conditions in its first half to post profits of €200 million.
The company announced yesterday that net profit for the six months to the end of September, the first half of its financial year, grew 18 per cent on the same period in 2003 to €200.1 million.
The return was well ahead of market forecasts, which estimated Ryanair's first-half net earnings would be between €185 million and €190 million.
Operating revenues grew 18 per cent to €721 million from €596.3 million in the first half of 2003. Operating profits after exceptional items were up close to 20 per cent at €234.3 million. Profits before tax were 18 per cent up on 2003 at €220.5 million.
Earnings per share in the first half grew by just under 20 per cent to 26.35 cents from 22.34 cents in the same period last year.
Deputy chief executive Mr Michael Cawley told reporters yesterday that the strong performance was due to better than expected demand for flights, particularly during the summer period.
Ryanair said that 14 million people flew with the airline during the six-month period, compared with 11.3 million in 2003, an increase of 24 per cent. It filled 87 per cent of its available seats, which was an increase of 4 per cent on 2003.
Good demand for flights meant that the airline's yields - the average profits earned from the sale of each seat - were better than both the company and market analysts expected.
Earlier this year, chief executive Mr Michael O'Leary predicted yields would fall by 5-20 per cent over the course of its financial year (which ends on March 31st, 2005).
Yesterday, Mr Cawley said that yields in the first half had fallen by 5-10 per cent. His boss said the fall was at the "better end" of that range and predicted it would remain there for the rest of the year.
The airline's average ticket prices fell by 5 per cent on the first half of 2003. According to its own figures, average revenues per seat during the period were €44.11, compared with €46.33 last year.
Another key issue for investors has been the volatile fuel market and the fact that, as of two days ago, Ryanair's exposure to this risk is no longer hedged. Its first-half fuel costs were €113.75 million, compared with €84.35 million in 2003.
Mr Cawley said that if Brent crude hit a price of $50 a barrel, it would add €55 million to its budgeted fuel costs over a full year. But he pointed out that oil had been steadily dropping below this figure in recent days.
His fellow deputy chief executive Mr Howard Millar told a press conference that the failure to hedge would cost the airline an extra €16-€17 million this year, if the price went back to €50 million.
However, both men argued against hedging on the basis that it would force the airline to commit to a price between €48 and €50 a barrel for six months, when the company believed it was going to fall below this level over that period.
"Ryanair can still make money at $70 to $80 a barrel, even though we would not like to see the price at that level," Mr Cawley said. He also argued that fuel surcharges imposed by other airlines were driving passengers to Ryanair, and helping to offset the worst effects of the ongoing fuel crisis.
In a statement, Mr O'Leary said that the better than expected yields would help to partially offset increased fuel costs. He added that the airline remained cautious in its outlook for the rest of the year.
