Bad weather brings loss for Ryanair
Published 31/01/2011 | 08:01
Budget airline Ryanair has reported a loss for the final three months of last year after it was forced to cancel more than 3,000 flights.
Chief executive Micheal O'Leary said the carrier had been expecting to break even in the third quarter but reported a net loss of €10.3m, compared with a deficit of €10.9m in the previous year, as strikes and severe weather grounded its aircraft.
However, a 15pc rise in average fares to €34, a surge of 20pc in ancillary revenues, such as in-flight sales of refreshments and entertainment, and a 6pc hike in passenger numbers helped offset the impact of strikes in Europe and heavy snowfall in Ireland and the UK.
The airline faced a 37pc rise in its third-quarter fuel bill but Mr O'Leary said the group was on course to hit full-year net profits at the upper end of its forecast range of between €380m and €400m.
Mr O'Leary said: "This small third-quarter loss of €10m is disappointing, as we were on track to break even, but earnings were hit by a series of air traffic control strikes in the third quarter, compounded by a spate of bad weather airport closures in December."
Mr O'Leary added that the 3,000 flight cancellations in the third quarter compared with 1,400 in the whole of the previous fiscal year.
He said that, although oil prices had risen significantly in recent months, the airline's "fuel hedging strategy" was continuing to pay off, with 90pc of fourth-quarter fuel bought at a reduced rate.
Mr O'Leary said he was surprised that recent commentary on the Irish economy had clouded analysis of Ryanair.
He said: "Ryanair has little exposure to the Irish economy."
In light of the adverse weather disruption, the chief executive took the opportunity to hit out at European regulations which require airlines to compensate passengers during widespread cancellations.
Mr O'Leary heavily criticised the directives after the volcanic ash cloud crisis, which led to airlines forking out millions in compensation to customers.
He said: "It is inequitable that airports enjoy a boost to their restaurant and retail revenues from stranded passengers when their runways close, yet the airlines are obliged to pay for meals, drinks and hotels, when these cancellations are outside our control."
Ryanair is not the first airline to flag up the cost of severe weather disruption.
Earlier this month, low-cost rival easyJet said the snow chaos cost it £18m (€21m), while British Airways estimated the disruption will cost it £50m (€58m).
Ancillary revenues came in at €194m in the third quarter, up from €162m a year earlier. Like its low-cost rivals, Ryanair sees ancillary revenues as a key part of business as it allows airlines to keep ticket prices lower.
Easyjet reported a 4.8pc increase in ancillary revenues in the three months to December 31, which includes checked bag charges. However, ancillary revenues by seat fell by 2.7pc per seat as fewer passengers opted to check in baggage.
Ryanair shares were up more than 1pc after today's release.
Andrew Fitchie, an analyst at Investec, said: "The update provides confidence that despite the dire consumer backdrop, low-cost carriers can continue to grow, driven by share shift as passengers trade down to low fares."
He added: "The release highlights that the low-cost market remains strong."