Business Irish

Saturday 30 August 2014

Rising fares and strong demand keep profits high at Irish carrier

John Mulligan

Published 29/01/2013 | 05:00

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It's quite incredible that Ryanair can deliver quarterly profits such as these even as its fuel bill soared 24pc to €81m in the period.

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But it's been helped by stronger demand as legacy carriers pare capacity in the face of harsh economic realities and punishing fuel costs. A relentless focus on containing costs also filters through to Ryanair's bottom line.

"Ryanair remains by some distance the lowest-cost producer in the industry," according to Davy Stockbrokers analyst Stephen Furlong.

He said that Ryanair's strong balance sheet (it had €3.5bn in gross cash at the end of the quarter) and cash flows allowed it to target about a 20pc share of the EU short-haul market by growing annual passenger numbers to over 120 million.

Its average fare has also been on the increase as it carries more passengers.

Ryanair also generated €13 per passenger in ancillary revenue in the third quarter, but that doesn't include fees for baggage, which are included in the scheduled revenue.

Baggage

Deputy chief executive Howard Millar said that during the third quarter, just under 30pc of passengers checked in baggage. That figure rises to about 40pc in the summer, but five years ago it was around 80pc. Ryanair now carries 40 million fewer bags than the 64 million it used to carry every year.

And while ancillary revenue comprised almost 23pc of total revenue in the third quarter, Ryanair won't add on services unless they can pay their way.

Aer Lingus is rolling out Wifi services on its aircraft but Mr Millar said Ryanair believed the external equipment required on an aircraft to provide it would result in drag that could increase Ryanair's €2bn annual fuel bill by between €20m and €40m. He said it also cost about $500,000 (€371,000) to install the equipment on an aircraft.

"Nobody has yet made this work," he insisted.

Shares in Ryanair traded down down 2pc but closed up 4 cent as investors welcomed the strong performance.

Irish Independent

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