Ryanair shares dive over fears fuel-price spike clouds future
Airline posts €401m but shares down 5.3pc despite 26pc rise in after-tax profits
Published 24/05/2011 | 05:00
RYANAIR shares had their biggest fall this year as investors grow concerned the low cost carrier's stellar growth is finally coming to an end.
At one points the carrier's stock dropped over 8pc as some analysts speculated that oil prices would continue to remain high, hurting airlines like Ryanair.
The steep fall in the shares came as the airline delivered a 26pc rise in after-tax profits to just under €401m in the financial year to the end of March and revenue climbed 21pc to €3.63bn.
Speaking in Dublin, Mr Cawley also confirmed that the carrier will ground up to 80 of its aircraft -- or roughly 26pc of its fleet -- this winter due to high fuel prices that, combined with normally seasonally depressed demand, make many routes highly uneconomical.
The cut in capacity will mark the first time in its history that Ryanair will report monthly falls in passenger numbers.
Despite the planned paring back of capacity, the airline's fuel bill will still increase by €350m to nearly €1.58bn in the current financial year.
Total operating expenses last year climbed 20pc to €3.11bn, largely due to more expensive fuel.
Shares in the airline closed down 5.3pc in Dublin yesterday as investors perceived the end of the stellar growth trend at Ryanair since it floated on the stock exchange in 1997.
Ryanair chief executive Michael O'Leary predicted that the current year's after-tax profit will be similar to last year's.
Ryanair's average fare price was 12pc higher in the last financial year and both Mr Cawley and Mr O'Leary said this was likely to increase another 12pc this year.
The rise will be spurred by longer average route lengths, fuel increases and the ability to charge higher fares as rivals raise theirs.
The airline has 90pc of its fuel requirement for the current financial year hedged, but none of its 2013 requirement. In March, Credit Suisse forecast a "significant risk" to Ryanair's 2013 full-year earnings because of its unhedged fuel position.
Mr Cawley said Ryanair might assess that situation later this year.
"There's no immediate urgency. We're of the view at the moment that buying at $110 a barrel at the moment is not a good price," he said.
"Come September, if all the things, such as Libya, that can affect the oil price are still going on, we might take a different view at that stage and be prepared to hedge at that price."
He said that "over the cycle" Ryanair could recoup higher fuel costs through cheaper airport and maintenance charges and upping fares.
In the 12 months to the end of March, Ryanair carried 72 million passengers -- 8pc more than it did in the previous financial year.
Ancillary revenue -- including sales of everything from cups of tea to car insurance -- jumped 21pc to €803m and accounted for 22pc of Ryanair's revenue.
Mr O'Leary predicted that passenger numbers at the carrier will rise 4pc in the current financial year to 75 million despite the significant cut in capacity this coming winter.