Shares surge 10pc as Ryanair expects to make €1.2bn profit
Ryanair investors gleefully ignored Michael O'Leary plea to avoid "irrational exuberance" yesterday, as shares in the airline were catapulted as much as 10pc higher as it boosted its profit outlook for the current financial year.
In an unplanned trading update, Ryanair said it now expects to make profits of between €1.17bn and €1.22bn in the 12 month period that ends next March. That compares to a previously guided range of between €940m and €970m, and marks a 25pc leap.
The early morning share surge added over €1.6bn to Ryanair's market capitalisation - more than the market value of companies such as Greencore, Bulmer's maker C&C, or Aer Lingus. The shares hit an all-time high of €18.26.
The spike gave Ryanair a market capitalisation of more than €18bn and closed the gap between it and Ireland's biggest company, CRH, which has a market capitalisation of €22.3bn.
Ryanair said it had experienced stronger than expected peak summer traffic and prices, citing the success of its 'Always Getting Better' customer programme.
It said that traffic growth in the current third quarter that ends in December is expected to be 15pc compared to a previously expected 13pc rise.
Third-quarter fares are also now expected to be flat, compared to a previously expected decline of between 4pc and 8pc. Despite that, Mr O'Leary said he still expects Europe-wide air fare wars this winter.
He recently predicted the "mother and father" of all fare wars in coming months.
Lower fuel prices for the unhedged portion of Ryanair's fuel bill will also help the airline. It has a fleet of over 315 Boeing 737 aircraft, and expects to have 520 by 2024.
But Mr O'Leary cautioned that some of the improvements in Ryanair's performance and its outlook are down to external factors beyond its control.
"We have clearly benefited from favourable industry trends this summer including bad weather in northern Europe, stronger sterling encouraging more UK families to holiday in the Med, reasonably flat capacity across the EU industry and lower prices for our unhedged oil," he said.
"Being the airline industry we do not expect these favourable conditions will persist, and we would urge shareholders and analysts to avoid irrational exuberance while we continue to execute our very ambitious growth plans during what we expect to be very attritional and sustained fare wars across Europe this winter." The average Ryanair fare cost passengers €47.05 during the airline's last financial year, with the average amount of ancillary revenue generated per passenger hitting €15.39 during the same period.
Ryanair is known for generally being conservative in its outlooks.
It has issued a number of profit upgrades over the past 18 months as it benefited from a swathe of changes that included cutting fees, introducing new fare families, revamping its website, toning down cabin interiors and targeting growth at primary airports to attract business passengers.
It expects to carry 104 million passengers in the current financial year. That's one million more than it previously anticipated.
The airline said its full-year profit projection remains "heavily dependent" on bookings made close to the time of travel during the current quarter.
Currently, 30pc of its available seats for the third quarter are sold, but it has zero visibility on what its performance will be like during the fourth quarter.
"Ryanair continues to expect downward pressure on fares and yields this winter as it grows strongly in major EU markets such as Germany, at a time when competitors will begin to benefit from lower oil prices as historic hedges unwind," it added.
The airline also said that it has now recovered all of the almost $5m that was fraudulently transferred to a Chinese bank from one of Ryanair's accounts earlier this year.