Sunday 8 December 2019

Ryanair benefiting from cuddlier strategy with passengers and rivals' strikes

Ryanair CEO Michael O'Leary during a press conference in Bratislava, Slovakia, last year. (Photo by Vladimir Simicek/isifa/Getty Images)
Ryanair CEO Michael O'Leary during a press conference in Bratislava, Slovakia, last year. (Photo by Vladimir Simicek/isifa/Getty Images)
John Mulligan

John Mulligan

Neil Sorahan couldn't have wished for better as he presided over his first set of results as Ryanair's new chief financial officer.

Not only did profits jump during the second half of the airline's financial year, but executives, including chief executive Michael O'Leary, are so optimistic that they hiked the full-year profit forecast by over 18pc to as high as €770m.

Ryanair is traditionally regarded by the investment community as being conservative in its forecasts, but Mr O'Leary also told analysts not to expect anything more.

He said he didn't believe the full-year profit figure would hit €800m and that the revised guidance was a rational, if still ambitious, expectation.

"There'll be some analysts out there saying, 'oh, let's stick an €800m number on it', but I don't think it will be €800m. I think the guidance we're giving now … should be fairly accurate," Mr O'Leary said.

Still, by whatever measure you cut it, the performance during the first half and second quarter has been stellar.

Ryanair's new growth strategy of schmoozing up to passengers and targeting primary airports for growth over the next decade is already paying off.

"The competition are trying to push up fares even higher, so in essence they're sending traffic in our direction," said Mr O'Leary. "There's no doubt that we've been helped by the almost continuous cycle of industrial relations problems among other airlines - the strikes in Aer Lingus, TAP, Air France."

"But there does seem to be an underlying momentum in the business at the moment that I thought would dip as we went into the winter and thus far, it doesn't seem to be dipping."

Ryanair has more capacity on its network this winter as it ensures passengers - and business travellers in particular - have more frequent and predictable services on key routes, such as Dublin to Stansted.

Ryanair is already in talks with main airports around Europe regarding its winter 2015/2016 schedule.

"We're working on winter 2015 right now," said Ryanair chief commercial officer David O'Brien. "We're in discussions with a lot of airports who see what we've done at the larger airports this winter and want to become part of that game. So we're in discussions with more Scandinavian airports, more German airports."

Analyst Stephen Furlong at Davy Stockbrokers said Ryanair will post "phenomenal" volume growth this winter, with forward bookings already up 5pc compared to last winter despite more capacity having been added to its route network.

That better volume growth is also helping to keep Ryanair's unit costs down, while a more benign oil price environment has enabled the airline to lock in 90pc of its jet fuel requirements for the financial year that ends in March 2016 at the equivalent of $93 a barrel - a 2pc unit cost reduction.

Mr Furlong said Ryanair has continued to deliver as it "grows relentlessly" in all segments, targeting 150 million passengers a year by 2024. The performance is also paying off for shareholders. Not only are they benefiting from share price appreciation, but also from special dividends and buybacks. The next big payout is due in February, but Mr O'Leary said the board has been discussing possible plans for an additional share buyback in the 2015 calendar year. We will continue to look at rewarding shareholders," he said.

 

Irish Independent

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