Tuesday, 24 May 2011

Ryanair profits up but braced for first-ever fall in passengers

Irish budget carrier Ryanair has reported a 374m euros ($525m; £325m) annual profit, a 23% rise.

Ryanair's inexorable passenger growth will go into reverse this winter for the first since it became a low-cost carrier, the airline admitted on Monday, as high fuel costs and weak demand force the grounding of up to 80 aircraft.

The airline saw 14,000 flights cancelled during the year to 31 March due to volcanic ash, snow and strikes.

It also said its fuel costs rose by 37% during the 12 months.

However, the airline now has 90% of its fuel needs hedged at a cost of $820 per tonne, or roughly $82 a barrel, which it says would give it an advantage over competitors.

Michael O'Leary, chief executive, said because of "higher oil prices next winter and the refusal of some airports to offer lower charges...we want to limit the losses in the second half." 

Ryanair is better hedged than most rivals, with 90% of its fuel bill secured for this financial year at around $82 a barrel – well below the current spot price of almost $110. Even so, Mr O'Leary stressed he still expected a €350m jump in this year's fuel bill.

Passengers will feel the squeeze immediately. O'Leary said high fuel prices would push up Ryanair's average fare by 12% to more than €43 (£37) this year, as the airline sought to recover an increase in fuel costs by €350m. "A 12% growth in average fares will only just cover the €350m additional fuel bill," he said.

He said Ryanair's average "lead-in" fare, the term for the lowest ticket price on a flight, will be €12 this summer compared with up to €9 last year. Fewer of those tickets will be offered too, he added.

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