Ryanair 2nd-Quarter Net Rises 15% on New-Route Sales (Update4)
Nov. 2 (Bloomberg) -- Ryanair Holdings Plc, Europe's biggest low-cost airline, said second-quarter profit increased 15 percent as the carrier added new routes and fares fell less than expected.
Net income rose to 147.6 million euros ($188.1 million), or 19.3 cents a share, for the three months ended Sept. 30, from 128.4 million euros, or 16.8 cents, a year earlier, Dublin-based Ryanair said. Revenue gained 19 percent to 418.3 million euros.
Ryanair added routes including London Stansted to Brindisi, Italy, and cut fares to counter competition from British Airways Plc and new low-cost carriers such as Barcelona-based Vueling Airlines SA. Chief Executive Michael O'Leary is cutting costs and adding revenue from hotel rentals and other services to counter an increase in oil prices.
``Given the state of the industry, these are a creditable set of numbers,'' said Hilary Cook, director of investment strategy at Barclays Private Clients in London, which manages the equivalent of $45 billion and doesn't own Ryanair shares. ``It's a bumpy ride for shareholders. O'Leary is choosing to gain market share over near- term profit, but this could be Europe's largest airline in a few years.''
Ryanair's net income beat the 138 million-euro profit forecast of a Bloomberg News survey of six analysts. The airline has a fleet of 78 aircraft, with firm orders for 96 new Boeing Co. 737-800s to be delivered over the next five years.
Shares of Ryanair have fallen 39 percent this year compared with a 16 percent decline in the Bloomberg Europe Airlines Index. Of 20 analysts covering Ryanair, six rate the shares as a ``buy,'' 12 as a ``hold,'' and two as a ``sell.''
Falling Fares
Yields, or average fares, will fall less than expected in the second half as they did in the first half, O'Leary said in an interview.
``We expect minus 5 to minus 10 percent so we aren't changing our guidance for full year,'' said O'Leary.
At the start of the year, he expected declines of as much as 20 percent in average fares. He said that he expects the airline to grow 20 percent next year and that the airline would still be profitable if oil soared to $70 a barrel.
The airline's fuel bill rose 42 percent to 61.9 million euros. Jet fuel has surged 71 percent this year. Crude oil averaged $43.77 a barrel in the airline's second quarter, 45 percent higher than the year-earlier period.
Ryanair's hedging, which allows company's to cover the risk of cost increases with futures contracts, expired last month, leaving the company exposed to fluctuations in prices. O'Leary said he won't put in place new hedging arrangements until oil prices ``return towards their previous normal levels.''
`More Upbeat'
``Ryanair has been more upbeat than the market was expecting,'' said Joe Gill an airlines analyst at Goodbody stockbrokers in Dublin, who has a ``buy'' recommendation in the stock. ``The business is continuing to grow and to do so profitably, despite fuel prices, because they have such a low cost base.''
Yields, or average fares, slipped 5 percent in the six months through September, according to Ryanair. That's at the lower end of the 5 to 10 percent range forecast by the airline.
``We attribute this to a combination of slightly better peak summer yields and the initial impact of the multiple fuel surcharges imposed by many of our competitors which has increased the price differential,'' said O'Leary in a statement.
Ryanair flew 20 percent more passengers in the three months ended in September than a year earlier. The carrier filled 90 percent of its available seats during the period, an increase of 3 percentage points from a year earlier.
Ancillary revenue, or sales of products such insurance and hotel rooms gained 43 percent, outstripping flight sales, which advanced 16 percent. Ancillary revenue made up 14 percent of total sales in the quarter compared with 12 percent a year earlier.
The airline, which operates 189 routes out of 11 European bases, sells return tickets from London Stansted to Berlin Schoenefeld in November for as little as 60.20 pounds ($110).
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Last Updated: November 2, 2004 02:57 EST