Ryanair reports 43% rise in FY2015 profits

Dino D'Amore
By Dino D'Amore May 23, 2016 14:05

Ryanair reports 43% rise in FY2015 profits

Ryanair has reported full year profits after tax of €1.242bn, a 43% increase on the prior year. Revenue rose by 16% to €6.536bn. Traffic grew 18% to 106 million as load factor jumped 5% points to 93%. The airline’s average fare dropped 1% to €46 as unit costs fell 6% (ex-fuel down 2%).

“FY16 was a year in which we delivered significant traffic and profit growth in all four quarters (despite an average oil price of $90bbl as a consequence of hedges put in place in 2014) as our Always Getting Better (AGB) service programme is attracting millions of new customers to our lowest fare/lowest cost model,” said CEO Michael O’Leary.

Ryanair highlights the five-year pay and conditions deals agreed with all 84 pilot and cabin crew bases as one of its successes during this fiscal year alongside proceeds from the Aer Lingus share sale, some €398 million, being distributed to shareholders in November and the airline fourth share buyback (€800m) launched in February.

This year Ryanair will take delivery of 52 new 737 aircraft to grow its fleet to 380 (net of handbacks) by year end.

The airline credits the success of Ryanair’s AGB programme for its record traffic and load factors. “Over the past 2 years we have seen load factors improve from 83% to 93% as our traffic has grown from 80m to over 106m p.a.”

“While AGB Years 1 & 2 were about fixing things that our customers disliked and improving our offering, Year 3 will be about digital acceleration and innovation, particularly through Ryanair Labs. This year’s initiatives will include a new Leisure Plus service, improved Business Plus, a “One-Flick” payment facility on our mobile app, auto check-in for “My Ryanair” customers and lower checked bag fees.”

Ryanair also highlights its best on-time performance for FY16, despite record load factors, French ATC strikes, the fire closure of T3 in Rome (FCO) last summer and Brussels Zaventem in March and repeated ATC delays following the introduction of a French ATC computer system.

The airline has called on the European Commission “to take action to prevent the skies over Europe being closed this summer due to unjustified strikes by ATC unions. The European courts should also reverse previous unjust rulings that EU airlines should compensate passengers during ATC strikes when airlines have no control over these and cannot under law recover costs from protected ATC unions.”

Ryanair’s FY16 fuel was hedged at approx. $90bbl. FY17 is 95% hedged at approx. $62bbl and €/$ is hedged at $1.18 which will deliver fuel savings of circa €200m (as price savings are offset by increased flight hours). The airline is now 44% hedged for FY18 at approx. $50bbl. “We plan to pass on most if not all of these fuel savings to our customers in lower air fares particularly as we grow capacity over the next 12 months in key markets around Europe,” it said in a statement.

Q4 yields on close-in Easter bookings were adversely impacted by over 500 flight cancellations following the Brussels terrorist attacks and repeated (mainly French) ATC strikes. In recent weeks Italian, Greek, Belgian and French ATC unions have also engaged in strikes which caused a further 200 plus cancellations. Q1 yields will be negatively impacted by these cancellations, lower fares (as competitor high cost fuel hedges unwind), the absence of Easter in April and Sterling weakness in the run up to the Brexit referendum on June 23.

Ancillary Revenue continues to track ahead of Ryanair’s long term target of 20% of revenue but it is seeking improvements thanks to a revitalised website.

Ryanair had net cash of €312m at Mar. 2016 following CapEx of €1.2bn, debt repayments of €385m and shareholder payments of over €1.1bn during FY16.

For the future, the airline sees growth opportunities for its lower fares and AGB programme. “We are, on average, 2% better booked for the peak summer months than this time last year but at lower fares. We expect our FY17 load factor will be similar to last year (93%) as we grow traffic by 9% to 116m. Pricing however will be softer, particularly in Q1 & Q4 neither of which have any Easter holiday benefits and capacity additions in Europe are higher than in previous years as hedged competitors enjoy falling oil bills. Since we continue to be load active/yield passive we expect (with very limited visibility) ave. fares to fall approx. 7% this year (comprising H1 -5% to -7% & H2 -10% to -12%).”

“Our cost discipline should see us deliver ex-fuel unit cost reductions of 1% in FY17. Our fuel bill will fall by some €200m as lower euro pricing is partially offset by bigger volumes due to growth.

Accordingly, we cautiously expect full year net profit to rise modestly, by approx. 13%, to a range of €1,375m to €1,425m. This guidance remains heavily dependent on the strength of close-in summer bookings and next winter’s yields, the strength of Sterling and the absence of any further external shocks or significant ATC strikes/cancellations.”
Dino D'Amore
By Dino D'Amore May 23, 2016 14:05