Ryanair’s net profit falls over business lost to volcanic ash, higher fuel costs
Irish budget airline Ryanair reported a 24 per cent drop in first-quarter net profit, citing C50 million (US$65 million) in lost business from the Icelandic volcano as well as a rising fuel bill – but the carrier says it remains poised to keep expanding.
Net profit for the April-June quarter fell to C93.7 million ($121.8 million) from C123 million in the same quarter a year ago.
Income from ticket sales rose 14 per cent to C692.9 million, while revenue from other income sources – including the company’s extra charges on everything from baggage to credit-card use as well as its commissions for insurance, hotel and car-rental bookings on its Web site – rose 23 per cent to C165.3 million.
”We continue to see enormous opportunities to grow our business across Europe as many airports vigorously compete to attract Ryanair’s traffic growth,” Chief Executive Michael O’Leary said. “This aggressive competition between airports has resulted in airport unit costs falling by 8 per cent.”
The Dublin-based airline reiterated its previous guidance for full-year net profit to rise 10-15 per cent to a range of C350 million to C375 million. That estimate excludes exceptional losses such as volcano-related cancellations and refunds.
Ryanair reported an exceptional pre-tax loss of C50 million because European air traffic authorities cancelled 9,400 Ryanair flights due to carry 1.5 million passengers in April and May during the volcanic ash threat. The airline’s unaudited statement noted that this loss figure represents only an initial estimate, because Ryanair has yet to pay out refunds to many of its passengers left stranded during the ash crisis.
O’Leary repeated his criticisms of a European Union consumer law that requires airlines _ rather than travel insurance companies or governments _ to reimburse customers’ hotel and meal bills when their flights are grounded by natural disasters. O’Leary said the relevant European law “should be urgently amended to prevent this unfair, disproportionate and discriminatory treatment of EU airlines.”
Despite all those grounded flights, Ryanair said it still spent C286.6 million on fuel, 24 per cent more than in the April-June period of 2009. The extra cost reflected rising oil prices and Ryanair’s ever-expanding route network, which now reaches 155 destinations across Europe, Morocco and Spain’s Canary Islands.
Ryanair said it has purchased advance contracts for 90 per cent of its expected aviation-fuel needs through 2011 and the first half of 2012 at rates of $730 and $755 per metric ton, respectively. That would be a significant premium to the current average price of $666 per ton.
Ryanair said its cash reserves have risen 11 per cent to C3.1 billion over the past year. It plans to pay its first-ever dividend to shareholders on Oct. 1 – a C500 million payment expected to gift O’Leary, one of the company’s biggest shareholders, a pre-tax gain of C20 million.
