- Ryanair h1 profits up 7pc to €1,168m
- Fares down by 10pc
- €550m share buyback approved by board
Ryanair average fares fell 10pc in the first half of the airline’s accountancy year to €50.
Load factor was up 2pc to 95pc
Ryanair now expect to carry just over 119m customers in 2017. The airline raised their long term traffic forecast by over 10pc from 180m to 200m customers by March 2024.
Currently the largest airlines in the world by passengers carried are American (147m), Southwest (144m) and Delta (139m).
Unit costs also fell by 10pc, they were down 5pc when fuel was excluded.
The airline raised their medium term guidance for ancillary sales from 20pc to 30pc of revenues, over the next four years to March 2020.
Their first half statement indicates that for the first time Ryanair will operate to a majority of primary (105) rather than secondary (95) airports by the end of 2016.
The summer 2017 schedule was launched two weeks earlier than last year sees 80 new routes and a new two aircraft base at Frankfurt am Main airport to open in late March.
Automatic check in and a wider choice of accommodation on the Ryanair Rooms platform is on the cards for the coming months.
Ryanair has already made membership of “My Ryanair” compulsory for bookings in the Irish market and this will be extended to other markets. The airline says 93pc of all customers are now booking directly on Ryanair.com and they expect membership of “My Ryanair” will significantly increase from 15m in Sept to 25m by end-2017. Ryanair.com recently overtook Southwest Airlines to become the world’s largest airline website. Ryanair Rooms was soft launched in October. Their mobile app became the 8th largest travel app in the English market by usage in September 2016, ahead of easyJet (No. 20) and BA (No. 37).
Ryanair reports stronger forward bookings for 2016. In July they became the first European airline to carry over 11m international customers in a calendar month since the heyday of Aeroflot. They say the uptake of Business Plus and Leisure Plus products is rising.
Ryanair say that 12pc traffic growth to 65m customers was spread widely across Europe as the airline opened 73 new routes and 6 new bases. This winter they take delivery of 31 new B737-800s and will open six more bases in Bucharest, Bournemouth, Hamburg, Nuremberg, Prague and Vilnius. The base in Berlin will grow from 5 to 9 aircraft, while Luxemburg will become their 33rd served country in November.
Ryanair reported a 7pc increase in H1 profits to €1,168m as AGB and lower fares delivered 12pc traffic growth to 65m customers and a 2pc jump in load factor to 95pc. Michael O’Leary said a 7pc increase in H1 profits, which was a creditable performance in difficult market conditions due to repeated ATC strikes, terror events, and the adverse economic impact of the Brexit vote in June which saw Sterling weaken materially over the peak summer period. We responded by accelerating our Always Getting Better (“AGB”) customer experience programme, and using our lower costs base to stimulate stronger forward bookings with lower fares. Despite the uncertainty of Brexit, Ryanair believes that we can deliver profitable growth across Europe by controlling costs, lowering airfares, and maximising load factors in a manner that will most benefit our customers, our people and our shareholders.
We remain cautious in our outlook for FY17. We have delivered a strong first half but weaker air fares and Brexit uncertainty will be the dominant features of H2. Having hedged both our fuel and Sterling exposures, we remain comfortable with our revised full year guidance of €1.30bn to €1.35bn. However, with limited Q4 visibility, and the absence of Easter from Q4, we expect fares will continue to fall (H2 fares are guided at c. -13pc to -15pc), so this guidance is heavily dependent upon there being no unexpected adverse declines in Q4 airfares. We expect FY unit costs will fall by approx. 3pc this year (we previously guided -1pc). H2 fuel will deliver significant savings as we are 95pc hedged at $59pbl but these savings will be passed on in lower fares.
During H1, we have observed a growing trend of competitors closing bases and routes where they are unable to compete with Ryanair’s lower fares and we expect this trend to continue, especially in markets such as Germany, Italy, Spain and Belgium where significant restructuring of loss making operators (even at lower oil prices) continues. This trend is encouraging more primary airports to incentivise Ryanair to grow while their incumbents are cutting.
We welcome the Italian Government’s decision to reverse the €2.50 Municipal Tax increase from Oct 2016, which enabled us to reverse base closures and capacity cuts in Italy. Ryanair responded by adding 3m seat capacity into the Italian market for 2017. Sadly the recent Brexit vote will result in pivoting some of our planned 2017 growth away from the UK, due to weaker Sterling, expected slower GDP growth and market uncertainty. We will reduce our planned UK growth from 12pc to approx. 5pc in 2017.
The uncertainty over England’s Eu status, and the final outcome of the Britain’s departure negotiations with the European Union, will continue to overhang our business for FY18. We expect to see weaker Sterling and slower economic growth in both the UK (approx. 26pc of our revenues) and Europe. We have responded by reducing our planned UK growth in 2017 from 12pc to approx. 5pc, and switched this capacity to accelerate growth in markets such as Italy (where the government have cut taxes), Germany (where incumbent carriers continue to restructure) and other markets such as Belgium, where competitors are closing routes and bases. We hope that the UK will remain a member of Europe’s “Open Skies” system, but until the final outcome of Brexit has been determined, we will continue to adapt to changing circumstances in the best interests of our customers, our people and our shareholders. Since the June referendum result in England, Sterling has fallen 18pc against the euro. This was primarily responsible for the recent €75m reduction in FY guidance from a midpoint of €1.4bn to €1.325bn. they have put Sterling hedges in place to end March 2017 to protect yields from any further Sterling weakness. For H2 fuel is 95pc hedged at approx. $59bbl.they have also increased our FY18 fuel hedge cover to 85pc at approx. $49bbl which (allowing for volume growth) will deliver further fuel savings of c. €140m in FY18.
We delivered a unit cost saving of 10pc in H1. Despite a 12pc jump in traffic, our fuel bill fell by 8pc (a 17pc unit saving) due to the hedges put in place 12 months ago. Ex-fuel unit costs fell 5pc as they took delivery of new lower cost aircraft (due to our currency hedges), cheaper financing, more competitive growth incentives from airports, and they also benefited from weaker Sterling and higher load factors.
At the end of September. Ryanair had net cash of €77m despite having spent over €600m on CAPEX, €200m on debt repayments and €468m on share buybacks during the half year. We completed our 7th share buyback in June at a cost of €886m, bringing our total returns to shareholders since 2008 to over €4.2bn. We will continue to return surplus funds to shareholders subject to market conditions as long as we remain profitable, cash generative, and can fund our CAPEX and other operational requirements.
The Board of Ryanair have authorised a further share buyback of up to €550m over the 4 month period from Nov 2016 to Feb 2017. We expect to split this 50/50 between ADR’s and ordinary shares, which will ensure we continue to comfortably exceed our 50pc EU ownership requirement.
