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Ryanair Profits From Lack of a Fuel Charge

Posted on: Monday, 1 August 2005, 06:00 CDT

RYANAIR will reap the reward of not having imposed fuel surcharges on fares like other airlines when it reports growth for the quarter to the end of June this Tuesday.

The Irish no-frills airline is expected to report net income of E54.4m ($64.7m, Pounds 37m) for the first quarter versus E52.6m in first-quarter 2004, defying the sky-high price of fuel and the slump in consumer spending.

Ryanair's yields were likely to have improved as a result of its flag-carrier rivals passing on surcharges for the high price of fuel to customers - making Ryanair's fares look more attractive, according to John Mattimoe at Merrion Stockbrokers. He said the competitive environment should have eased for Ryanair after several carriers went bust over the winter.

As the price of oil rose from $25 to $50 a barrel, Europe's flagcarriers, including British Airways (BA) and Lufthansa, applied up to four successive fuel surcharges on their fares; more are expected now oil is at $60 a barrel. In June, Ryanair guaranteed that it will not apply a fuel charge on its fares, "not now, not ever". BA also reports first-quarter results this week.

Ryanair, Europe's biggest no-frills carrier, is expected to post earnings per share of 7.1 euro cents compared with 6.9 cents in the same period of last year.

"We're looking for good first-quarter numbers but the key thing is guidance on second quarter when they make most of their money," said Joe Gill, analyst at Goodbody Stockbrokers. Last year Ryanair generated 55% of its annual profit in the peak summer quarter from July to September. "So we'll be hoping for some sense of that and also since the 7 July bombings what's going on around the London area and what that's doing to bookings."

Ryanair has admitted the number of passengers booking its flights fell in the immediate aftermath of the 7 July bomb attacks on the capital's Underground and bus system. But they are expected to have recovered quickly.

In an effort to counter any lasting slowdown, Ryanair has brought forward its annual autumn ticket sale by a month. It also launched a controversial advertising campaign to "keep London flying".

Ryanair boss Michael O'Leary said: "It's important we keep Britain flying and, more importantly, keep visitors coming to London.

"Generally, the best time to visit anywhere is after a terrorist attack because the hotels are discounting like mad and the place is crawling with security. I doubt if London has ever been safer than it is today."

Last month O'Leary resurrected warnings of a "bloodbath" among European airlines this year if oil prices remained at current levels at about $60 a barrel. He stuck by previous guidance for growth at Ryanair. The company is hedged from September for up to 90% of its winter fuel needs at $47 per barrel.

Last week, EU Jet, based at Kent's Manston airport, also went out of business; still expanding Ryanair is said to be interviewing its pilots. Ryanair, which expects to carry 35m passengers in the 12 months to next April, is also due to announce two new bases soon, bringing the total to 16.

Source: Sunday Business; London (UK)

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