Ryanair confident of achieving profit target

Ryanair, Europe's largest low-cost airline, saw its profits squeezed by soaring fuel costs in the three months to June, but said higher sales this summer would keep it on track to hit its profit target for the year. The Irish airline, which operates more than 1,500 flights a day, boosted revenue by 29 per cent in the quarter on a year ago as it carried 3 million more passengers and boosted income from its "ancillary" sales which include the extra charges it levies for hold baggage and in-flight food and drink. But a 50 per cent surge in fuel prices cost the airline 140 million euros more than planned, pushing profits below market expectations. Its shares opened down 1.73 per cent at 3.39 euros. "It's a solid performance, even if the costs may have surprised some," said Brian Devine, an analyst at NCB stockbrokers. Article continues below "But there is no real catalyst for the share price. The market's profit expectations for the year are well ahead of Ryanair's and there is nothing here to change that," he said. The airline made a profit after tax of 139.3 million euros in the first quarter, up 1 per cent on a year ago but well short of the 151 million euros forecast by analysts polled by Thomson Reuters. Unchanged It maintained its profit forecast for the year of 400 million euros, unchanged from the previous year, although analysts have been forecasting an even better 447 million euros. Full-year profits will depend heavily on the second quarter as the company bets more heavily on summer sales, with it planning to cut back capacity during the winter. Ryanair said a 10 per cent growth in traffic in the first half would be followed by a 4 per cent fall in the second half to give 4 per cent growth for the year as a whole. Average ticket prices will rise by 12 to 15 per cent in the second quarter, it said, but it was not making a prediction for winter sales. Traffic was up 18 per cent in the first quarter with fares up 11 per cent and ancillary sales up 22 per cent. "We are going to have a very strong Q2 and we are confident that despite high oil prices we can deliver net profit of 400 million euros," Chief Financial Officer Howard Millar said in a telephone interview. "Consumers are clearly spending money this summer but we will have to see what the winter brings," he said. Ryanair, which has lost tens of millions of euros in the past through poor fuel price hedging, said it was 90 per cent hedged on fuel at around $86 a barrel for the year to March. But the airline said it was disappointed by Boeing's decision to scrap plans for an all-new 737 short-haul jet and instead upgrading its current design with new engines. Ryanair exclusively flies 737s and has said it could be in the market for up to 300 aircraft for delivery by 2016. "Our preference would have been for a redevelopment," said Millar. "The key driver will be pricing and how much fuel it would save. Its very early days, but clearly it's something we have to look at."