Ryanair fares are set to rise 12% this year
Ryanair passengers face a 12% rise in average fares as the budget airline seeks to pass on soaring fuel costs.
Flight extras: Revenues from add-ons like refreshments and entertainment were up 21%
The carrier already hiked ticket prices by 12% in the year to March 31, and predicts continuing oil cost pressures will force it to make the same increase in its current financial year.
The Irish group posted a 26% rise in annual underlying profits to £348m, which it declared itself pleased with considering oil prices, the global recession, and the volcanic ash disruption at the start of last year.
Total revenues were up 21% at £3.1bn, while passenger numbers surged 8% to 72.1m.
Ancillary revenues, like in-flight sales of refreshments and entertainment, rose 21% to £697m.
Looking ahead, Ryanair chief executive Michael O'Leary said that due to higher oil prices the company expected operating cost per passenger to rise by 13% in the current year.
'Since we have limited visibility on bookings, we remain concerned at the impact of the recession, austerity measures, and falling consumer confidence on fares.
'Despite these concerns we cautiously expect that our average fares will rise by up to 12% this year due to a better mix of new routes and bases, slower traffic growth, and higher competitor fuel surcharges,' he said.
Mr O'Leary added that the higher fares would only help to finance higher fuel and other costs, and he expected this year's profit to be similar to last year's result.
Meanwhile, he raised the possibility that higher oil prices would lead to 'more airlines going broke', creating further growth opportunities.
He said: 'Higher oil prices will force competitors to continue to increase fares and fuel surcharges which makes Ryanair's lower fares even more attractive.
'In many cases competitors' fuel surcharges are higher than Ryanair's lead-in fares. Higher oil prices will lead to further consolidations, increased competitor losses, and more airlines going broke.'
Earlier this month, low-cost rival easyJet reported a near doubling in half-year losses as it battled higher fuel prices.
Ryanair, which operates more than 1,500 flights per day, cancelled 14,000 in the last financial year due to volcanic ash disruption, airport snow closures and repeated air traffic control strikes.
It added 40 new aircraft to its now 272-strong fleet and moved into eight new bases, including Seville, Tenerife and Lanzarote among others.
Ryaniar forecasts traffic will grow by 4% to 75m passengers in the year to March 2012.
Shares in Ryanair were down 5% or € 0.19 at € 3.39 in trading today.
View from the City
Irish broker Dolmen Securities said Ryanair's forward guidance appeared muted.
'Management cites concerns over the recession, the austerity measures and falling consumer confidence. However, guidance incorporates a large proposed pull back in the second half (80 planes to be grounded versus 40 last year), with reduced services into “high cost” airports that refuse to lower their charges.
'We presume, given the wider economic impact of Ryanair flights into such airports, that this “warning shot” will see costs renegotiated, flights retained and second half guidance raised as the year progresses.'
Gert Zonneveld, analyst at broker Panmure Gordon, said: 'Even though consensus earnings forecasts are likely to come down, we believe the shares are attractively valued given Ryanair's proven ability to generate strong growth at superior margins.
'Over the medium term, the anticipated capacity growth deceleration should drive further profit growth and strong cash generation. We retain our buy recommendation.'
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