Ryanair Looks Strong for 2015, But 2016 May Be Rocky

Ireland’s Ryanair reported strong net profit and revenue for fiscal 2015, but warns it expects a fiscal 2016 yield decline of two percent.

Dublin-based budget airline Ryanair reported fiscal 2015 results Tuesday with a 66 percent rise in net profit and a 12 percent increase in revenue thanks to increased traffic and expansion in primary markets.

Ryanair reported full-year net profit of €867 million ($943 million), up 66 percent from €523 million ($569 million) in the fiscal year ending March 2014. Revenue rose 12 percent from €5 billion ($5.4 billion) to €5.7 billion ($6.2 billion) for the same period.

The Irish airline saw an 11 percent increase in year-over-year traffic, from 81.7 million customers in fiscal year ending March 2014 to 90.6 million customers in fiscal year ending March 2015.

“Over the past year, we have relentlessly improved our lowest fare/lowest cost model,’’ Ryanair Chief Executive Officer Michael O’Leary said in a press release. “We have expanded into primary airports, added business schedules and extended long-term, low-cost growth deals at major bases including London (STN) and Dublin where the Irish government has rebooted tourism by abolishing the travel tax.”

Ryanair warned that its current 2015 fleet of 320 aircraft is insufficient to handle expected demand attributed to its BusinessPlus and Family Extra services; the company plans to lease six aircraft in its peak period. The airline expects more than half its growth from primary airports such as: Brussels, Lisbon, Rome, Athens, Copenhagen, Berlin, Cologne, Dublin and London Stansted Airport (STN).

But the company warned that while it anticipates traffic growth will be strong, up an expected 10 percent, the airline also expects “irrational pricing response” from competitors who cannot compete without lowest costs and fares. Ryanair remains “vigorously ‘load factor active/price passive.’”

“Therefore, even with the benefit of lower oil, aircraft and financing costs we may suffer periods of fare/yield weakness especially during the H2 winter season,” O’Leary said. “This is why our yield guidance remains cautious at broadly flat in H1 but down 4 percent to 8 percent in H2 for a forecast FY yield decline of 2 percent.”

Ryanair expects unit costs in fiscal 2016 will provide a 10 percent rise in profits to between €940 million ($1.02 billion) to €970 million ($1.05 billion) for the full-year to March 2016.

The low-cost carrier said forward bookings are up 4 percent ahead of the same time last year, and it expects a 2 percent rise in load factors from 88 percent in fiscal 2015 to 90 percent in fiscal 2016.

To handle the expected increase in passengers, Ryanair ordered 183 B737-800’s for expected delivery between 2014 and 2018 and 200 B737 Max 200’s for expected delivery from 2019 and 2023.

“These aircraft will deliver at lower US$ rates and much lower Eurobond finance rates which (with 8 extra seats and 18 percent more efficient engines) will transform our aircraft costs and enable us to lower fares, which underpins our traffic and market share growth, while maintaining and/or growing margins,” O’Leary said.

Ryanair employs over 9,500 people and operates more than 1,600 daily flights from 73 bases, connecting 190 destinations in 30 countries with a fleet of more than 300 new Boeing 737-800 aircraft.

[Photo: iStock]