Irish budget carrier Ryanair profits after tax dropped more than a quarter in the third quarter to €35 million ($52 million).
While the fall was in line with Ryanair guidance and the carrier is sticking to its previous net profit growth estimates for the full year, it has warned profits could fall sharply next year.
For the three months ending 31 December 2007 Ryanair revenues grew 16% to €569 million. Adjusted profits after tax fell 27% in the third quarter to €35 million, excluding a €12 million gain on the disposal of five Boeing 737-800s.
Ryanair CEO Michael O’Leary says: “This net profit of €35 million is a creditable performance in very adverse market conditions. It reflects Ryanair's 21% traffic growth, a 4% decline in yields, flat unit costs and a strong ancillary sales performance.”
The carrier says it expects average fares to fall around 5% over the winter, within its previous guidance range, and is maintaining its forecast of a 17.5% increase in net profit to around €470 million.
“At this time it is too early to make any accurate forecasts in such volatile markets for 2008/09. However with oil prices at $90 a barrel and fear of recession in the UK and many other European economies, the current outlook for the coming fiscal year is poor,” says O’Leary.
“We remain essentially unhedged for next year. Current oil prices, which have risen by nearly 40% to $90 a barrel, will impose significantly higher costs during a year when we are expanding capacity by almost 20%. Costs will be hurt by a projected 5% increase in sector length.”
He also points to the possible compounding impact of waning European consumer confidence which could cause yields to stay flat or fall further.
“While it is impossible to accurately forecast full year fuel prices and yields this far in advance, there is now a significant chance that profits may decline next year,” he says.
“At our most optimistic, a combination of flat yields and $75 oil would see profits grow by 6% to approximately €500m, but at our most conservative, if forward oil prices remain at $85, and consumer sentiment/sterling weakness leads to a 5% reduction in yields, then profits in the coming year could fall by as much as 50% to as low as €235 million.”
Source: Flightglobal.com's sister premium news site Air Transport Intelligence news
Source: FlightGlobal.com
