Full year net profits slipped 8% at European low-cost carrier Ryanair to €523 million ($716 million) for the 12 months to March 2014 as weaker fares ate into its profitability.

Revenues grew 3% during the year to €5.04 billion on passenger numbers up 3%. But average fares were down 4% during the year and its revenue growth came from higher volumes and a jump in ancillary revenues. The profit is slightly above the €510 million it was guiding three months ago.

"While disappointing that profits fell 8% to €523 million due mainly to a 4% decline in fares, weaker sterling, and higher fuel costs, we reacted quickly to this weaker environment last September by lowering fares and improving our customer experience which caused H2 traffic to grow 4% as load factors rose 1%," says Ryanair chief executive Michael O'Leary. "Ancillary revenues grew 17%, much faster than traffic growth, and now accounts for 25% of total revenues.

The carrier says its forward bookings for the summer are ahead of last year, as it began offering lower fares and reduced its schedules earlier, which it says should deliver 2% higher load factors. It expects its full-year traffic to increase 4% to 84.6 million.

"While fares fell by 4% in full year 2014 we expect full-year fares to rise by up to 2%," says O'Leary. "H1 fares will rise by up to 6% due in part to Easter, stable growth in Q2, and stronger forward bookings and load factors. However we remain very cautious about H2 guidance (especially following last winter’s weak price environment) where we are committed to 6% capacity growth which could cause H2 fares to fall by as much as 6% to 8%.

"In conclusion, we expect this combination of a strong H1, but a weaker H2 will generate a significant rise in after tax profits to a range of between €580m to €620m, although this guidance is heavily qualified by H2 yield outturn, over which we currently have zero visibility."

Source: Cirium Dashboard