Ryanair lifts estimate as profit climbs 30%

LONDON (MarketWatch) -- Shares of Ryanair Holdings Plc rose as much as 6.5% on Monday after Europe's largest low-cost airline lifted its earnings estimate for the year and posted a 30% jump in third-quarter profit, helped by higher fares and luggage charges.

LONDON (MarketWatch) -- Shares of Ryanair Holdings Plc rose as much as 6.5% on Monday after Europe's largest low-cost airline lifted its earnings estimate for the year and posted a 30% jump in third-quarter profit, helped by higher fares and luggage charges.

Net income for the three months ended Dec. 31 improved to 47.7 million euros ($61.7 million) from 36.8 million euros in the year-earlier period. Sales climbed 33% to 493 million euros. Yields, also known as average fares, rose 7%, helped by the impact of recently introduced charges for checked-in luggage.

"This exceptional 30% increase in third-quarter profit during a period of higher oil prices, intense competition, and 21% seat-capacity growth demonstrates, yet again, the robustness of Ryanair's lowest-fare model," said Chief Executive Michael O' Leary.

Ryanair said it expects passenger volume to rise 25% in the fourth quarter. It sees average fares in line with the year earlier, compared with an earlier forecast of a slight decline.

As a result of likely better-than-expected second-half results, the Irish no-frills carrier lifted its annual profit forecast 11% to 390 million euros from an earlier view of 350 million euros.

Ryanair shares were last up 5.2% in London morning trading.

Ryanair maintains margin despite higher fuel prices.

Passenger volume in the third quarter increased 19% to 10.3 million. Ryanair said it maintained a 10% net margin even as fuel costs jumped 52% to 175 million euros.

Ryanair is now 90%-hedged on fuel costs through March at $73 a barrel and 50% hedged through the next fiscal year.

"We took advantage of the recent oil-price weakness to extend our hedging position," the company said.

Ancillary revenue, which refers to food and other expenses Ryanair customers incur during their trips, jumped 61%. Ryanair said the increase stemmed from higher passenger spending and increased service penetration, but also from the receipt of a one-time settlement with its hotel partner. The settlement arose from early termination of a contract.

The airline said it expects to announce the selection of a replacement hotel-service provider before the end of March. When Ryanair customers book trips on the airline's Web site, they are offered privileged rates at hotels near their destinations. Ryanair also has a car-rental partnership with Hertz.

Ryanair said its luggage charges are beginning to have the desired effect, with fewer passengers traveling with check-in baggage. The airline wants to cut the number of customers that have to go through check-in desks and to encourage passengers to check in on line.

"A growing number of passengers are using our on-line check in/priority boarding facility, arriving later at airports, bypassing check-in queues and proceeding directly to the boarding gate, where they are priority boarded and have their choice of seats," O'Leary said.

Finally Ryanair said it remains confident that its offer for domestic peer Aer Lingus Group (UK:AERL: news, chart, profile) , in which it has built a 25.2% stake at a total cost of 342 million euros, will be "good for Aer Lingus' passengers and good for competition."

"At a time when the European Union is encouraging airlines to consolidate, we remain confident that out offer for Aer Lingus will obtain E.U. Commission approval following this phase 2 review," O'Leary said.

Ryanair's 1.48-billion-euro hostile offer for Aer Lingus automatically lapsed under takeover rules after the commission said it would submit the bid to closer regulatory scrutiny. See archived story.
Aude Lagorce is a reporter for MarketWatch in London.

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Source: Market Watch