Ryanair today announced a fiscal Q3 loss of €11m down from a loss of €102m in Q3 last year. Revenues rose by 1% to €612m, as 14% traffic growth was largely offset by a 12% decline in average fare. Unit costs fell by 23% (excluding fuel they fell by 4%) despite a 3% increase in sector length. The airline said it was lifting its forecast for the current year to €275m having previously signalled profits would come in at the lower end of a €200m to €300m. Ryanair said that a better mix of new routes will help ensure the money the airline makes from each seat doesn't fall as much as it had initially feared.

Goodbody analyst Eamonn Hughes commented: "Ryanair reported a net loss of €10.9m for Q310 vs our -€40m estimate, and up from a loss of €102m in Q309. Adjusted EPS was -0.7 cent vs our -2.7 cent forecast, up from -6.9 cent in Q309. For the quarter, traffic statistics show that Ryanair carried 16m passengers with an 82.5% load factor, implying 14% growth yoy. Scheduled revenues were €472.5m (flat yoy) for the quarter, which compared to our €432m estimate, with passenger yields down just 12% compared to our estimated 20% decline. Ancillaries were up 6% to €139.4m vs our €137.3m forecast (c.1.5% better per pax than forecast), with ancillary growth slowing due to behavioural changes and the lack of any "new" ancillary product. Operating costs ex-fuel were €403.9m (+9.6% yoy), while we had been anticipating €395m. The major drivers were Route Charges (+18% yoy, including sector length +3%), Depreciation (+14%), Rentals (+28%) and Staff (+10%). Fuel costs fell 37% yoy to €206.6m compared to our €206.4m estimate (-37% yoy). Elsewhere, other costs (mainly in the form of interest charges) were €13.9m whilst we were anticipating €13m.

Yields fell 12% yoy in Q3 (versus our estimate of -20% yoy), so were much better than anticipated. Previously, we were -17% for the full year, so provisionally would anticipate ending up inside the updated management guidance of -15%.

Net debt came in at €201m for Q3, compared to the €49m figure at the end of Q2 and our €367m expectation. Focusing on the asset side of the balance sheet, gross cash was €2,439.7m, whilst we had been anticipating a figure closer to €2,505m.

For the full year (FY10 to March), Ryanair previously guided passenger figures up 13% and c10% in FY11 (we have 11% in FY11). On the yield side, as mentioned above, we have pencilled in a 17% yield decline in our models for FY10, though are now likely to come inside management guidance of c15% declines. On the cost side, Ryanair is indicating that it has now hedged out 90% of the first three quarters of FY11 at $720/mt and 25% of Q4, adding some certainty on that line. For the full year, management is guiding net profit guidance of €275m, from the lower end of the €200-300m range. Currently, we are €234m and anticipate this will rise. These are good results and the risk bias to estimates and fair values is upwards."

Irish airline Ryanair increased its full-year profit forecast Monday after reporting a narrower-than-expected third-quarter loss as fares fell less than earlier projected. Michael Cawley, deputy CEO of Ryanair, discusses how the less-than-expected fall in yields and the group's non-fuel cost reductions helped earnings:

Ryanair’s CEO, Michael O’Leary, said: “Our Q3 loss of €11m is disappointing although better than expected, and a significant improvement on last year’s Q3. These numbers are distorted by a 37% fall in fuel costs which offset a 12% decline in average fares. Yields fell by 12% which was better than anticipated due to an improved mix of new routes and bases this winter and deep cuts in loss making winter capacity at high cost airports such as Dublin and Stansted. Ancillary revenues grew by 6%, slower than the growth of passenger volumes due to changes in consumer behaviour.

Over the past few months we have witnessed the demise of Blue Wings (GER), Flyglobespan (UK), Sky Europe & Seagle Air (Slovakia), and My Air (Italy) and we expect further casualties this winter. We are increasing market share particularly where we compete with the big three high fare flag carrier groups led by Air France, BA and Lufthansa. Market conditions remain difficult, although the increasing pace of consolidation and closures among our competitors allied to Ryanair’s continuing fleet expansion will lead to further market share gains this year in particular in Italy, Scandinavia, Spain, and the UK.

Our passion to lower costs has resulted in unit costs excluding fuel falling by 4% despite a 3% increase in average sector length. Fuel costs fell by 37% to €207m reflecting the benefit of lower oil prices and we recently extended our hedging for fiscal 2011 with 90% of the first 3 quarters and 25% of Q4 now hedged at $720 per tonne."

Results detail