Ryanair today reported a third-quarter loss, in
line with previous guidance, after Europe’s biggest low-fares airline cut ticket
prices in response to increased competition.
The net loss for the three months ended December 31, 2013, was €35.2m compared
with a profit of €18.1m a year earlier. Michael O’Leary, CEO, reaffirmed
a profit target of €510m for the full-year ending March 31 and said that
bookings for the first quarter of fiscal 2015 are significantly higher than a
year ago, even allowing for the timing of Easter.
Traffic grew 6% to 18m passengers. Revenue per
passenger declined 6%, as strong ancillary revenue growth offset a 9% fall in
fares. Excluding fuel, sector length adjusted unit costs fell by 9%.
said: “Our Q3 loss of €35m is in line with previous guidance and is entirely due
to a 9% fall in average fares and weaker sterling. We responded to this weaker
pricing environment last September with seat promotions and lower fares which
stimulated traffic across all markets resulting in 6% growth in Q3, and a 1%
rise in monthly load factors.
Ancillary revenues grew by 13%, significantly
faster than traffic growth due to strong customer uptake of reserved seating,
priority boarding, and higher credit card fees. Excluding fuel, Q3 sector length
adjusted unit costs fell 9% as Ryanair continues to deliver industry leading
Results detail [pdf]
are likely to leave our overall estimates unchanged. However, market commentary
into the summer is more positive with Ryanair commenting that “market pricing
remains soft but is no longer declining” and that “advance bookings for Q1 FY’15
are significantly higher than this year’s comparable, even allowing for the
impact of Easter”. Falling fuel and website/customer service changes should
allow for significant margin expansion in FY 2015.
We remain “Outperform” with a
€7.50 price target. In terms of Q3, the net loss of -€35m was in line with
previous guidance and includes average fares down 9%, passenger growth of 6% and
13% rise in ancillary revenues. Operating expenses increased by 6% with fuel up
10%. Unit costs ex-fuel fell 3% and by 9% on a sector length adjusted basis
underscoring cost leadership. The balance sheet has gross cash of €2.825bn net
debt of €365m (after €414m in buybacks, nearly €500m now in Fy’14) and should be
back to net cash by the March year-end. A further c.€500m will be returned to
shareholders in FY 2015 via a mix of special dividends and some limited share
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