Ryanair profits slide as fuel costs surge

Ryanair has posted a significant drop in profits for the first quarter of the 2012-13 financial year, as high fuel costs hit the company’s bottom line.

The budget airline generated a net profit of €99 million (£77m) for the three-month period ending 30 June 2012 – 29% lower than the €139m registered this time last year. Ryanair carried 22.5m passengers in the quarter, up 6% year-on-year, which helped drive revenues up 11% to €1.16bn. But the company’s fuel costs jumped 27%, adding an extra €117m to the airline’s expenses.

Photo by pio3 / Shutterstock.com
Photo by pio3 / Shutterstock.com

The airline said in a statement however, that its fuel hedging strategy meant that Q1 is likely to have seen the largest fuel cost rise, and that the “pricing differential [will] narrow significantly over the remaining three quarters of the year”.

Ryanair’s CEO Michael O’Leary also predicted that the current economic conditions would help the airline in the months and years ahead, driving the failure of rival carriers.

“High oil prices and Europe’s recession will drive further consolidation and more airline closures this winter. This will open more growth opportunities for Ryanair because we have the youngest, most fuel efficient fleet as well as the lowest fares and costs,” O’Leary said.

Despite this bullish prediction, Ryanair maintained what it called a “cautious” outlook for the rest of the year.

The carrier said it expects full-year traffic to grow 7% in the first half of 2012-13, but then just 1% in the second half of the year due to capacity cuts in the forthcoming winter schedules.

“Currently, we have no visibility of next winter’s yields but expect that continuing austerity, EU recession, and lower yields at new bases will restrain fare growth”, the airline said, adding that its full-year profit guidance remains unchanged at €400-440m – down from €503m in full-year 2011-12.

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