Ryanair’s Share Price Takes Off on Better-Than-Expected Profit Growth

on May 20, 2013

Ryanair’s share price (LON:RYA) jumped by more than six percent to €6.74 in Dublin morning trading on Monday, May 20 after Europe’s largest discount airline delivered record full-year profits and higher revenues despite rise in fuel costs.

Ryanair reported €569 million (₤482 million) in net profit for the full year ended March 31, up 13 percent year on year and beating the €560 million (₤473 million) projected in survey of analysts conducted by the company. Traffic increased by five percent to 79.3 million, despite the European recession and the grounding of up to 80 winter aircraft. Fuel costs increased by over €290 million (₤245 million) and now represent 45 percent of total costs. Excluding fuel, unit costs were up by three percent, which Ryanair said was due to “excessive and unjustified increases in Italian ATC, Eurocontrol and Spanish airport fees.”

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Revenue increased by 13 percent to €4.33 billion (₤3.66 billion) in the year through March as the carrier added 15 new planes, expanding its fleet to 305 aircraft. It also introduced 217 new routes to bring the total to more than 1,600 and created seven new bases in Morocco, Croatia, Greece, Poland and the Netherlands.
“Ryanair remains by some distance the lowest-cost producer in the industry; renewed growth story and underlying cash generation imply considerable medium-term upside; we retain our ‘Outperform’ rating and €7.5 price target,” Davy Stockbrokers’ equity research team said on Monday, as quoted by The Irish Times.

Ryanair warned that it expected profit for the current fiscal year started on April 1 to be at most €600 million (₤507 million), an increase of five percent, but could also be flat at €570 million (₤482 million). “We expect modest yield (revenue per passenger mile) and traffic growth for the full year to be partly offset by higher oil and Eurocontrol costs,” Michael O’Leary, chief executive officer, said in a statement, referring to the pan-European air traffic control body. “With almost zero yield visibility into H2 (the second half) and the EU wide recession, we expect that there will continue to be downward pressure on yields which will dampen full-year profit growth.”

The discount airline also said it would idle fewer airplanes than usual next winter, lifting the passenger total by 2 million for the year to 81.5 million. “Our big challenge is we don’t have a huge amount of capacity available to us and that’s why we’re changing our tactics,” Bloomberg quoted Howard Millar, chief financial officer, as saying on Monday.

The airline also announced on Monday that it was in “active discussions” with the new owners of Stansted Airport and the new management at Dublin Airport. “While no agreements have yet been reached, if a competitive cost base emerges, then we could restart growth at one or other airports as early as September 2013,” O’Leary said.
**Shares in Ryanair’s Major Rival easyJet Soar on Analysts Upgrade**
Ryanair’s rival easyJet (LON:EZJ) also saw its share price surge on Monday after Deutsche Bank analysts raised their target price on the stock from ₤10.40 to ₤13.70. The bank has a “buy” rating on the airline’s shares.
!m[Europe’s Largest Discount Airline Warns of Flat Profit in Current Fiscal Year](/uploads/story/2366/thumbs/pic1_inline.png)
easyJet’s share price has climbed by more than 60 percent in the year-to-date. It recorded large gains last week after the budget airline reported a narrower pre-tax loss and said it hoped to finish the full year with improved returns and profitability (easyJet Slashes Half-Year Loss and Eyes Improved Full-Year Profitability).
**Ryanair’s share price was €6.70 as of 20.05.2013, 09.30 GMT.**
**easyJet’s share price was ₤12.4128 as of 20.05.2013, 09.30 GMT.**


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