Ryanair sees sharp fall in profits due to higher fuel costs

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Ryanair’s profits dropped sharply in the first quarter of its financial year largely because of rising fuel costs.

Europe’s largest low-cost carrier by revenue said profit after tax fell 21 per cent to €78m, in line with its forecasts. Fuel costs rose 6 per cent compared with the same period last year to make up 47 per cent of its total operating costs.

Howard Millar, chief financial officer, said the airline had looked at how to save fuel and as a result was flying its aircraft more slowly, adding about two minutes to an hour of flying time.

“We’re flying slightly slower, but what we’re seeing is we’re burning less fuel,” Mr Millar said. “Fuel is our single biggest cost, so we have a proportionally bigger problem than everybody else from these higher fuel prices.”

Other factors that added to the company’s costs included French air traffic control strikes and weakness in the value of sterling, which makes up about 25 per cent of its sales. The timing of Easter, which fell earlier this year, also contributed to its smaller profits in the first quarter, ending June 30. Earnings for the holiday period were included in its fourth-quarter results.

The fall in profits was partly offset by revenues earned from reserved seating, which the airline introduced in November, as well as from priority boarding and higher credit card fees. Those ancillary earnings rose 25 per cent to €357m, and Mr Millar said he expected the growth to continue.

Ryanair’s revenue increased 5 per cent to €1.3bn, while the number of passengers carried rose 3 per cent to 23.2m.

Its shares were down 2.64 per cent by mid-afternoon trading to €6.98.

The airline is looking to take advantage of rivals scaling back and this year plans to introduce more bases and routes. Seven new bases in countries including Holland, Poland and Morocco were performing well, Mr Millar said, and it was looking at the Turkish and Israeli markets.

During the next few years Ryanair will take delivery of its order of 175 Boeing aircraft, which it says will allow it to fly 110m passengers a year.

The airline was cautious in its outlook for the rest of its year, pointing to tough market conditions arising from fiscal austerity and continued high fuel costs. Its guidance for its full-year profit after tax remained unchanged at between €570m and €600m.

Michael O’Leary, chief executive, said the company expected a better second quarter, usually the strongest period for airlines, although the heatwave in northern Europe had slightly depressed recent bookings.

This month, the group said it would sell its 29 per cent stake in rival airline Aer Lingus to any EU airline that bought more than 50 per cent, in response to an investigation by the UK competition authority.

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