Ryanair reported a 4% rise in Q1 profit to €256m, as traffic grew 11% to 31m while average fare fell 10% to €39.92, offset by a 9% reduction in unit costs.
Ryanair’s Michael O’Leary said: “This modest 4% increase in Q1 profit to €256m is in line with previous guidance. The absence of Easter in Q1 and on-going market volatility arising from terrorist events, and repeated ATC strikes (particularly in France) weakened fares on close-in bookings and caused almost 1,000 flight cancellations. We remain committed to our load factor active/yield passive strategy which is why Q1 fares fell 10% to under €40. Traffic rose 11% and load factor improved 2 points to 94% as our Always Getting Better (“AGB”) customer experience programme continues to win new customers and new markets. Ancillary sales rose to 26% of revenues (24% in PY Q1). Cost control remains core which is why unit costs reduced 9% (ex-fuel down 4%). Highlights of Q1 include:
New Routes and Bases:
Our 4 new S16 bases in Belfast, Corfu, Ibiza and Santiago are performing well with strong advance bookings. We announced 8 new bases (Bucharest, Bournemouth, Hamburg, Nuremburg, Prague, Sofia, Timișoara and Vilnius) as part of our W16 schedule which will also see our Berlin base grow from 4 to 9 aircraft and Luxembourg become our 33rd country. We will open 133 new routes during W16. Sadly, the introduction of an NOK80 (€8.50) air travel tax in Norway has led to 16 route cancellations and the closure of our Oslo Rygge base in October.
AGB Customer Experience:
Year 3 of AGB was unveiled in April and continues to improve our customer experience through service, digital and inflight developments. In addition to lower fares and wider destination choices, our customers now enjoy new initiatives such as Leisure Plus, improved Business Plus (with more flexible ticketing) and one-flick payments on our mobile app. In June, we simplified and cut checked bag fees for 92% of our customers.
Our industry leading on-time performance fell in Q1 from 91% last year to 87% due to adverse weather (thunder storms), and a succession of unjustified ATC strikes in Belgium, Italy, Greece and especially in France. UK NATS has also mismanaged its staffing rosters leading to repeated slot capacity restrictions and delays at London Stansted.
French ATC unions alone, have engaged in 53 strikes over the past 7 years during a period when Irish & UK ATC suffered zero strikes. Ryanair and other airlines have called on the European Commission to take 3 simple measures to alleviate the impact of these ATC strikes on Europe’s citizens as follows:
1. Require (French) ATC unions to engage in binding arbitration instead of strikes;
2. Allow other ATC’s to operate French over-flights while their unions strike;
3. Allow airlines to recover their EU261 costs from these ATC providers where mismanagement permits repeated strikes.
Our cost advantage over competitors increased in Q1 as unit costs fell 9%. Fuel fell by €42m to €518m in Q1. Ex-fuel unit costs were cut 4% due to lower cost aircraft, cheaper financing, discounted airport growth deals, lower sales & marketing spend, and weaker sterling, which was partly offset by slightly higher staff costs as 5 year pay deals kick in across our 84 bases and our headcount rises in line with fleet growth.
FY17 fuel is 95% hedged at $622 per tonne (c. $62bbl) which will (allowing for additional volumes) deliver fuel savings of c. €200m. Almost 55% of our FY18 fuel is now hedged at just under $500 per tonne (c. $50bbl). We expect to pass on most if not all of these fuel savings to customers in lower air fares as we continue to grow traffic and routes strongly.
Shareholder Returns & Balance Sheet:
In February we announced an €800m share buyback programme. After the Brexit vote, the Board increased this programme to €886m and completed it in late June at an ave. price of €13.48 per share. We have now returned over €4.2bn to our shareholders since 2008. On July 27 we hold an EGM to seek shareholder approval to give the Board discretion to engage in further selective share buybacks, if it’s in the best interest of shareholders to do so over the next 15 months.
Despite these buybacks our balance sheet remains strong, with net cash of €162m at June 30, following Q1 CapEx of €381m, debt repayments of €89m and buybacks of €468m.
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