Ryanair beats odds to treble profit

Published on Saturday 29 May 2010 14:34

NO-FRILLS airline Ryanair will brush aside recessionary fears, oil-price volatility and volcanic ash clouds this week to book a trebling in its underlying net profits.

Michael O'Leary's group made an underlying profit of ?105 million (89.3m) in the previous year amid tough recessionary trading conditions, and this is expected to have revved up to a pre-exceptional profit of about ?320m-?331m in the latest year to March 2010. Yields – profit per airplane seat – also turned positive in the final quarter. However, following a more upbeat-than-expected investor day from rival British Airways last week, analysts believe any gains for Ryanair from BA's recent high-profile industrial problems will be muted.

Charles Stanley transport analyst Douglas McNeill said: "It's interesting EasyJet has already said it has not benefited to any discernible extent from BA's problems, and this may be the case with Ryanair. Corporate bookings on transatlantic for BA are running a little bit ahead of last year.

"BA said people were postponing trips not cancelling them. There are not that many business trips that cannot wait a week or so if there is strike action."

However, McNeill said Ryanair may have picked up custom as a result of BA's cabin crew strike action in the leisure market. "You can postpone a business trip easier than a holiday," he said.

Eamonn Hughes, head of research at Goodbody Stockbrokers in Dublin, forecast a profit of ?331m after Ryanair raised market guidance on 1 April from ?275m to "no less than ?310m".

After heavy restructuring costs in the year to March 2009 Ryanair fell to a headline loss of ?169.2m and post-exceptional profits this time are expected to come in at about ?317.4m.

O'Leary said in April that profits would be better than expected because of "somewhat stronger than expected passenger bookings, at better than expected yields, during late February and March in the run-up to the Easter holiday weekend".

Goodbody says it expects yields "to have reached an inflection point" in Q4, turning positive with a 2.7 per cent year-on-year rise, bringing the full-year decline to 12.5 per cent.

Ryanair is also expected to have benefited from a 30 per cent fall in the oil price since the start of the year. Analysts say for every $1 move in the oil price the company's earnings per share rise 1 per cent.