(qlmbusinessnews.com via news.sky.com– Mon, 21 May 2018) London, Uk – –
The no frills carrier says it is more cautious about its current financial year as a surge in costs could push profits lower.
Ryanair has reported a 10% rise in annual profits despite the impact of its costly pilot rota failure last autumn that hit the travel plans of 700,000 customers.
The no frills carrier said profits after tax came in at €1.45bn (£1.27bn) in the 12 months to 31 March aided, it said, by a 9% rise in passenger numbers to 130.3 million and its planes being 95% full on average.
However, its results statement showed the airline had become more cautious on the current financial year, with Ryanair cutting its profit guidance to between €1.25bn and €1.35bn as it prepared to book a surge in costs.
It warned they included a potential €400m rise in fuel bills as oil prices continue to climb despite the cost being 90% hedged.
Ryanair also pointed to rising staffing costs.
It has been forced to offer revised terms since its decision to cancel thousands of flights over the last winter schedule – blamed on a blunder over pilot rotas – that brought to the surface simmering tensions over pay.
Ryanair revealed the disruption alone had cost it €25m in compensation and another €25m in flight vouchers for those affected.
Ryanair has since started work on union recognition for the first time in its history – agreeing deals with pilots’ unions in the UK and Italy – and has agreed new five-year pay deals with pilots and cabin crew.
It said of the current financial year: “We expect staff costs to rise by almost €200m, half of which is higher pay for our front line people and half is additional headcount for growth.”
Chief executive Michael O’Leary said of the pressures ahead: “Our outlook for FY19 (full-year 2019) is on the pessimistic side of cautious.
“We expect to grow traffic by 7% to 139 million, at flat load factors of 95%.
“Unit costs this year will rise 9% due to higher staff and oil prices which will, when adjusted for volume growth, add more than €400m to our fuel bill.
“Ex-fuel unit cost will rise by up to 6% as we annualise pilot and cabin crew pay increases, and invest in our business and our systems to facilitate a six year growth plan to 600 aircraft and 200m guests per annum.”
He added: “Forward bookings are strong but pricing remains soft. Since only half of Easter fell in April, we expect a 5% fare decline in Q1 (quarter one) but a 4% rise in Q2 fares.
“While still too early to accurately forecast close-in summer bookings or H2 fares, we are cautiously guiding broadly flat average fares for FY19.”
Mr O’Leary said he expected revenue from passenger surcharges to continue growing but not by enough to offset higher costs.
Ahead of the market open Neil Wilson, chief markets analyst at Markets.com, said of thge results: ” Despite the impact of rostering-related cancellations and the grounding of aircraft, revenues rose 7% to more than €7bn on 9% higher traffic.
“Fares fell by 3% but costs were 1% and net margins remained steady at 20%.
“Great results but a very cautious outlook could weigh on the stock this morning.
“Ryanair has a habit of setting the bar rather low and then far exceeding it, so we must take this ‘pessimistic side of cautious’ outlook with a grain of salt.”
Shares fell on opening but soon recovered – up 1% in morning trade
By By James Sillars