LOWER FARES TO DRIVE FASTER TRAFFIC GROWTH IN H2
FY TRAFFIC GROWS TO 105M AS GUIDANCE RISES TOWARDS €1,225M
Ryanair, Europe’s favourite airline, today (2 Nov) announced H1 profits (pre-exceptions) rose 37% to €1,088m. Traffic grew 13% to 58m as load factor jumped 4% points to 93%. Ave fares rose 2% as unit costs fell 6% (ex-fuel they were flat).
| H1 Results (IFRS) | Sep 30, 2014 | Sep 30, 2015 | % Change |
| Customers (m) | 51.3 | 58.1 | +13% |
| Revenue (m) | €3,537 | €4,040 | +14% |
| Profit after Tax (m)* | €795 | €1,088 | +37% |
| Net Margin* | 23% | 27% | +4pts |
| Basic EPS* | €0.57 | €0.80 | +39% |
* Excludes exceptional accounting gain of €317.5m on sale of Aer Lingus shareholding.
Ryanair’s CEO, Michael O’Leary, said
“We are pleased to report this strong set of H1 results. We have enjoyed a bumper summer due to a very rare confluence of favourable events including stronger sterling, adverse weather in northern Europe, reasonably flat industry capacity and further savings on our unhedged fuel, as millions of customers switched to Ryanair for our Always Getting Better (“AGB”) customer experience programme. Key milestones in the half-year include:
? Traffic up 13% to 58m (load-factor up 4 points to 93%)
? Ave fares up 2% to €56
? Unit costs down 6%
? H1 profits up 37% to €1,088m (pre-exceptions)
? First EU airline to carry over 10m customers in one month (July)
? €400m share buyback completed in Aug
? €400m Aer Lingus proceeds returning to shareholders in Nov
? New personalised website launched in Oct
New Routes and Bases:
This winter Ryanair will open 4 new bases (Berlin, Corfu, Gothenburg & Milan) and 119 new routes including a 4 daily Dublin – Amsterdam route, a 6 daily Cologne – Berlin service, and 3 routes to Eilat Ovda (Israel) from Budapest, Kaunas and Krakow. We will deliver double digit growth in Ireland, UK, Spain, Italy, Portugal, Poland, Germany, and in Denmark where our Copenhagen operations (15 routes) will grow by over 100% to 2.5m customers p.a.
This winter we take delivery of 28 new Boeing 737 aircraft which will take the fleet to 340 by year end, with another 330 on order. These aircraft will deliver with Boeing’s new Sky interiors and slimline seats which will improve leg room and provide our passengers with an even more enjoyable on board experience.
Improving “AGB” customer experience:
The continuing success of our AGB programme is driving stronger forward bookings, higher load factors, and accelerating our traffic growth. Having raised our full year traffic target from 103m to 104m in Sept we are raising it again today to 105m which is 16% higher than last year’s 90.6m. In the next 6 months customers will enjoy further improvements including our personalised website, new cabin crew uniforms, inflight menus, new Sky interiors, better seating and defibrillators fitted on all our aircraft.
The early customer feedback on our new personalised website has been very positive. Customers are finding it easier and faster to book our lowest fares, select keenly priced ancillary services, and the volume of “My Ryanair” registrations is accelerating. This new website will enable Ryanair to better understand our customers and better meet their travel needs with appropriate offers for hotels, car hire, restaurants venues and other services. Our new car hire partnership with CarTrawler has significantly improved car hire availability and service.
The key element of Ryanair’s AGB programme remains our relentless commitment to offer the lowest fares in every market, but with the best on-time performance. In H1, despite the impact of French ATC strikes, the fire closure of Terminal 3 in Rome (FCO) and record load factors, our on-time performance improved 2% points to 91% as follows:
| Apr | May | Jun | Jul | Aug | Sep | ||
| FY15 | 91% | 89% | 87% | 86% | 90% | 90% | 89% |
| FY16 | 90% | 92% | 91% | 90% | 90% | 92% | 91% |
Fuel and US$ Hedging:
We have taken advantage of occasional oil price weakness this summer to further extend our fuel hedges to 95% cover for FY17 at an ave rate of $62 pbl. Having already hedged our US$ opex, we expect these hedges to deliver fuel savings of some €430m in FY17. We plan to pass on these savings to our customers in the form of lower airfares particularly as we grow capacity quickly in major markets such as Belgium, Denmark, Germany, Ireland, Italy, Poland, Portugal, Spain and the UK in 2016.
Customers will also benefit from our successful US$ hedge programme. Our aircraft capex out to March 2018 is fully hedged at an ave €/$ rate of 1.31 which means we will be adding these new Boeing 737-800NG aircraft to our balance sheet at lower euro prices than most of our existing fleet. This combination of lower aircraft and fuel costs will enable Ryanair to continue to lower fares and grow market share while extending our unit cost leadership over all airline competitors in every market we fly in Europe.
Shareholder Returns & Balance Sheet:
In August we completed a €400m share buyback and, following EGM approval in October, we will return the €398m proceeds from the sale of our Aer Lingus stake to shareholders in November. When this is complete, we will have returned over €3.3bn to shareholders since 2008. Ryanair’s balance sheet continues to be one of the strongest in the industry. Our net cash position increased by over €600m over the half year to €976m notwithstanding capex of €482m, share buybacks of €289m and debt repayments of €194m.
Outlook:
We continue to see significant growth opportunities for Ryanair’s lower fares and AGB customer offering. We are have raised our FY16 traffic target from 104m to 105m customers due to higher load factors in H2 with Q3 traffic set to grow 17% and Q4 by 22%.
As forward pricing has softened in recent weeks we expect Q3 ave fares will be broadly flat against last year, but Q4 fares (with almost zero visibility) will fall by approx. 4%. We expect unit costs to fall by 5% in FY16, while ex-fuel unit costs will be down 1%. Ancillary revenue, while ahead of our long term target of 20% of total revenue, will track behind this year’s 16% increase in traffic due to a one-time benefit last year arising from the earlier loading of the S15 schedule and the absence of a car-hire partner in July and Aug.
Accordingly, we now guide that full year net profit (pre-exceptions) will be towards the upper end of our €1,175m to €1,225m range. However, we caution that this guidance is heavily dependent on the strength of close-in bookings in Q4 where we have almost zero visibility yet are planning to deliver 22% traffic growth. Looking beyond the current year, based on these stronger than expected load factors, we have raised our long term traffic target from 160m to 180m customers p.a. by FY24.”
