Ryanair Holdings plc today (4 Nov.) reported an unchanged H1 net profit of €1.15bn and pointed to the following highlights.
- Traffic grew 11% to 86m guests.
- Revenue per guest rose 1% (5% lower fares; ancillary rev. up 16%)
- 90% of flights arrived on-time (excl. ATC delays)
- 5 new bases opened (Bordeaux, Marseille, Toulouse, Southend & Berlin)
- Georgia & Armenia become the 39th & 40th countries in Ryanair’s network
- New Environmental Policy launched
- €250m returned to shareholders under €700m buyback programme.
|H1 (IFRS) – Group||Sep. 30 2018||Sep. 30 2019||Change|
EUROPE’S GREENEST, CLEANEST AIRLINE:
The welfare of our planet is of vital importance to our customers and our people. Ryanair has the lowest carbon emissions of any major EU airline at just 66 grams of CO₂ per passenger-km. Passengers switching to Ryanair can halve their CO₂ emissions compared to some other major EU carriers. Ryanair operates the youngest fleet, the highest load factors, and newest most fuel-efficient engines. Ryanair will, over the next decade, cut carbon emissions by 10% and noise emissions by 40%.
Ryanair launched its new Environmental Policy at its Sept. AGM, committing to;
- Be plastic-free in 5 years;
- Cut noise emissions by up to 40% per seat;
- Cut CO₂ emissions by a further 10% by 2030 (up to 50% less than other major EU airlines);
- Encourage guests to use our voluntary carbon offset programme;
- Work with environmental partners to improve our environment in Europe.
While aviation is responsible for just 2% of Europe’s carbon, our industry must work to further cut this very low level of emissions. EU airlines already pay substantial environmental taxes – Ryanair will pay over €630m in such taxes this year.
Revenue grew 11% to €5.39bn. Scheduled sales rose 5% to €3.74bn as we carried 86m guests at 5% lower airfares due to the weak consumer demand in the UK and overcapacity in Germany and Austria. Ancillary Revenue jumped 28% to €1.65bn as more guests chose Priority Boarding and Preferred Seat services. In Oct., Ryanair Labs launched a new digital platform with improved, personalised, guest offers.
Our fuel bill rose 22% (+€289m) to €1.59bn due to higher prices and 11% traffic growth. Ex-fuel unit costs rose 2%, primarily due to higher staff costs, increased pilot pay and higher than expected crew ratios (as pilot resignations slowed to almost zero), higher maintenance (as older aircraft remain in the fleet due to the Boeing MAX delivery delays), and the consolidation of Lauda costs. This was partially offset by improved punctuality and lower EU261 costs. Our fuel is 90% hedged for FY20 at a rate of $71bbl. Currently, 63% of our FY21 fuel is hedged at $61bbl. We continue to negotiate attractive growth deals as airports compete to win Ryanair’s traffic growth. Sadly, due to the MAX delivery delays, we will be forced to cut or close a number of loss-making bases this winter leading to pilot and cabin crew job losses. We continue to work with our people and their unions to finalise this process.
Group airlines continue to develop strongly. Buzz flew 24 B737s in S.19 from its 6 Polish bases and is developing growth opportunities in other Central EU countries. 7 aircraft are dedicated to charter operations with the remaining 17 operating scheduled flying for Ryanair.
Lauda’s pricing environment remains difficult in its key Austrian and German markets and Lauda’s revenue per guest remains behind target. They are working hard to grow ancillary services, lower costs and increase efficiencies. This summer Lauda operated 80 routes across its 4 bases. With A320 aircraft and pilots recently released from the failure of Thomas Cook and Adria Airways, Lauda plans to grow from a fleet of 23 A320s in S.19 to 38 for S.20. While still loss-making in FY20, we expect this very strong traffic growth, cost reduction and improved ancillary spend will push it towards breakeven in FY21.
Malta Air became the 4th airline in the Ryanair Group in June. Over the next 3 years Malta Air will grow our Maltese base from 6 to 10 based aircraft. It will also, over the coming year, operate most of the Group’s French, German and Italian bases.
During H1 Ryanair DAC opened 5 new bases (Bordeaux, Marseille, Toulouse, Southend & Berlin) and launched 241 new routes, including new country markets in Ukraine, Turkey and Lebanon. Ryanair will operate to Georgia and Armenia in S.20. Eddie Wilson was appointed CEO of Ryanair DAC in Sept., reporting directly to the Group CEO.
Boeing MAX update
Delivery of the Group’s first B737-MAX-200 aircraft has been repeatedly delayed from Q2 2019. We now expect our first MAX aircraft to deliver in March/April 2020 at the earliest (subject to EASA approval). The risk of further delay is rising. We expect to receive only 20 MAX-200s (previously 58) in time for S.20 which has cut our S.20 growth rate from 7% to 3% (162m to 157m guests in FY21). We remain confident that these “gamechanger” aircraft (which have 4% more seats, but burn 16% less fuel) when delivered will transform our cost base and our business for the next decade. Due to these delivery delays, we will not see any of these expected cost savings delivered until FY21.
Balance Sheet & Shareholder Returns
Ryanair’s BBB+ rated balance sheet remains one of the strongest in the industry and 70% of our aircraft fleet is debt-free. This allows us to grow while weaker airlines collapse, sell or retrench in the current, difficult, market conditions. We have, to date, returned over €250m to shareholders under our €700m 2019 share buyback programme. With €450m still unspent, we retain the flexibility to repurchase more shares from UK holders in any hard Brexit scenario. Despite the share buyback and the impact of IFRS16 (€227m), net debt was just €460m at period end.
Our outlook for the remainder of the year remains cautious. We try to avoid the unreliable optimism of some competitors. Full-year traffic will grow 8% to 153m but we expect a slightly better fare environment than last winter (although we have limited H2 visibility). This, however, remains sensitive to any market uncertainty such as a ‘no deal’ Brexit. We expect ancillary revenues will grow ahead of traffic growth, supporting full-year revenue per guest growth of 2% to 3%. The full-year fuel bill will rise by €450m and ex-fuel unit costs will increase by 2%. While Lauda’s losses will be higher than originally expected, due to overcapacity in Austria and Germany, traffic will be higher as we take advantage of the availability of low-cost A320 leases. We are therefore narrowing our full-year guidance to a new range of €800m to €900m PAT. This guidance is heavily dependent on close-in H2 fares, Brexit and the absence of any security events.