RYANAIR EXPECTS to break even in its current fiscal year following losses in the second six months after interim pretax profits fell 77 per cent due to high oil prices and a €93.6 million writedown on its Aer Lingus shares.
The benefit from the recent drop in oil prices will be offset by a 15-20 per cent cut in winter fares as the airline attempts to stimulate demand in the face of testing economic conditions in its main markets.
"Our previous guidance remains unchanged and we remain confident that we will break even for the full year," said company chief Michael O'Leary.
Shares in Ryanair, down 50 per cent in the past 12 months, gained 3 per cent to close at €2.83 in Dublin as it said the likely demise of further European airlines after four bankruptcies since August would create growth opportunities for the company. Highly critical of the Government's €10 air travel tax, the company has warned that it will cut services from Shannon airport by 75 per cent from November next year if the tax goes ahead. "We expect that Dublin may also see cuts for the winter 2009/2010 season as more routes become unviable," said NCB analyst Neil Glynn.
The airline has grounded 15 aircraft at Stansted in London and four aircraft in Dublin in the current winter season in an attempt to reduce its losses.
Ryanair was unhedged as oil reached $147 per barrel this year, although the airline has hedged 25 per cent of supplies at $76 per barrel in the first quarter next year and 25 per cent at $79 per barrel in the second quarter.
With oil currently trading around $67 per barrel, deputy chief Michael Cawley told reporters in Dublin that the credit crunch had curtailed the availability of hedging contracts. However, he said Ryanair would have a strong rebound in profit next year if oil remained around $80 per barrel next year.
Mr Cawley acknowledged that difficult economic conditions were "a concern" for the company, but remained confident of delivering a 14 per cent increase in full-year traffic to 58 million passengers this year.
The number of booked seats flown by the airline rose 18 per cent to 5.35 million in October. In the six months to September it rose 19 per cent to 31.6 million.
Fuel costs more than doubled to €788.5 million from €392.7 million, total revenue rose 16 per cent to €1.8 billion and post tax profit excluding exceptional charges dropped 47 per cent to €408 million. While net profit margin dropped to 12 per cent from 26 per cent, Mr Cawley said "we expect it to return to the high teens in the not too distant future".
Adjusted basic earnings per share declined to 14.44 cent from 26.61 cent and basic earnings per share fell to 6.42 cent from 26.61 cent. Operating profit fell to €210.73 million from €461.43 million as the airline took a €25.7 million accelerated depreciation charge on 15 aircraft to be sold this year and next.
Pretax profit fell to €105.24 million from €459.55 million, a decline that took account of a write-down on its 29 per cent stake in Aer Lingus.
