Ryanair has reported a 4 per cent rise in pre-tax profits to €45.1 million in the three months to the end of June with the low-cost airline signalling that it will continue to aggressively cut fares.
The figures were broadly in-line with expectations although investors remain concerned about the reduction in the percentage of seats sold on each flight and about the outcome of an EU investigation into Ryanair's deal at Charleroi Airport in Brussels.
Announcing the first quarter results yesterday, Ryanair chief executive, Mr Michael O'Leary, said the continuing EU investigation was the "only grey cloud" on its commercial horizon but said it would appeal an unfavourable outcome. A decision is expected in October or November and could have repercussions for the deals Ryanair has secured at between 10 and 20 per cent of the airports its flies to.
Ryanair deputy chief executive, Mr Howard Millar, said he believed that fewer than 10 per cent of its airport deals could be affected. These include Frankfurt Hahn, and Ryanair's two new bases at Skavsta in Scandinavia and Bergamo in Italy.
Mr O'Leary sought to dismiss suggestions that if the EU were to rule that Ryanair's deal at Charleroi was unfair it could drive up its cost base and challenge the airline's low-cost model. Speaking to analysts, he said airport costs represented about 12 per cent of Ryanair's total costs. "These costs could double and we would still be profitable," he said.
Ryanair shares rose 17 cents to €6.10 in Dublin yesterday on foot of the results.
The airline has expanded rapidly putting on additional capacity with 50 new routes that helped to raise passenger numbers by 45 per cent from 3.5 million to 5.1 million. But the load factor has remained below last year's levels with Ryanair suggesting it will achieve an average load factor of about 80 per cent this year and rise to 85 per cent in 2004.
It had signalled that its yield per passenger would decline by between 10 and 15 per cent this year because of the weakness of sterling, its rapid route expansion and the continued reduction in airfares to stimulate passenger demand.
In the first quarter, the yield fell by 14 per cent to €41.71 per passenger. About 6 per cent of this reduction was due to the weakness of sterling, it said yesterday. The UK accounts for 50 per cent of Ryanair's sales.
Mr O'Leary stated that Ryanair would continue to cut its fares by around 5 per cent every year for the next couple of years regardless of what its competitors were doing. He tried to allay analysts concerns about the fall in load factors and yields saying the underlying business was "fine".
During the three months, the airline incurred exceptional costs, which included the restructuring of Buzz, amounting to €2.7 million after tax. Total revenues rose by 26 per cent to €245.2 million, while operating costs increased by 29 per cent to €192.1 million. After tax, Ryanair's margins declined from 20 per cent to 18 per cent.
