Ryanair hikes profit forecast on surge in winter bookings

Ryanair has the capacity to cut fares in the winter months by more than the 5 per cent to 10 per cent pledged this morning if rivals respond with reductions of their own, according to its incoming head of finance.

The Irish airline hiked full-year profit guidance to between €750 million and €770 million, from its previous prediction of €620 million to €650 million, for the 12 months to the end of March, when it released its first-half results earlier.

The company plans to slash fares in coming months to boost market share, and is promising cuts of 6 per cent to 10 per cent in the first three months of 2015. Neil Sorahan, who is due to succeed Howard Millar as Ryanair's head of finance, indicated today that it could go further than that.

“We have the capacity to cut fares by more than that, we have €4 billion in cash on our balance sheet,” he said. However, Mr Sorahan added that it has not seen any indication that its competitors are planning to cut their ticket prices.

Ryanair reported a 32 per cent increase in profit to €795 million for the six months to the end of September, the first half of its financial year. Passenger numbers rose 4 per cent to 51.3 million.

Separately the company also reported that the number of people who flew with Ryanair in October rose 5 per cent on the same month last year to 8.4 million.

The airline filled 89 per cent of the seats on its craft last month, six percentage points more than in October 2013.

The sale of 2.2 million more tickets than planned over the winter will consolidate the Irish airline’s position as Europe’s largest airline by passenger numbers during the second half of its financial year, which ends on March 31st.

Mr Sorahan estimated that this will increase annual numbers to an estimated 89 million, up 8.5 per cent over the previous year.

Overall bookings for the second half are 5 per cent ahead of this time last year. For the month of December alone they are 7 per cent up.

Chief executive, Michael O’Leary said that Ryanair plans to boost its market share by cutting fares by up to 5 per cent in the three months to December and by up to 10 per cent in the first three months of next year.

It expects traffic to rise by 16 per cent or 5.3 million in the second half of the year, 2.2 million more than originally anticipated. As a result of that and falling costs, it said that full-year profit will significantly exceed previous guidance.

The airline is locking in the recent fall in oil prices by hedging 90 per cent of its fuel needs for the year to March 2016 at around $93 per barrel and may extend that further in the coming months.

Mr O’Leary said that the airline had a “bumper first half” and as a result had to boost its guidance for the full year.