Ryanair announce €376m profit decrease

Ryanair recorded a €105m profit for 2009, a staggering drop of €376m in adjusted profits after tax compared with the profits of 2008.

The budget airline, which made a record profit of €481m in 2008, has cited the increase in oil prices as the reason for the severe dip in profits.

Chief Executive Michael O’Leary stated that Ryanair’s policy of absorbing the changes in oil prices was the primary factor in the disappointing dip in the company’s profits for 2009.

“As Europe’s lowest fare airline, Ryanair maintains a policy of never imposing a fuel surcharge, regardless of how high fuel prices are”, said O’Leary, “ While most other airlines were raising fuel surcharges last year, Ryanair absorbed these higher oil prices which were the direct cause of our large profit decline.”

The airline’s fuel bill rose by 57% to €1.57bn and accounted for 45% of operating costs compared to 37% for the previous year.  Their average fuel cost last year was $105 per barrel and they say they have responded to higher oil prices by reducing costs across all other areas of the business. As a result, the airline says that non-fuel related operating costs fell by 3% on a per passenger basis.

“This 2009 adjusted net profit was a significant achievement considering Ryanair was affected by these record high oil prices which caused our fuel bill to rise by €466m”, added the Ryanair boss.

For 2010, they say that fuel costs will be significantly lower due to their fuel hedging and cost reduction programmes.  They are 90% hedged for the first 3 Quarters at approximately €62 per barrel and €61 per barrel in Quarter 4 of the coming year.

They also anticipate that non fuel unit operating costs will fall by 5% due to cost reduction programmes, and that they will use the cost savings to reduce fares even further.

Fuel, which represents 45% of total operating costs compared to 37% in the previous year, increased by 59% to €1.25bn, due to the increase in the price per gallon and an increase in the number of hours flown, offset by a positive movement in the US dollar exchange rate versus the euro.

Despite a huge 78% decrease in profits, the Irish airline opened 223 new routes, including six new bases at Alghero, Birmingham, Bologna, Bournemouth, Cagliari and Edinbugh.

“Over the next 5 years we intend to grow to become the second largest airline in the world, ranked only behind our guide and mentor Southwest Airlines”, said O’Leary.

As well as the opening of these new routes, their traffic increased by 15% to 59m, meaning that Ryanair carried more international passengers than any of its European competitors to become the largest European airline and the sixth largest airline in the world.

This was also reflected in the IATA airline rankings, crowning Ryanair as the largest airline in Europe, surpassing Air France, Lufthansa and British Airways. In the last year they lowered their average fare by 8% to €40.

According to budget airline’s annual report, Ryanair’s average fare for the year was €40 with no fuel surcharge, Air France’s was €267 with a €26 surcharge, Lufthansa’s average fare was €287 with a fuel surcharge of €24, and British Airway’s was €284 with a £12 surcharge.

Their total operating expenses increased by 29% to €2.8bn, primarily due to the increase in fuel prices, the higher level of activity and increased costs associated with the growth of the airline.

As well as becoming the largest European airline, Ryanair boasted a 21% in employment numbers, rising from 5,262 to 6,369 employees.  Within that number, 1,526 people were promoted and average pay was €45,333, which was higher than its European competitors, excluding Air France, whose average pay was €50,976 for the year.

In December, Ryanair made a second bid for Aer Lingus plc at €1.40 per share, which Aer Lingus shareholders rejected. 

“We regret that the shareholders of Aer Lingus rejected our offer, since we believed that Ryanair was the logical and strongest airline to partner to secure Aer Lingus’s slots, brand and its long-term future”, said O ‘Leary.

“Without Ryanair as a strong partner, sadly Aer Lingus remains a small, peripheral, loss making regional airline”, he concluded.

Ryanair’ balance sheet remained in a healthy position despite the decrease in profits, with over €2.5bn in liquid funds.

Adjusted earnings per share for the year was 7.10 cent, compared to earnings per share of 31.80 euro cent in the year ended March 31, 2008, mainly due to the losses caused by the €466m increase in their fuel bill.

In the next year, they plan to move towards 100% carry-on luggage flights, and 100% web check- in as of October 2009.

“We have the necessary resources to increase our aircraft fleet to over 300 by 2012, and that should see our annual traffic grow to over 90m passengers by 2012/13”, said Ryanair Director David Bonderman, “ By then our low fares will save passengers over €9bn annually.”

Over the past year, Ryanair has improved flight punctuality by 2%, to 90% punctuality.

Total operating revenues increased by 8% to €1,942.0m, yet total revenue per passenger decreased by 6%.  This was due to the increase in their traffic, which hasn’t been mirrored by their operating revenues, but the airline predicts that the opening of 223 new routes will eventually increase total revenue significantly.

Operating margin fell by 15 points to 5% whilst operating profits fell by 74% to €144.2m.