UPDATE: Ryanair Net Profit Falls After Ash Cloud Hits Traffic

20th Jul 2010 07:20

By Kaveri Niththyananthan Of DOW JONES NEWSWIRES LONDON(Dow Jones)--Ryanair Holdings PLC (RYA.DB) Tuesday said it remains cautious about the future as it posted a 24% decline in first-quarter net profit after it was forced to ground flights due to volcanic ash clouds across European airspace. However, Chief Executive Michael O'Leary said that despite the ash cloud disruption, Ryanair continues to increase its traffic yields, "while most of our competitors are cutting capacity and reporting losses." The airline expects passenger numbers to continue rising, and yields in the three months to end-September to increase by between 10% and 15%, but added, "since we have no visibility, we must remain cautious about yields for the coming winter." It said yields over the full year will increase by 4%, although the figure will show a fall of 6% once adjusted for sector length. It's managing to increase yields by ensuring it flies to destinations where there's strong demand, reducing frequency, changing schedules to times of the day that can draw higher fares and moving capacity, Deputy Chief Executive and Chief Operating Officer Michael Cawley said. As a result, it expects net profit for the full year to rise by between 10% to 15% or between EUR350 million and EUR375 million, which it said is in line with previous guidance. Cawley said its cautious stance is down to "fragile demand" given the economic environment and risk of further increases in oil prices. Additionally the airline will focus on reducing costs where it can. Cawley said that if Germany goes ahead with planned tax increases, the airline will be forced to pull capacity in favor of adding capacity in Italy and Spain. Germany represents about 9% of its total capacity. The Irish carrier hasn't been shy about voicing its distain for governments that have been increasing aviation taxes during the downturn, and in June said it was cutting winter capacity in the U.K. by 17%. The closure of European airspace during April and May this year cost the airline EUR50 million after it was forced to cancel 9,400 flights. It's now in talks with various governments about compensation and expects some contribution to recoup some its losses. For the three months to June 30, Europe's largest budget airline posted a net profit of EUR93.7 million, down from EUR123 million a year ago, while pretax profit fell 22% to EUR104.6 million. Fuel costs rose 34% to EUR287 million, reflecting both higher oil prices and a 13% increase in the sector length of average journeys flown. Ryanair reported a 16% rise in first-quarter revenue to EUR896.8 million as yields increased 5%. Ancillary sales, or income other than fares, grew 23% to EUR203.9 million, amounting to 23% of total revenues. Diluted earnings per share fell 24% to 8.31 euro cents. In June, Ryanair proposed a one-off dividend of EUR500 million, or EUR0.34 per share, payable Oct. 1. The dividend is the airline's first since it went public in 1997, after its foundation in 1986. The carrier may pay another EUR500 million dividend by the end of 2013 time if it can't strike another deal with aircraft manufacturer Boeing Co. (BA) within two years, which Cawley described as now being increasingly remote. Over the past three months, Ryanair shares have shed 3% of their value, closing Monday at EUR3.78. By Kaveri Niththyananthan, Dow Jones Newswires; 4420 7842 9299; [email protected] (END) Dow Jones Newswires July 20, 2010 02:20 ET (06:20 GMT)