Ryanair to break even in 2009 despite 20% profits rise

Ryanair has announced a 20% increase in profits and traffic but warned that soaring fuel prices will mean the airline will break even in 2009.

The budget carrier posted net profits after tax of 481m euros and said traffic now stood at 51m. At the same time, fares had fallen by 1%.

But chief executive Michael O’Leary said in a statement: “Based on forward bookings, we now believe it likely that average fares for the coming year will rise by approximately 5% and if oil prices remain at $130 per barrel, then we expect to accordingly break even for fiscal 2009.”

As barrel prices reached new heights, the airline added that it planned to absorb higher oil costs. The statement said: “Ryanair remains committed to a policy of no fuel surcharges – ever. We will continue to absorb these high oil costs even if it means our profits will fall in the short term.” A hedging programme last year insulated the carrier against the rising cost of oil.

The carrier said it had gone through a series of cost cutting measures to protect against fare increases such as using more fuel efficient aircraft, announcing a pay freeze, making redundancies in its Dublin call centre, renegotiating airport maintenance and handling contracts and increasing charges on baggage and airport check in.

O’Leary said he believed the current fuel crisis would lead the way for expansion for Ryanair as it filled the gaps left by other airlines pulling out of routes or going under.

The statement said: “No airline is better placed in Europe than Ryanair to trade through this downturn. We will therefore continue to grow, by lowering fares, taking market share from competitors, and expanding in markets where competitors either withdraw capacity or go bust. We believe that our earnings will rebound strongly when oil prices settle down, as we believe they will, and in the interim we will take the tough decisions necessary to lower our costs in this difficult period.”

O’Leary also used the financial statement to take a pop at BAA and its airport charges and call for a break up the UK’s “BAA monopoly” on airports.

He said: “Unit costs rose by 2% reflecting the unjustified doubling of airport charges by the BAA Stansted monopoly, higher charges at the Dublin Airport monopoly and a 6% increase in average sector length. Cost increases over the winter were limited by our decision to ground seven aircraft at Stansted and we will extend this program next winter by grounding up to 20 aircraft (approx. 10% of our fleet), mainly at Stansted and Dublin where high airport charges make it more profitable to ground aircraft rather than fly them through the winter.

“The CAA’s recent proposal to allow the BAA Stansted monopoly to raise prices by up to 150% on top of last year’s doubling of airport charges proves yet again that the UK’s airport regulatory regime has failed abysmally.”

By Dinah Hatch