Ryanair raises profit forecast amid higher fares

Dublin: Ryanair raised its annual profit forecast yesterday as a 17 per cent rise in fares made up for more expensive fuel and reduced capacity.

Underlining the resilience of the low-cost sector as legacy carriers struggle, Ryanair soared past analyst forecasts with net profit of ¤15 million (Dh72.7 million) in the third quarter to December 31. Its shares hit a four-year high before later retracing.

The higher fares made up for a 2 per cent fall in passenger numbers as the airline grounded 80 of its 270 planes over the winter due to high fuel costs.

"Ryanair is doing so well because it can increase its fares and still be lower than the competition," said Gerard Moore, an analyst with Merrion stockbrokers in Dublin.

Scope

"Cutting capacity more aggressively than its rivals gives it even more scope to increase average fares and this strategy is paying off."

Ryanair shares initially gained 2.7 per cent to ¤4.262, but later slipped around one per cent into negative territory. Analysts warned the good results had been priced into the stock, which has gained 35 per cent in the past five months, outpacing the broader Irish market.

"They upgraded significantly, but expectations are elevated so no one was really surprised," said a trader at Goodbody's Stockbrokers in Dublin. Ryanair followed British peer EasyJet in posting strong revenue growth as higher-priced rivals are battered by fuel costs and a struggling global economy.

German group Lufthansa and Air France-KLM have cut profit forecasts after being hit by fuel cost rises and slashed plans to expand in 2012.