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Ryanair lifts profit forecast on resilient Northern Europe

Average fares surge 8 per cent in three months to December

Gulf News

Dublin: Ryanair hiked its full-year profit forecast on Monday as strong demand in Northern Europe lifted average fares dramatically in the last three months of 2012.

Dublin-based Ryanair, Europe’s top low-cost airline, which has used its size and low costs to undercut struggling flag carriers, hiked its profit forecast to €540 million ($728 million) for the year to March, up from an earlier €490-520 million range.

“We saw strong demand out of the UK, out of Germany and out of Scandinavia and that has gone straight to our bottom line,” Chief Operating Officer Michael Cawley told Reuters.

Strong demand in the run-up to Christmas and a high uptake of reserved seating options helped to lift ticket prices in northern Europe well above the company’s forecasts, he said.

Sales were not as buoyant in Southern Europe, with Spain in particular “very weak”, and fare growth in Italy flat, he said.

An 8 per cent rise in average fares lifted the airline to a profit of €18 million in the traditionally weak three months to December, compared with an average forecast by five analysts polled by Reuters of a €5 million loss.

Fare growth compared with 5 per cent in the six months to September and was way ahead of the 3 per cent average forecast by three analysts polled by Reuters.

Average fares will grow at a slower pace in the three months to March, however, Cawley said.

Ryanair has been able to sweep up customers as traditional rivals cut back capacity in the face of slow economic growth in Europe and high fuel costs.

Revenues climbed 15 per cent to €969 million in the quarter, better than the 9.2 per cent revenue growth its chief low cost rival easyJet reported last week.

Ancillary revenues, which exclude ticket prices, were up 24 per cent from a year earlier.

“Demand is exceeding supply in the short-haul market and Ryanair is capitalising on it,” said Davy stockbrokers analyst Stephen Furlong. “The market will be very happy with these numbers.”

Higher fares helped Ryanair absorb a 24 per cent hike in fuel costs compared with the same quarter last year. Fuel cost inflation is expected to ease to 5 per cent in the year to March 2014 from 14 per cent in the current financial year.

Excluding fuel, unit costs rose 4 per cent in the quarter due to increases in Italian air traffic control costs, Spanish airport charges and the strength of Sterling to the Euro, Ryanair said.

Next year fares will continue to rise though capacity will likely only grow by 2-3 per cent in the financial year to March 2014, Cawley said, down from the 4 per cent rise forecast in the current year, due to the lack of new plane deliveries planned.

The airline remains in “protracted negotiations” with Boeing about a large plane order, Cawley said.

In a separate statement, Ryanair said it remained confident European Union antitrust regulators would approve its bid for Irish rival Aer Lingus by March.

Ryanair’s shares opened down 1 per cent on Monday at 5.42, compared with a fall of 0.2 per cent on the broader Irish market.