LIVERPOOL’S biggest airline, Ryanair, says falling fuel costs will help it post better-than-expected full-year profits, even though it dipped into the red in the third quarter.
The low-cost carrier posted a quarterly loss of 101.5m euros (£90.3m) – but now expects to report an annual profit of between 50m euros (£44m) and 80m euros (£71m), having previously forecast that it would only break even.
Ryanair, which flies to more than 40 destinations from Liverpool John Lennon Airport, was battered by last year’s oil price bubble which saw its fuel costs soar by 71% in the final three months of 2008. However, oil prices have since collapsed amid the global economic downturn. Ryanair now expects to return to “substantial profitability” in the next financial year in light of lower fuel costs.
Its third-quarter losses compare to post-tax profits of 35m euros (£31m) a year ago. It said the performance was “disappointing”, but added passenger traffic was rising as cash-strapped consumers switched to lower cost travel. Ryanair’s passenger numbers rose 13% to 14m in the three months to December 31.
The Dublin-based airline, led by flamboyant chief executive Michael O’Leary, cut air fares by 9% on average to lure cost-conscious travellers. The fare cuts came despite Ryanair forking out an extra 328m euros (£291m) on fuel between October and December.
The group said its decision not to “hedge” – or effectively fix – fuel costs in the fourth quarter of its financial year had paid off as prices continue to fall sharply.
“Ryanair will enjoy significantly lower oil costs, thanks to our recent hedging programme, when most of our competitors are already hedged at much higher prices. We intend to use this cost advantage to again lower fares,” said Mr O’Leary.
The group expects fares to fall by more than 10% in its next financial year, although it says the recession could force prices down even lower.
Mr O’Leary said: “The longer and deeper this recession, the better it will be for the lowest cost producers in every sector.”
Ryanair is also benefiting from strong “ancillary” sales, up 19% in the third quarter and now accounting for more than a fifth of group revenues. It is trialling an on-board mobile phone service from the end of this month, which it hopes will eventually add further to revenues.
Ryanair also confirmed that it was unlikely to make another offer for rival Dublin carrier Aer Lingus after it last month withdrew its latest bid for the airline, which was rejected by the Irish government.
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