Ryanair reports a 55% profit rise in the first quarter of 2017, as its income reaches $ 462 million, providing its shareholders a $232 million returns via share buybacks. Among other results, the company also reports traffic increase by 12%, reaching 35 million, the decrease of unit costs by 6%.
The company’s customers reached 35 million (12% growth), revenue - $2.2 billion (up by 13%), net margin increased by 6% to 21% and basic EPS grew 63% to 38.01 dollar cent in June 30, 2017 compared to June 30, 2016. However, the results are distorted by the timing of Easter in the first quarter, with no holiday period in the prior year comparative.
“We are pleased to report this 55% increase in PAT to €397m but caution that the outcome is distorted by the absence of Easter in the prior year Q1,” said Michael O’Leary, Ryanair’s CEO. “While Q1 ave. fares rose by 1% to just over €40, this was due to a strong April (boosted by Easter) offset by adverse sterling, lower bag revenue as more customers switch to our 2 free carry-on bag policy, and yield stimulation following a series of security events in Manchester and London.”
However, despite the 55% profit rise, the company provides a rather cautious outlook, by stating that the Q1 results were substantially boosted by the presence of Easter in April but not in the prior year comparable.
The H1 outcome remains dependent on close-in Q2 summer bookings, therefore H1 ave. fares are predicted to fall down approx. 5% as H1 traffic grow by almost 11% and checked bag revenue continues to decline. Due to the higher Q1 load factors and the winter ’17 schedule, the FY18 traffic target is raised to 131m (up 1m on previous guidance). After a difficult winter last year, the company expects the pricing environment to remain very competitive into H2 where traffic is expected to grow by approximately 7%. Yield visibility into H2 is zero and H2 ave. fare guidance of an 8% decline remains intact. Ex-fuel unit costs are on track to deliver a 1% reduction this year, and fuel hedging is expected to deliver savings of approx. €%81 million, when adjusted for volume growth, which is being passed on to customers in lower fares. Ancillary revenue continues to grow in line with traffic. Overall, the FY18 PAT is expected in a range of $1.63 billion to 1.69 billion.
Ryanair delivered a 6% unit cost reduction in Q1 despite a 12% increase in traffic. Ex-fuel unit costs, helped by weaker sterling fell by 3%, allowing the airline to deliver previously guided ex-fuel unit cost reduction of 1% in FY18. FY18 fuel is 90% hedged at approximately $49pbl and is expected to deliver significant savings this year.
Balance Sheet & Shareholder Returns
In May the Board approved a €600m ordinary share buyback programme, of which €165m was spent in Q1 under this buyback at an ave. price of €18.20. The company also purchased €39m worth of ADR’s under the €150m “Evergreen” ADR buyback programme launched last Feb. Despite this cumulative spend of over €200m on buybacks and capex of almost €400m in Q1, the net debt was reduced by €150m from €244m at Mar. 31 to €94m at Jun. 30.
Ryanair has announced “seeking clarity” on whether UK would remain in the EU Open Skies agreement, before publishing summer 2019 schedule in the second quarter of 2018. If there won’t be certainty about the legal basis for the operation of flights between the UK and the EU by autumn 2018,
Ryanair is planning to cancel flights and move some, or all, of UK based aircraft to Continental Europe.
Routes, Bases & Fleet
Ryanair took delivery of 14 B737’s in Q1 and opened new bases in Frankfurt Main (opened in March) and Naples (April). The Frankfurt Main base is projected to increase from 2 to 7 aircraft in September 2017. At that time the launch of two new bases - Memmingen (Munich) & Poznan – is planned, which would open 170 new routes.
In June Ryanair ordered 10 more B737-MAX-200 “Game Changer” aircraft. Five of these will be delivered in spring 2019 and 5 more in spring 2020. It also agreed extensions of 10 operating leases for 3 more aircraft for S.18 and 10 for S.19 to address a temporary capacity shortage in S.19 before the deliveries of MAX.