Ryanair released passenger statistics for November yesterday that showed an improvement both in terms of the number of passengers flown and the load factor achieved by the airline. Passengers numbers increased to 5.2 million (+6% YoY) leaving the year to November number at 81.2 million (+2% YoY). The load factor achieved in the month increased to 81% (+1% YoY) leaving the year to November level at 83%. <p>

This is a solid outturn by Ryanair and likely reflects the benefit being received by the airline in terms of reducing fares in order to spur demand. We expect Ryanair to benefit from increased passenger numbers owing to lower average fares over the coming quarters but as we have seen all ready this year, this does create profitability headwind. <p>

easyJet has also reported November passenger statistics this morning that showed an increase in the number of passengers carried and a small decrease in the load factor of the airline. For the month, the number of passengers carried increased to 4.255 million (+3.4% YoY). The load factor for the airline decreased to 89% (-60bps). November’s result leaves the rolling twelve month passenger numbers at 61.1 million (+3.7% YoY) while the load factor for the same period is 89.3% (+60bps). <p>

Overall, we continue to see low cost carriers performing better than legacy flag carriers given their lower cost structures coupled with ability to generate superior investor returns. That being said, we remain cautious on the sector in the near term as more aggressive fare pricing coupled with relatively elevated oil prices puts profitability margins under pressure. However on a longer term basis, we expect that low cost carriers will continue to be able to produce returns far superior to their flag carrier competitors.
<p><h5>David Holohan</h5>

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