Ryanair reported Q3 results this morning that were largely in line with management’s previous guidance and our own forecasts. Revenue for Q3 amounted to €964 million (merrion: €980 million) while the loss for the period was €35.2 million (merrion: -€30 million). Average fares declined by 9% in the quarter, in line with previously provided guidance while traffic increased by 6% (load factor +1%), in response to lower fare levels. Ancillary revenues increased by 13%, benefitting from increased traffic growth and higher usage of priority boarding and reserved seating by passengers. Ryanair exhibited good cost control with adjusted costs excluding fuel declining by 9% in the quarter. <p>
Ryanair is hedged 90% for FY 2014 at fuel usage at c.$98 per barrel and management have increased the hedging profile for FY 2015 to 90% at c.$96 per barrel which will deliver savings to the airline of c. €80 million. <p>
In terms of shareholder friendly actions, Ryanair completed €414 million of share buybacks entering Q4 and there is a further €70 million buyback programme underway that will continue until March. This will bring the total amount spent on stock buybacks to €484 million for FY 2014 (previous guidance of c.€400 million. <p>
In terms of outlook, Ryanair management are maintaining their FY 2014 net profit outturn of between €500-520 million noting that pricing remains soft but is no longer falling. Management is increasing their forecast for passengers carried to 81.5 million (old guidance: “just under 81 million), reflecting the inclusion of new bases and now expects that yields will decline by 8% in Q4 (old guidance: -10%). In terms of forward booking levels, Ryanair is experiencing forward booking levels for Q4 2014 and early 2015 significantly ahead of last year but at weaker yields. <p>
Overall, the Ryanair Q3 results are largely in line with our forecasts and consensus with the improvement in Q4 yield guidance largely anticipated by the market. Ryanair continue to exercise good cost restraint in a weak pricing environment for the airline. The increased fuel hedging for FY 2015 brings hedging coverage to 90% at c.$96 per barrel (old guidance: FY 2015 60% hedged at c.$94 a barrel). Ryanair will now face the challenge of restoring yield growth in FY 2015 in what management characterise as a “weak pricing guidance”.
<p><h5>David Holohan</h5>
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