Ryanair posted record annual profits today as its strategy of continuing to expand in Europe despite an already crowded market paid off. It has vowed to set a new record for profits next year while cutting ticket prices by up to 7 percent.
The Irish low-cost pioneer in Europe added almost 14 million seats in the year to March 31 with fares discounted by an average of 13 percent on the previous year's as it continued to cut unit costs by increasing loadings and securing cheaper airport user charges as traffic increases.
Its costs were also cut significantly by the fall in the value of sterling over the past year and looking ahead the airline expects to gain significant savings from new more fuel efficient planes with more seats and from a five-year pay deal with staff.
"The gap is widening between Ryanair and our competitors,” Chief Executive Michael O’Leary said.
Last year, despite lower fares Ryanair earned a record net profit of €1.316 billion, in line with analysts' forecasts.
"Given the terrorist attacks and a big shift in capacity from North Africa, Egypt and Turkey into Spain creating overcapacity, it was a good year," chief commercial officer David O'Brien said.
The airline said it expected to increase its net profit in the current year by around 8 percent to between €1.4 billion and €1.45 billion by adding an additional 10 million seats of capacity while allowing fares to fall by a more modest 5 to 7 percent.
PRICE FALLS SLOW
After years of falling ticket prices, some rival European carriers in recent weeks have reported seeing signs of a turnaround as the decline in fares slows.
British Airways owner IAG had said before it was hit by a disastrous IT failure at the weekend that it expected quarterly revenue per passenger mile flown to register its first year-on-year increase since 2014 in the three months to the end of June.
Air France and Lufthansa have also said that the pricing environment and bookings are improving heading into the summer.
"We are maybe a little less optimistic than some of the other airlines out there on pricing but we are all singing the same tune," Chief Financial Officer Neil Sorahan told Reuters.
Ryanair's cost base, already the lowest in the industry, fell 5 percent last year after fuel price falls were excluded and will fall a further 1 percent this year, Sorahan said.
In a sign of Ryanair's financial confidence, Sorahan announced a new €600 million share buyback to start immediately.
However, O'Leary warned that there were a number of potential clouds on the horizon, including Brexit negotiations which he has said could lead to a total breakdown in all flights between Britain and the EU for a time.
The impact on bookings of the recent suicide bombing in Manchester in which 22 people died was likely to be short-lived, but an additional attack could knock bookings off course, he said.
"Investors should be wary of the risk of negative Brexit developments, or any repeat of last year’s security events at European cities, which could damage consumer confidence," O'Leary said.