Ryanair 'cautious' on fares and profits

Ryanair has warned that the company expect profits during this final quarter may decline by as much as 30% over those recorded in the comparable quarter last year.

Based on initial bookings for the first three calendar months of 2004, Ryanair said these reductions in fares were significantly greater than the 10% to 15% range recorded over the first three quarters. Full-year profit could be down by up to 10% from a net profit of €239m last year to approximately €215m for the current fiscal year.

However, announcing the results, Ryanair’s Chief Executive, Michael O’Leary said: "We are very pleased with the strong growth in traffic and profits for the third quarter which demonstrates the success of our strategy of rapid capacity expansion across new bases and new routes, over the past year.

"The yield reduction of 11% - although greater than originally expected - has stimulated a 54% increase in traffic, whilst an 8% reduction in unit operating costs has ensured that our strong profitability continues."

But, he said that early indications in our fourth quarter suggest a marked further reduction of between 25% to 30%. This was attributed to continuing capacity growth, the launch in January and February of two new bases at Rome, the impact of Sterling’s continuing weakness against the euro and intense price competition in Europe.

Mr O'Leary said that there was "considerable downward pressure" on fares and yields, in many cases from Ryanair, but some was from what he said were "loss making airlines" that were trying to compete and survive.

He said: "Ryanair’s strategy continues to be successful all over Europe. Traffic has grown by over 50% so far this year. We have launched 4 new bases in Europe, and 73 of our 146 routes are in their first 12 months of operation. While we now expect after tax profits for the current year to dip slightly, our annualised profit margin will still be in excess of 20% and Ryanair will continue – by some considerable distance – to be the world’s most profitable airline by margin."

Ryanair is to initiate a detailed review and reduction of certain elements of its cost base.

(SP)