Published on February 10th, 2020 | by FII Reader0
Ryanair Reports Q3 Net Profit Of €88m
Ryanair Holdings plc (owner of Ryanair DAC, Ryanair UK, Buzz, Malta Air & Lauda) reported a Q3 profit of €88m, compared to a €66m loss in the same quarter last year. The main highlights include:
- Traffic grew 6% to 36m passengers.
- Revenue per passenger rose 13% (9% higher fares; ancillary rev. up 21%).
- Over 90% of flights arrived on-time (excl. ATC delays).
- 111 new routes announced for S.20.
- Director of Sustainability appointed to drive Environmental Policy.
- Over €440m returned to shareholders under €700m buyback programme.
|Q3 (IFRS) – Group||31 Dec. 2018||31 Dec. 2019||Change|
Sales grew 21% to €1.91bn. Better than expected Christmas and New Year bookings, at higher fares, led to a 16% increase in Scheduled Revenue to €1.19bn as they carried 36m passengers at 9% higher fares. Ancillary Revenue increased by 28% to €0.72bn as more passengers choose Priority Boarding and Preferred Seat services. In October, Ryanair Labs launched a new digital platform with improved, personalised, passenger offers. Labs are now focused on improving penetration across key ancillary products over the coming quarters. Rentalcars.com became a new car hire partner in late 2019 and will help grow car hire penetration and revenue over the next 3 years.
The fuel bill rose 14% (+€83m) to €0.7bn due to higher prices and 6% traffic growth. Ex-fuel unit costs rose by 1% due to higher staff and maintenance costs (older aircraft longer in the fleet due to the Boeing MAX delivery delays), offset by falling EU261 costs due to improved punctuality. Fuel is 90% hedged for FY20 at $71bbl and 90% of FY21 fuel is now hedged at $61bbl, delivering over €100m fuel savings into FY21.
The Group airlines continue to grow. In Q3 Buzz increased its fleet to 32 B737s and expanded outside Poland with new bases in Prague and Budapest. Buzz will grow its fleet to 50 B737s for S.20, with 7 aircraft in Polish charter operations and 43 operating scheduled flying for Ryanair.
Lauda continues to underperform with fares much lower than expected, despite strong traffic growth and high load factors. As announced on 10 January, this is a direct result of intense price competition with Lufthansa subsidiaries in both Germany and Austria. While Lauda will now carry 6.5m passengers in FY20, average fares are well below those of other Group airlines. Lauda’s management is implementing a new cost cutting plan and is improving penetration on ancillary products. Lauda will grow its fleet from 23 to 38 A320s by S.20 with increased capacity in Vienna and a new base in Zadar.
Malta Air continues to grow strongly and has taken over the Group’s French, German, Italian and Maltese bases. Its fleet will grow to 120 aircraft by S.20.
Ryanair DAC saw its fleet reduced to 360 B737s in Q3 as both Buzz and Malta Air took over more flight operations for the Group. Armenia became the newest destination in January. Regrettably the Boeing MAX delivery delays mean that Ryanair DAC had to close a number of loss-making winter bases leading to some crew redundancies in Spain, Germany and Sweden.
Boeing MAX update
Delivery of the Group’s first Boeing 737-MAX200 aircraft has been repeatedly delayed from Q2 2019. It is now likely that the first MAX aircraft will not deliver until September or October 2020. The requirement for MAX simulator training will also slow down the delivery of backlogged aircraft and new deliveries. Ryanair continue to believe that these “gamechanger” aircraft (with 4% more seats, burn 16% less fuel), when delivered, will transform their cost base and business for the next decade. Due to these delivery delays, no cost savings will been seen until late FY21. As a direct result of these delivery delays, the group plan to extend their 200m p.a. passenger target by at least one or two years to FY25 or FY26.
According to O’Leary Ryanair is reported to have made an offer to Boeing for an undisclosed number of B737 MAX 10 jets, a larger model than the MAX200 model the airline currently has on order. The MAX10 is a direct competitor of the Airbus A321neo and is 6–7 ft longer than the MAX9, seating 226-232 in a single class. There are currently over 500 orders for the MAX10.
Meanwhile analysts believe it will take up to two years to clear the backlog of parked MAX aircraft once the aircraft is certified. O’Leary said Ryanair don’t have the capacity to take MAX deliveries in the summer so the earliest deliveries will be in September or October. The airline can accept the aircraft at a rate of 8 per month and about 50 per year. Traditionally, Ryanair never take new deliveries in the busy summer period.
Boeing engineers have discovered a new software problem on the grounded 7B37 Max that must be patched before the plane can return to service, US FAA chief Steve Dickson said. Mr Dickson confirmed during remarks in London that the agency is evaluating the issue. A light indicating that the stabiliser trim system wasn’t working properly “had been staying on for longer than a desired period“, Mr Dickson said. No further details were provided but he was most likely referring to the STAB OUT OF TRIM light which indicates an issue with the stabiliser trim when the autopilot is engaged.
Balance Sheet & Shareholder Returns
Ryanair’s BBB+ rated balance sheet is one of the strongest in the industry. 70% of aircraft are debt free. The group have returned €440m to shareholders under the current €700m share buyback programme. Despite the share buyback and the impact of IFRS 16 (€230m), net debt was just over €700m at period end. Due to the uncertainty surrounding the Boeing MAX aircraft deliveries, peak Capex and maturing bonds in 2021, the Board has decided to extend the current €700m buyback programme until the end of July.
As announced on 10th January, Ryanair’s FY20 PAT guidance has risen to a range of €0.95bn to €1.05bn thanks to stronger Christmas and New Year travel bookings, at better than expected fares. Q4 forward bookings are 1% ahead of this time last year at slightly better than expected average fares and the group now expect full year traffic to grow by 8% to 154m passengers. Ancillary revenues continue to grow, but at a slower rate having annualised the cabin bag changes in November. This will support full-year revenue per passenger growth of between +3% to +4%. The full year fuel bill will rise by €440m and ex-fuel unit costs will increase by approx. 2%. On the basis of current trading, Ryanair expects to finish close to the mid-point of the new PAT guidance range. This guidance is heavily dependent on close-in Q4 fares and the absence of any security events.
Speaking after the results were announced Michael O’Leary said Ryanair will not be a slave to bond markets and could be debt-free within the next five years. “I don’t want to be sucked into a situation, with all companies, that once they start raising bond money they just start replacing one bond with another bond, and the debt never gets paid back,” he said this week after the company released its third-quarter results….”It would have a significant impact on our earnings if we repay that debt…If we don’t repay that debt, we’re sitting there with substantial surplus cash and I have no use for that. I’d rather we would pay down debt.”
Dublin Training Centre
The Irish Independent have reported that Ryanair will open a new Technical Centre of Excellence at the Woodford Business Park in Santry. The centre will house two B737 Max full motion simulators and two Airbus A320 full motion simulators which will be used by Lauda. Planning files show that the centre will also house two fixed base simulators.
January 2020 Passenger Figures
On 4th February Ryanair Holdings released January traffic statistics below. The Group operated over 62,000 flights!
|Ryanair Group||10.3m||10.8m (92%)||+5%|
|Rolling Annual||141.1m||152.9m (96%)||+8%|