* Full-year profit down 8 pct at 523 mln euros
* Average fares set to rise 6 pct over summer, fall up to 8
pct in winter
* Delivery of new planes to give airline more seats to sell
* Shares climb 10 percent
(Adds Breakingviews link)
By Conor Humphries
DUBLIN, May 19 European low-cost airline Ryanair
reported its first fall in profits in five years on
Monday, blaming tougher competition, but said prospects of
strong demand this summer would help lift profits by up to 20
percent in the coming year.
The Irish airline earned 523 million euros ($717 million)
after tax in the year ended March 31, a fall of 8 percent on the
previous year but investors were relieved the result was better
than the airline had predicted and the shares rose 10 percent
after it said this year's profit could climb to 620 million
Rivals said last year's first profit warnings by Ryanair in
a decade were the result of it being forced to cut ticket prices
after losing business to competitors seen as being more friendly
In response Chief Executive Michael O'Leary in September
called an end to decades of famously austere service, adding
seat allocations, easing restrictions on hand luggage and
cutting penalty charges such as for failing to print out online
With forward bookings for the summer 5 percent ahead of last
year, the strategy appears to be working, O'Leary told a results
conference call on Monday.
"While disappointing that profits fell 8 percent ... we
reacted quickly to this weaker environment last September by
lowering fares and improving our customer experience," O'Leary
"We expect this combination of a strong first half but a
weaker second half will generate a significant rise in after-tax
profits", he said.
Ryanair shares were up 10 percent at 6.98 euros by 1249 GMT,
though that was still 10 percent below their all-time high of
7.82 euros, hit before last year's two successive profit
Ryanair had predicted its after-tax profit for last year
would be between 500 and 520 million euros, while analysts had
on average expected the result to be around 515 million euros
according to a company poll of more than 20 analysts.
"The bottom line is Ryanair are telling us the summer
revenue performance is going to be very strong," said Stephen
Furlong, an analyst with Davy Stockbrokers in Dublin, which
increased its price target to 8 euros from 7.50.
Investors did not appear to be very concerned about the
possibility of fares weakening year on year in the winter as
there was currently no information on bookings, Furlong said.
O'Leary said profit in the current year should be between
580 million and 620 million euros, an increase of between 11 and
That was below the average of 634 million given in the
Ryanair poll but many analysts see Ryanair as being routinely
cautious in its forecasts.
Ryanair expects average fares to increase 6 percent in the
key summer months compared with the same period a year earlier.
Rival easyJet last week forecast growth in revenue per
seat yields "in the low single digits" for the same period.
But Ryanair's average fares are expected to then fall by
between 6 percent and 8 percent in the six months to March as
the first of 180 new Boeing jets are delivered, Chief Financial
Officer Howard Millar said.
Millar said the airline would like to take five or six extra
jets next summer, but that it appeared unlikely that Boeing
would have the spare capacity.
The airline expects passenger numbers to increase 4 percent
to 84.6 million in the current year, consolidating its position
as Europe's largest airline by passenger numbers.
The percentage of seats left empty on flights should fall by
about 2 percentage points per year over the next three years
from its current level of 17 percent, O'Leary said.
(Editing by Greg Mahlich)