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* Net profit jumps to 197 mln vs 157 mln euros forecast
* Forward bookings strong, service improvements taking hold
* Guidance boost follows profit warnings by main rivals
* Shares up 4 percent
By Padraic Halpin
DUBLIN, July 28 Ryanair raised its
full-year profit forecast on Monday as a campaign to improve
service quality pulled more customers away from its struggling
Europe's biggest no-frills airline has let travellers choose
their seats, eased restrictions on hand luggage and cut penalty
charges, giving them fewer reasons to book flights with more
expensive, full-service airlines.
It is also trying to focus on more primary airports that
land holidaymakers and business travellers closer to their
destinations, addressing another weakness versus competitors.
The changes followed a fall in profits last year that pushed
the Irish airline to rethink a focus on price over service that
often left customers disgruntled and tarnished an image Chief
Executive Michael O'Leary said was seen as "cheap and nasty".
Ryanair said its first-quarter profit more than doubled to
197 million euros ($264.7 million), beating a consensus forecast
of 157 million euros from analysts polled by the company. It
raised its profit forecast for the year to March 2015 to 620-650
million euros from 580-620 million.
Fares were likely to fall in the second half of its
financial year, the company said, as rivals compete more
aggressively on price.
Yet it is still in rapid expansion mode, and plans to raise
winter season seat capacity by 8 percent. Ryanair will take on
the first of 180 new Boeing aircraft in September.
That could spell further bad news for big European airlines
such as Lufthansa and Air France-KLM, which
have both warned of lower profits.
"A lot of the problems that are hitting the sector are not
hitting Ryanair because, if anything, Ryanair is the protagonist
- they're the ones that are making problems for other players,"
said Gerard Moore, a Dublin-based analyst at Investec, who rates
Ryanair shares a "buy".
Ryanair shares, which rose in advance of the results after
O'Leary told Reuters he did not plan to cut profit forecasts,
were up 4 percent at 7.116 euros by 1150 GMT.
FORWARD BOOKINGS STRONG
Many traditional airlines emerged leaner from the global
financial crisis but face new problems as Middle Eastern
airlines challenge them on long-haul routes and low-cost
carriers like Ryanair and easyJet compete on routes
Lufthansa has said it plans to expand its own low-cost
brands. Air France-KLM has announced a plan to win back
customers from the budget airlines, but analysts say that will
be difficult to achieve.
Ryanair's fares rose 9 percent in the first quarter. Chief
Financial Officer Howard Millar said paying to choose a seat was
particularly popular with passengers and had made up for the
reduced charges elsewhere.
"We've made a lot of service improvements over the last six
or seven months and we're seeing the benefits in terms of rising
profitability," Millar told Reuters in a telephone interview.
Ancillary revenue - charges for extras like carry-on baggage
and on-board refreshments - rose 4 percent in the first quarter,
in line with growth in passenger numbers.
Ryanair said strong forward bookings from a strategy aimed
at tempting passengers to book their flights earlier had
increased its confidence for the year ahead.
But it included a note of caution, warning against any
"irrational exuberance" in what it said was still a difficult
"For the flag carriers, excess capacity coming on from the
low-cost airlines is the last thing they want to see," said
David Holohan, an analyst at Merrion Stockbrokers.
($1 = 0.7443 Euros)
(Additional reporting by Tess Little in London; editing by
Jason Neely and Tom Pfeiffer)