Ryanair says falling fares won't hit profit, announces record buyback

DUBLIN (Reuters) - Ryanair RYA.L forecast that record passenger numbers will enable it to hit its annual profit target despite falling ticket prices, and said it would share the proceeds with investors via a record 800 million euro ($870 million) share buyback.

File photo of passangers leaving a Ryanair aircraft at Modlin airport near Warsaw, Poland June 26, 2014. REUTERS/Franciszek Mazur/Agencja Gazeta

The low-cost giant said on Monday average fares will continue to fall in the coming months due to lower fuel prices.

In a broadside against higher cost rivals, it said it would cut prices as much as necessary to maintain 8 percent traffic growth.

The share buyback, its largest ever, is aimed at cutting the proportion of the company held as American Depositary Receipts outside Europe and reward shareholders without committing to a regular dividend.

Ryanair raised its full-year profit forecast by 25 percent in early September, citing poor summer weather in northern Europe, strong sterling and the impact of improved customer service.

But security alerts after attacks in Paris in November and strong competition has since forced it to cut average fares, which fell 1 percent in the last three months of 2015 and will fall 6 percent in the first three months of 2016.

“We expect the lower fare environment to continue for the foreseeable future” with some respite during the summer months, Chief Executive Michael O’Leary said in a video presentation.

Rival easyJet EZJ.L said last week its revenue per seat fell 3.7 percent in the three months to Dec. 31 and that it would continue to fall in early 2016.

Ryanair last year was the first airline in the world to carry 100 million international passengers. On Monday, it increased its forecast for its financial year to March 31 to 106 million from 105 million and said it expected to grow to 113 million in its next financial year.


Ryanair re-affirmed its expectation to post net profit at the upper end of a range of 1.175 billion to 1.225 billion euros for its financial year.

O’Leary said was heavily dependent on a strong Easter and the presumption there will be no major militant attacks in Europe and that there was “little upside.”

O’Leary said that Ryanair, which Commerzbank described in a note on Monday as a “cash machine”, was set to generate around 2 billion euros per year in cash, with around half of that needed for capital expenditure.

It will start the 800 million euro share buyback in the coming days with the aim retiring 3-4 percent of the company’s stock, it said.

O’Leary said he hopes half of that would be American Depositary Receipts, which are trading at a relatively low premium to London-listed shares, in order to keep U.S. ownership comfortably below 50 percent to meet European Union rules.

The buyback underlines the company’s reluctance to commit to a regular dividend which it said would not suit the cyclical nature of the airline industry. An ad hoc programme gives Ryanair flexibility in the event of a downturn, O’Leary said.

“If you want a dividend yield go and buy a baked bean company or something,” he told industry analysts on a conference call.

Shares in the airline were up 4.6 percent at 1207 GMT at 14.32 euros, up 42 percent from a year ago.($1 = 0.9221 euros)

($1 = 0.9200 euros)

Reporting by Conor Humphries; Editing by Clarence Fernandez, Alexander Smith and Adrian Croft