Ryanair trims prices and seeks to dispel jet fuel fears
Ryanair's Financial Performance and Strategic Updates
By Conor Humphries
DUBLIN, May 18 (Reuters) - Ryanair is cutting summer air fares to woo wary consumers, it said after posting record annual profit, adding that the risk of jet fuel shortages has all but disappeared.
Europe's largest airline by passenger numbers reported a slightly better than expected 40% jump in full-year profit on Monday but downgraded its forecasts on fare income owing to consumer concerns over the broader impact of the Iran war.
Discounting to Maintain Volumes
DISCOUNTING TO MAINTAIN VOLUMES
"There is a little bit of customer nervousness out there," Chief Executive Michael O'Leary told analysts on a conference call. "We're having to do a little bit of price discounting to keep the volumes going."
Ryanair forecast a mid-single-digit percentage fall in average fares year on year in the April-June quarter and broadly flat for July to September.
But that forecast is conservative, O'Leary said, adding that he expects a "reasonable surge" once the war ends.
Fuel Supply Risk and Cost Management
FUEL SUPPLY RISK 'ALMOST ZERO'
Jet Fuel Supply Outlook
O'Leary said that the risk of a jet fuel shortage forcing cancellation of flights in Europe this summer had dropped to "almost zero" thanks to production increases by refiners after securing alternatives to Gulf crude.
Profitability and Hedging Strategy
If the war does drag on, however, Ryanair would be squeezed by both weaker demand and higher costs, potentially leading to a dip in profitability.
The airline has hedged 80% of its jet-fuel requirements for the year to the end of next March at $67 a barrel, less than half the current spot price. However, costs per passenger could still rise by a mid-single-digit percentage if fuel prices remain at current elevated levels.
Ryanair shares fell by 3% after the results were released, but they recovered to a gain of 5.5% by 1318 GMT after slightly more optimistic commentary on the analyst call.
Leadership and Contract Developments
O'LEARY NEARS DEAL TO EXTEND CONTRACT
O'Leary's Contract Extension
The budget carrier has almost concluded negotiations on an extension to O'Leary's contract to 2032, including a 10 million share-option agreement, subject to performance targets. A previous share option scheme is set to earn O'Leary as much as 100 million euros ($116.5 million).
O'Leary, 65, did not directly answer an analyst who asked if the extension would be his last.
Annual Profit and Legal Provisions
Full-Year Profit Results
Ryanair's full-year post-tax profit of 2.26 billion euros was slightly better than a forecast of 2.2 billion euros in a company poll of analysts.
Legal and Regulatory Issues
That excluded an 85 million euro provision related to a fine from the Italian competition authority, which Ryanair expects to be overturned on appeal.
Currency Exchange Rate
($1 = 0.8583 euros)
Reporting Credits
(Reporting by Conor HumphriesEditing by Thomas Derpinghaus, Kate Mayberry and David Goodman)
