(Updates with analyst comment in sixth paragraph, deputy CEO in fifteenth.)
Jan. 28 (Bloomberg) -- Ryanair Holdings Plc, Europe’s biggest discount airline, lifted its fiscal full-year profit forecast amid higher travel demand in the third quarter.
The carrier aims for net income of almost 540 million euros ($727 million) in the year through March, compared with a previous target of as much as 520 million euros, the Dublin- based carrier said today. Analysts expect 528 million euros, according to the average of 13 estimates compiled by Bloomberg. Ryanair also forecast a drop in fourth-quarter passenger traffic and said it experienced some “softness” in January.
Average fares on flights gained 8 percent in the third quarter as the airline boosted the number of passengers carried by 3 percent to 17.3 million. EasyJet Plc, Europe’s second- biggest discount carrier, has said sales gained 9.2 percent in the three months through December as rivals trimmed capacity and the airline added flights.
“We had strong pre-Christmas bookings and that boosted average fares, and that meant we performed better than expected,” Chief Financial Officer Howard Millar said in a phone interview.
Fourth-quarter passenger traffic will drop about 3 percent after the airline grounded 80 planes to cut costs amid high oil prices and seasonally weaker demand, the airline said.
Ryanair traded 2.1 percent lower at 5.39 euros at 10:37 a.m. in Dublin, after rising as much as 0.6 percent to a five- year record earlier today. The stock has gained 14 percent this year.
“The stock and sector has had a very good run and some investors are likely just taking a little profit,” Donal O’Neill, an analyst at Goodbody Stockbrokers, said. “The market will also be trying to digest the softer outlook guidance for the fourth quarter.”
Profit for the three months through December was 18.1 million euros, compared with 14.9 million euros a year earlier. Third-quarter sales advanced 15 percent to 969 million euros, while the airline’s fuel-bill jumped by 24 percent to 81 million euros. The airline opened its 51st base in Maastricht, the Netherlands, in December and is planning to add six more in locations including Zadar, Croatia and Fez, Morocco from April.
Iberia-owner International Consolidated Airlines Group SA, Air France-KLM Group and Deutsche Lufthansa AG have all trimmed jobs in the past six months, hurt by an economic slump and competition from discount operators.
“We expect further capacity cuts and restructuring in Europe as high-fare, lossmaking carriers struggle to compete with Ryanair’s expansion at low prices,” the airline said.
The No. 1 low-cost carrier is not planning to place an order for new aircraft for 12 to 24 months, Millar said today. The airline’s fleet of 305 Boeing Co. 737-800s had an average age of four years, Chief Executive Officer Michael O’Leary said in November.
Ryanair’s gross cash balance stood at 3.15 billion euros at the end of the quarter. The company paid out a special dividend of 34 cents a share in the quarter, bringing the total returned to shareholders over the past five years to 1.53 billion euros.
European Union regulators should give the go-ahead for Ryanair’s 694 million-euro bid for local rival Aer Lingus Group Plc and that it expects a response in early March, the Irish carrier said in a separate release.
“Ryanair has submitted a radical and unprecedented remedies package to the EU in support of its offer for Aer Lingus,” O’Leary said in the statement. “The remedies involve two upfront buyers each basing aircraft in Ireland to take over and operate a substantial part of Aer Lingus’ existing route network and short-haul business.”
Flybe Group Plc said last week that it would consider taking over some of the Aer Lingus routes where the operators have a duopoly, guaranteeing competition, if regulators sanctioned the deal.
Ryanair owns about 30 percent of Aer Lingus and renewed an attempt to buy the rest in June. The EU blocked a takeover effort five years earlier, saying it would create a monopoly for Irish flights.
A reorganization of Flybe announced last week doesn’t preclude a deal with Ryanair, Flybe Chief Executive Officer Jim French said on Jan. 23. British Airways paid Flybe about 130 million pounds to cover restructuring costs when the long-haul carrier gave up its regional routes in 2006, the executive said, adding that Flybe would welcome similar deals.
“We’re not seeking necessarily financially or commercially to divest these routes, this is a competitive imperative for us to do it,” Deputy Chief Executive Officer Michael Cawley said in an interview today. The Aer Lingus deal is a “different scenario” to that of BA in 2006, he said. “Aer Lingus is a very profitable company, it’s not profitable enough, but it’s profitable.”
--Editors: Benedikt Kammel, Thomas Mulier