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Ryanair beats profit forecasts but rising costs weigh

Profit of €1.15bn was the same as the year before, as revenues rose 11% but the fuel bill increased by 22%

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Delivery of Ryanair’s first Boeing 737-MAX aeroplanes has been delayed again

Ryanair Holdings PLC (LON:RYA) reported unchanged half-year profits as higher fuel and staff costs weighed down the budget airline to offset its rising revenues.

Dismissing competitors’ “unreliable optimism” about the second half, the Dublin-headquartered carrier said that losses from its Laudamotion acquisition will be higher than originally expected and customer traffic is likely to slow in the second half but with flight fares improving.

For the full year, Ryanair gave new guidance for profit after tax, given the nice Irish acronym of PAT, to shrink 12%-21% for the full year to €800mln-€900mln.

But for the six months to 30 September, PAT came in at €1.15bn, the same as the year before after the second quarter was stronger than analysts expected as average fares not as bad as feared.

Flight fares fell 5% in the first half but are expected to be “slightly better” in the second, although there remains some uncertainty in the market, especially around Brexit.

Rising costs

Even so, a rise in customer traffic meant revenues rose 11% to €5.4bn, which was offset by a 22% increase in the fuel bill to €1.59bn due to higher prices and more flights.

Non-fuel costs also rose 2% after pilots and cabin crew won better pay deals after strikes.

For the second half, the fuel bill is seen increasing by another €161mln, while non-fuel unit costs are expected to rise 2%.

Ryanair's hopes to cut future costs by using more fuel efficient aircraft were somewhat scuppered too, as the delivery of its first B737-MAX-200 aeroplanes was delayed yet again.

With cracks having been found in other airline's planes, the carrier has now lightly pencilled in “March/April 2020 at the earliest” for delivery of only 20 rather than 58 of the total aircraft expected and said “the risk of further delay is rising”.

Ryanair shares took off on Monday, rising 7% to €13.36 by lunchtime.

Broker Liberum said the increase in profits "is likely to prove unusual across the sector this quarter".

However, Liberum analysts said that while full year net profit guidance was narrowed the midpoint remains the same, which suggests the quarterly outperformance "is a phasing issue".

As such the analysts predicted that the current year consensus will not change much from the current €836mln and "the balance of risks to next year is modestly on the downside given further MAX delivery delays".

-- Share price and broker comment added --

Quick facts: Ryanair Holdings plc

Price: 11.255 EUR

LSE:RYA
Market: LSE
Market Cap: €12.26 billion
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