Ryanair Grows Profits, Warns High Oil Costs To Ground Planes

May 23, 2011
The Dublin-based carrier said profit after tax jumped 26% to 401 million euros ($575 million) in the year to March 2011 compared with its previous fiscal year, as passenger traffic grew by 8% and fares rose 12%.

Ryanair said that its annual net profit rose by a quarter but Europe's biggest no-frills airline warned of a tough outlook as high fuel costs force it to ground planes and hike fares.

Ryanair chief executive Michael O'Leary meanwhile predicted that there would be no large-scale closure of airspace as volcanic ash from Iceland drifts towards key market Britain.

However worries that the ash cloud could trigger a repeat of last year's massive disruption to European air travel combined with Ryanair's weak outlook to send the group's shares crashing almost 5.0% in late trade.

The Dublin-based carrier said profit after tax jumped 26% to 401 million euros ($575 million) in the year to March 2011 compared with its previous fiscal year, as passenger traffic grew by 8% and fares rose 12%.

O'Leary said the results were pleasing, coming amid "higher oil prices, the global recession, and volcanic ash disruptions."

In a bid to reduce costs, the airline said it would ground as many as 80 aircraft during the European winter.

"Higher oil prices next winter and the refusal of some airports to offer lower charges, makes it more profitable to tactically ground up to 80 aircraft," Ryanair said in its earnings statement.

Although the airline has hedged most of its fuel costs, it said the overall economic outlook might dampen the travel market and was forecasting just 4% traffic growth in its current financial year when it will hike fares by 12%.

The company's results come as airlines face the threat of further flight cancellations caused by volcanic eruptions in Iceland.

France's junior transport secretary Thierry Mariani warned on Monday that flights would be cancelled if an ash cloud from Iceland's Grimsvoetn volcano blew over Europe, sending airline shares tumbling.

Air safety officials said ash from the Grimsvoetn eruption may reach northern Scotland by Tuesday before sweeping across Britain to hit France and Spain two days later.

But O'Leary said the impact should not be as far-reaching as 2010, when a similar event caused widespread flight cancellations.

The Ryanair boss said the aviation authorities were better prepared this time and they were ready to leave the decision to ground planes largely in the hands of airlines.

"What they tend to do is to let the airlines continue to fly. We do inspections every time there is a landing," O'Leary told BBC radio.

"If we notice any dust on the aircraft then we take appropriate procedures.

"But there is no ash cloud by the time it gets to the UK or to continental Europe, the thing is dispersed -- that was our experience last time and I think the widescale airspace shutdowns won't be repeated," he added.

Last year's closure cost Ryanair nearly 30 million euros as it cancelled 9,400 flights, the Irish airline said in its earnings statement on Monday.

Ryanair shares traded down 4.74% to 3.38 euros in late deals on Dublin's main index, which was off 1.62%.

Copyright Agence France-Presse, 2011

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