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Huge Losses at Ryanair

By
PADDY CLANCY,
IrishCentral.com Staff Writer

Published Tuesday, March 10, 2009, 1:25 AM
Updated Thursday, November 12, 2009, 12:20 PM

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LOW-fares flier Ryanair has warned it could mark up a $95 million loss this year if oil prices stay at around $130 per barrel.The Irish airline said its profits fell by 85% in its first quarter this year as high oil prices almost doubled the fuel bill. Despite increasing passenger numbers by 19% to 15 million during the period, and boosting revenue by 12% to $1,223 million, profit slumped to $33 million from $219 million in the same period in 2007.The company said fuel now represented almost 50% of total operating costs, compared to 36% last year. Lower fares also had an impact. Ryanair calculated its average fare, including bag charges, at $66, a drop of 8%.Chief Executive Michael O'Leary said the company had taken advantage of a recent drop in oil prices, hedging 90% of its fuel requirement for September at $129 per barrel, and 80% for the third quarter at $124 per barrel. However, the final quarter of the year remains unhedged.The no-frills airline recently announced it was grounding 15 aircraft at Stansted in England for the winter, and four in Dublin. It will also temporarily cut routes to some of its higher cost bases, including Budapest, Valencia and Krakow. "The emerging economic recession in the U.K. and Ireland caused by the global credit crisis and high oil prices means that consumer confidence is plummeting, and we believe this will have an adverse impact on fares for the rest of the year," he said."Higher oil prices will speed up the decline of high fare short-haul travel this winter as many European airlines consolidate or go bust. We believe that oil prices of approximately $130 per barrel are unsustainable over the medium term, but we don't know when they are going to fall."Despite the gloomy forecast, O'Leary refused to be downbeat and insisted his company will emerge stronger from the crisis."The airline industry is cyclical, and this downturn will provide enormous opportunities for strong, well financed airlines, such as Ryanair to grow," he said.O'Leary believed Ryanair's earnings would rebound strongly once oil prices eased.The news of a hefty drop in profits had a negative effect on Ryanair's share prices, with the stock losing almost 18% on Monday this week, trading at $4.17.

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