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
“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 ‘ALMOST ZERO’
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.
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.
O’LEARY NEARS DEAL TO EXTEND CONTRACT
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.
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.
That excluded an 85 million euro provision related to a fine from the Italian competition authority, which Ryanair expects to be overturned on appeal.
($1 = 0.8583 euros)
(Reporting by Conor HumphriesEditing by Thomas Derpinghaus, Kate Mayberry and David Goodman)
