Revenues rose 6% to 7.6bn euros due to 7% higher traffic, a 6% cut in ave. fares to 37 euros, while Ryanair Labs continues to stimulate ancillary sales growth with spend per guest up 11% to over 17 euros.
Ryanair reported a full year profit of 1.02bn euros (excl. Lauda). Strong traffic growth, up 7% to 139m, was offset by a 6% decline in fares. Strong ancillary growth (+19%) was offset by higher fuel, staff and EU261 costs.
|
Full-year Results (IFRS)* |
Mar. 31, 2018 |
Mar. 31, 2019 |
% Change |
|
Guests |
130.3m |
139.1m |
+7% |
|
Load Factor |
95% |
96% |
+1% |
|
Revenue |
€7.15bn |
€7.56bn |
+6% |
|
PAT |
€1.45bn |
€1.02bn |
-29% |
* excl. Lauda 139.5m euros exceptional start-up loss (FY19). Group traffic (incl. Lauda) was 142m
Ryanair’s Michael O’Leary said: “As previously guided, Ryanair (excl. Lauda) reports a full year after tax profit of 1.02bn euros. Short-haul capacity growth and the absence of Easter in Q4 led to a 6% fare decline, which stimulated 7% traffic growth to over 139m (142m guests incl. Lauda). Ancillary sales performed strongly up 19% to €2.4bn, which drove total revenue growth of 6% to 7.6bn euros.
FY19 highlights include:
- Ave. fare fell 6% to just 37 euros
- Traffic grew 9% to 142m (incl. Lauda)
- Ancillary revenue rose 19% to 2.4bn euros
- Yr. end fleet grew to 455 B737 & 19 A320 aircraft
- 406 new routes and 9 new bases launched
- Ryanair Sun (Buzz) traded profitably in Yr.1
- Purchase of Lauda completed in Dec. with an exceptional Yr.1 loss of 139m euros
- UK AOC received in Dec.
- Union agreements concluded in most major markets
- Over 560m euros returned to shareholders via buybacks
Revenue
Revenues rose 6% to 7.6bn euros due to 7% higher traffic, a 6% cut in ave. fares to 37 euros, while Ryanair Labs continues to stimulate ancillary sales growth with spend per guest up 11% to over 17 euros. Priority boarding and reserved seat services grew strongly. Ryanair Labs continues to improve our digital platform (website, app & 3rd party ancillary plug-ins).
Cost Leadership
Ryanair has the lowest unit costs of any EU airline, and the cost gap with EU competitors continues to widen. FY19 was a year of investment in our people, our support systems and our business as we grow to 200m guests p.a. by 2024. Ex-fuel unit costs rose 5% (better than previously guided 6%) due to 200m euros higher staff costs (incl. 20% pilot pay increases) and 50m euros higher EU261 costs due to the repeated ATC staff shortage disruptions in FY19. As weaker European airlines are sold or fail, airports are competing to attract Ryanair’s efficient, high load factor, traffic growth. Our airport costs are 35% lower than our nearest competitor. During FY19 our oil bill increased by €440m. We are 90% hedged for FY20 at $709 per tonne and 35% hedged for Q1 FY21 at $654.
Group Airlines
In S.2018 we launched Ryanair Sun (now rebranded “Buzz”), our Polish AOC, with 5 B737 aircraft offering charter flights to/from Poland. Buzz has taken over Ryanair’s scheduled bases in Poland and will operate a fleet of 25 aircraft in FY20 (incl. 7 for charters). The Buzz management team successfully delivered a modest profit in their first year of operations.
In December 2018, Lauda (an Austrian AOC) became a wholly owned subsidiary of the Ryanair Group. We consolidated 3m customers in its first year of operations to March 2019 but suffered exceptional start-up losses of 139.5m euros, mainly due to the very late release of its S.2018 schedules, very low promotional fares, expensive short-term aircraft leases and an unhedged fuel position. Lauda enters its second year with a larger (lower-cost) fleet of 23 A320 aircraft, and a target of just over 6m guests p.a. They have signed agreements to grow this fleet to 35 x A320 aircraft for S.2020 and by year 3 (FY21) we believe Lauda will grow to carry over 8m guests p.a. and will be trading profitably.
Higher oil prices and lower fares have seen a wave of EU airline failures including Primera (UK & Spain), Small Planet, Azur and Germania (Germany), Sky Works (Switz.), VLM (Belgium), Cobalt (Cyprus), Cello & Flybmi (UK) and WOW (Iceland). Flybe (UK) was sold, while both Alitalia and Thomas Cook airline are currently for sale.
Ryanair closed unprofitable bases in Bremen & Eindhoven and we cut aircraft numbers in Niederrhein, Hahn and the Canary Islands. Norwegian has closed multiple bases (many where they compete with Ryanair), including Rome, Las Palmas, Palma, Tenerife, Edinburgh & Belfast, and they will cut their Dublin base from 6 to 1 aircraft in October. Wizz (Poznan), Lufthansa (Dusseldorf) and EasyJet (Oporto) have also announced base cuts and/or closures in recent months. We expect further consolidation and airline failures in winter 2019 and again into 2020 due to over-capacity, weaker fares, and higher oil prices particularly among those airlines who are significantly unhedged, or unable to hedge.
Boeing 737 MAX
We have delayed the delivery of our first 5 B737-MAX aircraft to Winter 2019 (subject to regulatory approval by EASA). We continue to have utmost confidence in these aircraft which have 4% more seats, are 16% more fuel efficient and generate 40% lower noise emissions. They are hedged at an average €/$ rate of 1.24 out to FY24, and will deliver significant unit cost savings for the next 5 years, although the delayed deliveries in 2019 means that we will not see any meaningful cost benefit until FY21.
Balance Sheet & Fleet
The Group’s BBB+ rated balance sheet is one of the strongest in the industry. Almost 95% of our 455 aircraft fleet is owned, with over 63% debt free. At year end the Group had 3.2bn euros gross cash. Ryanair generated almost 2bn euros net cash from operations in FY19, but spent over 1.5bn euros on capex (primarily aircraft, simulators, engines & hangars), returned 560m euros to shareholders in share buybacks, and repaid more than €400m of debt. As a result, year-end net debt rose slightly to 450m. euros. We recently concluded a low-cost, 750m euros unsecured (5-year) bank facility. This facility, coupled with strong operating cashflows, will fund this year’s peak capex of c.2bn euros, maturing secured debt and other general corporate purposes. We are also in advanced negotiations to sell 10 of our oldest B737s for over $170m before the end of March 2020.
Shareholder Distributions
The Board has approved a 700m euros share buyback which will commence later this week and run over the next 9 to 12 months. We expect to split this approx. 500m/200m euros between ADR’s and ordinary shares, although the Board has discretion to revise this allocation. This latest buyback will bring to almost 7bn euros of the funds returned to shareholders since 2008.
FY20 Guidance
While we separately disclosed Lauda’s year 1 start-up loss as exceptional in FY19, their FY20 results will not be split out in the Ryanair Group income statement. FY20 guidance is therefore for the consolidated Ryanair Group.
Our outlook for FY20 remains cautious on pricing. Traffic will grow by 8% to 153m. Assuming revenue per pax (“RPP”) growth of 3%, we are guiding broadly flat Group profits. This will range from 750m euros if RPP rises 2%, up to 950m euros if RPP rises 4%. While H1 bookings are slightly ahead of last year, fares are lower and we expect this trend will continue through S.2019. We have zero H2 visibility. Costs will increase as our full-year fuel bill jumps by another 460m euros. Ex-fuel unit costs will rise by just 2%, mainly due to stronger sterling, the absence of Lauda prior-year cost comparisons for most of H1 and delivery delays of the B737 MAX aircraft this year. This guidance is heavily dependent on close-in peak summer fares, H2 prices, the absence of security events, and no negative Brexit developments.”
Ryanair results are far from disastrous, but company is right to urge caution, says GlobalData
Nick Wyatt, Head of Research and Analysis for Travel & Tourism at GlobalData, a leading data and analytics company, offers his view: “Ryanair's results shouldn't come as a huge surprise as the company has issued two profit warnings in the last year. But while people will be eager to jump on this as a sign of huge problems, the fall in profits should be viewed as disappointing rather than a disaster.
“Ryanair has still posted a profit, something which is far from guaranteed in the airline industry, as it is facing strong headwinds with increasing fuel costs and the looming spectre of Brexit.
“The company boasts some of the lowest unit costs in the industry and this should stand it in good stead. Increased non-fuel costs are the main source of disappointment but Ryanair will be hoping the increased pilot pay it awarded last year will not be repeated.
“It does need to move Laudamotion closer to profitability though as that has been cited as a drag on profits in the latest release but patience is required as integration and reorganization efforts are still very much ongoing.
“The company had urged caution for the current financial year and it is right to do so, but demand remains strong and Ryanair's lean cost model should help it navigate cyclical industry turbulence.”
Vicky is the co-founder of TravelDailyNews Media Network where she is the Editor-in Chief. She is also responsible for the daily operation and the financial policy. She holds a Bachelor's degree in Tourism Business Administration from the Technical University of Athens and a Master in Business Administration (MBA) from the University of Wales.
She has many years of both academic and industrial experience within the travel industry. She has written/edited numerous articles in various tourism magazines.
