Ryanair has put in another strong financial performance, reporting a 16 per cent rise in profits to €175.5 million in the six months to the end of September, well ahead of market expectations.
The company has also claimed that, within five years, its average fare will be just €20.
In the crucial three months between July and September, the airline's profits rose from €109.8 million to €130.8 million. This is the key quarter for the airline, typically accounting for almost 50 per cent of its full-year earnings.
During those months, Ryanair increased its seat capacity by 50 per cent and aggressively cut fares to stimulate demand in a bid to counter the negative impact of the Iraq war, higher oil prices and weak economic conditions in Europe.
Ryanair's chief executive, Mr Michael O'Leary, said the average profit yielded from each passenger was softer and would continue to be for the rest of this year although traffic growth would continue to be strong.
"We are cautious about fares and yields. We expect that average yields will continue to decline by between 10 per cent and 15 per cent compared to those charged last year and remain equally determined that Ryanair will continue to be the lowest-fare airline in every market in which we operate."
Mr O'Leary said Ryanair's average fare over the six-month period was €46 and would decline by 50 per cent over the next five years to just over €20.
"Ryanair will continue to drive down costs and prices and, by so doing, we will continue to replicate the success of other industry price leaders such as Southwest Airlines, Dell and Wal-Mart," Mr O'Leary said yesterday.
In the six months to the end of September, Ryanair carried 11.3 million passengers, a 45 per cent increase on the same period last year. The airline expects to carry 24 million passengers this year.
Ryanair shares fell 14 cents to €7.16 last night on the Irish Stock Exchange.
Revenues rose by 28 per cent to €596.4 million. Some €523.5 million was generated directly from passengers while ancillary revenues, including the commissions it earns from promoting items such as car hire and hotel accommodation on its website, brought in a further €72.8 million, up 36 per cent.
Total operating costs increased at a faster pace than operating revenues for only the second time in its history. Operating costs rose by 32 per cent to €393 million. Mr O'Leary said this reflected the airline's higher level of activity, higher staff, fuel and depreciation costs but added that the higher number of new 737-800 series jets being added to its fleet would improve efficiencies in the longer term.
Staff costs increased by 32 per cent to €61.5 million. Ryanair's staff numbers rose by 34 per cent during the six months to 2,232. Mr O'Leary said the bulk of the increase reflected the recruitment of additional pilots who are the highest paid staff. The airline also paid a 3 per cent pay increase.
Ryanair's net profit margins declined from 32 per cent to 29 per cent but remain well above its target of 20 per cent. At the end of September, the airline had €1.16 billion in cash reserves, €100 million more than at the end of the same period last year. Mr O'Leary said Ryanair would continue to build its cash reserves in the future to guard against aggressive price cuts by rivals.
It is also close to finalising negotiations with financial institutions to secure new and cheaper financing to cover the cost of its new aircraft. In the longer term, the airline intends to reorganise its fleet so that it will eventually own 66 per cent of its aircraft and lease the remainder.
