Ryanair Q1 Earnings and Revenues Rise, Profit Guidance Up

Europe's leading low fare airline Ryanair Holdings Plc. RYAAY reported first-quarter fiscal 2015 adjusted earnings of €196.8 million ($270.0 million), up by a whopping 152.0% owing to  rise in average fares and strong load factor, partially offset by higher operating expenses.

Total operating revenue in the first quarter came in at €1,495.7 million ($2051.7 million), up 11.4% from the prior-year quarter. Passenger revenues leaped 14.1% while ancillary revenues increased 4.0%. Shift in the timing of Easter this year, the strengthening of sterling against the euro, and rise in traffic boosted the first-quarter top-line number.    

Ryanair's four new bases – Athens, Brussels, Lisbon and Rome – are performing well owing to its low fares and industry-leading customer service.

Operating Statistics

Total revenue per passenger increased 7%, while average fares rose 9% during the quarter. Load factor was up by 400 basis points to 86% while unit cost including fuel fell 2%.

Operating Income and Expenses

Operating income rose to €231.8 million ($318.0 million) as compared eith €103.3 million ($134.9 million) in the first quarter of 2014. Operating margin stood at 15.5%, up from 7.7% during the first quarter of fiscal 2014.

Operating cost increased by 2.0% to €1263.9 ($1733.7 million) during the reported quarter. Rise in airport and handling charges, marketing and depreciation and amortization cost led to the rise in operating expenses.

Balance Sheet

Ryanair ended the first quarter with unrestricted cash and short-term investments of €2,572.7 million ($3,511.2 million). Long-term debt as of Jun 30, 2014 was €3,374.5 million ($4,605.5 million) as opposed to €2,615.7 million ($3,407.2 million) as of Jun 30, 2013.

Operating free cash flow at the end of the quarter stood at €616.0 million ($845.0 million).

Dividend

The carrier plans to return €520 million to its shareholders via a special dividend of 37.50 cents per ordinary share which is expected to be paid in the fourth quarter of fiscal 2015.

Guidance

Owing to its strong forward bookings, Ryanair expects strong first-half 2015 results. The company estimates traffic to rise 3% and fares to increase 6% subject to late booking fares in Aug and Sep 2014.

However, the carrier expects softer pricing environment in the second half of 2015 due to lowering of fares by other competitors. Further, Ryanair plans to increase its capacity by 8% this winter, which will inevitably put pressure on fares. They expect second half of fiscal 2015 yield to fall between 6% and 8%, which will led to a 2015 yield gain of only 2%.

Unit cost is expected to rise by 4% in fiscal 2015, bettering its previous guidance of a 5% rise. Full year traffic is expected to grow by 5% to 86 million. Estimated profit after tax for the fiscal year has been raised to the range of €620–€650 million from the earlier guided €580–€620 million.

Peer Releases

Delta Air Lines Inc. DAL reported second-quarter 2014 adjusted earnings of $1.04 per share, beating the Zacks Consensus Estimate of $1.03, while Southwest Airline Co.'s LUV earnings of 70 cents also steered ahead of our estimate of 61 cents. United Continental Holdings Inc. UAL posted a profit of $2.34 per share, higher than the Zacks Consensus Estimate of $2.22.

Ryanair currently carries a Zacks Rank #3 (Hold).