Ryanair Q1 profit falls over volcano, fuel costs

[July 20, 2010]  DUBLIN (AP) -- Irish budget airline Ryanair reported a 24 percent drop in first-quarter net profit Tuesday, citing euro50 million ($65 million) in lost business from the Icelandic volcano as well as a rising fuel bill -- but the carrier says it remains poised to keep expanding.

Net profit for the April-June quarter fell to euro93.7 million ($121.8 million) from euro123 million in the same quarter a year ago.

Income from ticket sales rose 14 percent to euro692.9 million, while revenue from other income sources -- including the company's extra charges on everything from baggage to credit-card use as well as its commissions for insurance, hotel and car-rental bookings on its Web site -- rose 23 percent to euro165.3 million.

"We continue to see enormous opportunities to grow our business across Europe as many airports vigorously compete to attract Ryanair's traffic growth," Chief Executive Michael O'Leary said. "This aggressive competition between airports has resulted in airport unit costs falling by 8 percent."

Most airline analysts had expected Iceland's Eyjafjallajokul volcano to do more damage to Ryanair's bottom line. Investors snapped up shares Tuesday in growing expectation that Ryanair has positioned itself well for serving summer sun spots, particularly in Spain, where the airline has boosted operations from Barcelona to the Canary Islands off Morocco's coast.

In Dublin, Ryanair shares initially jumped more than 4 percent, then settled back at euro3.80, up 0.5 percent in morning trade on the Irish Stock Exchange.

The Dublin-based airline reiterated its previous guidance for full-year net profit to rise 10-15 percent to a range of euro350 million to euro375 million. That estimate excludes exceptional losses such as volcano-related cancellations and refunds.

Ryanair reported an exceptional pre-tax loss of euro50 million because European air traffic authorities canceled 9,400 Ryanair flights due to carry 1.5 million passengers in April and May during the volcanic ash threat. The airline's unaudited statement noted that this loss figure represents only an initial estimate, because Ryanair has yet to pay out refunds to many of its passengers left stranded during the ash crisis.

O'Leary repeated his criticisms of a European Union consumer law that requires airlines -- rather than travel insurance companies or governments -- to reimburse customers' hotel and meal bills when their flights are grounded by natural disasters. O'Leary said the relevant European law "should be urgently amended to prevent this unfair, disproportionate and discriminatory treatment of EU airlines."

Despite all those grounded flights, Ryanair said it still spent euro286.6 million on fuel, 24 percent more than in the April-June period of 2009. The extra cost reflected rising oil prices and Ryanair's ever-expanding route network, which now reaches 155 destinations across Europe.

Ryanair said it has purchased advance contracts for 90 percent of its expected aviation-fuel needs through 2011 and the first half of 2012 at rates of $730 and $755 per metric ton, respectively. Aviation fuel has risen sharply in price this month and currently exceeds $690 per ton.

Not that Ryanair will have trouble paying its fuel bills. The cash-rich airline said its reserves have risen 11 percent to euro3.1 billion over the past year. It plans to pay its first-ever dividend to shareholders on Oct. 1 -- a euro500 million payment expected to gift O'Leary, one of the company's biggest shareholders, a pre-tax gain of euro20 million.

[Associated Press; By SHAWN POGATCHNIK]

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