LDN - Business

Ryanair posts third quarter profit but warns 737 MAX woes could delay growth target

[February 03, 2020] By Conor Humphries

DUBLIN (Reuters) - Ryanair <RYA.I> cheered investors with a return to profit in the third quarter but warned its target of flying 200 million passengers per year may be delayed two years due to the grounding of Boeing's <BA.N> 737 MAX jet.

Shares in Europe's largest budget airline jumped 4% on Monday following the results.

Ryanair reported profit after tax of 88 million euros ($97.63 million) for the three months to December 31 after a loss of 66 million a year earlier.

Average fares rose 9% and revenue from optional extras such as pre-booked seating jumped 21%.

Goodbody analyst Mark Simpson in a note described the results as "stellar" and said he expected the positive momentum in revenue per passenger to continue in the summer. Goodbody are market makers in Ryanair shares.

TARGET DELAY

CEO Michael O'Leary, however, suggested Boeing's delivery schedule could ultimately be up to two years late - meaning Ryanair will not reach its goal of 200 million passengers a year by March 2024.

"At best that means we will have to roll forward our plans to fly 200 million passengers per year ... by at least 12 months, possibly 24," O'Leary said in a pre-recorded video presentation when asked about the grounding of the MAX and Boeing's decision to temporarily halt production of the jet.

Ryanair is one of the biggest customers of the grounded jet, with 210 on order.

It aims to have 55 of them flying by summer 2021, a year later than originally planned, with 50 more planes per year due for each of the following three years.

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Ryanair Chief Executive Michael O'Leary speaks during a Reuters Newsmaker event in London, Britain October 1, 2019. REUTERS/Peter Nicholls/File Photo

Boeing last month said it did not expect the MAX, which was grounded in March 2019 after two crashes which killed 346 passengers and crew, to return to service until mid-2020.

Ryanair, which does not take deliveries during its summer peak of June-August, said on Monday it did not expect to receive the first MAX jets until September or October.

It will take a maximum of eight planes per month, or around 50 deliveries per year, O'Leary said.

Asked if there was any risk to its plans for 55 MAX jets flying by next summer, Chief Financial Officer Neil Sorahan told Reuters: "I don't believe so, but we have been disappointed before."

Ryanair in January raised its profit forecast citing a better-than-expected performance over Christmas and New Year as reduced capacity in Europe pushed up fares.

On Monday it reiterated that forecast, saying it expected profit after tax for the year to March 31 around the mid-point of a range of 950 million and 1.05 billion euros.

The MAX delays and the retraction of smaller struggling airlines have both helped cut capacity, pushing up fares, CFO Sorahan said.

"Clearly the capacity coming out of the market has been helpful," he said.

(Reporting by Conor Humphries; editing by Louise Heavens and Jason Neely)

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