Thin air

2 February 2015 By Olaf Storbeck

Europe’s largest low-cost carrier upped its fiscal-year forecast again, eyeing a 60 pct net profit jump. But sober days lie ahead. Hedges limit the impact of lower oil prices. Other costs will rise. After gaining nearly 50 pct lately, the richly valued stock looks vulnerable.

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Shares of Ryanair fell more than 5 percent in early trading on Feb. 2 after it warned that profit growth would be modest next year as rivals’ cheaper fuel pushes fares down. The Dublin-based low-cost carrier will only benefit slightly from lower jet fuel costs this year as it has hedged 90 percent of March 2016 fuel needs at $92 per barrel, about double the current price after benchmark Brent crude plummeted in recent months.

The carrier expects to make a profit of between 840 million euros and 850 million euros ($949 to $961 million) for the year ending in March, up from a previous forecast of 810 million euros to 830 million euros. It said it expects traffic to grow by 25 percent in the three months to the end of March, up from a prior estimate of 20 percent, while fares would fall by 6-8 percent. Unit costs for the full year are likely to fall by 5 percent due to lower oil prices.

In the three months to December, Ryanair earned 49 million euros after tax, compared to a 35 million euro loss a year earlier.

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