Lf Rises 1% To 96% On Lower Fares

Ryanair, Europe’s No.1 airline, today (2 Nov) released October traffic statistics as follows:

• Traffic grew 8% to 11.8m customers.
• Load factor rose 1% point to 96%
• Rolling annual traffic to October grew 12% to 128.2m customers.

 

	Oct 16	Oct 17	Change
Customers	10.9M	11.8M	+8%
Load Factor	95%	96%	+1%

 

Ryanair’s Kenny Jacobs said:

 

“Ryanair’s October traffic grew by 8% to 11.8m customers, while our load factor jumped 1% to 96%, on the back of lower fares. These figures include the flight cancellations announced in September. Ryanair customers can look forward to even lower fares when they make advance bookings for winter or summer, so there’s never been a better time to book a low fare flight on Ryanair.”

Ryanair Cuts H1 Fares By 5%, Profits Rise 11%
Traffic Grows 11% As Q2 Load Factors Improve To 97%
FY Profit Guidance Unchanged

Ryanair, Europe’s No.1 airline, today (Oct. 31) reported an 11% increase in H1 profit to €1.29bn.  Traffic grew 11% to 72m thanks to a strong Easter and a 5% reduction in airfares saving customers over €160m in the half year. Unit costs (including fuel savings) fell 5%, ex-fuel unit costs were flat.

H1 Results (IFRS)	Sept 30, 2016	Sept 30, 2017	% Change
Customers (m)	64.8	72.1	+11%
Revenue (m)	€4,132	€4,425	+7%
Profit after Tax (m)	€1,168	€1,293	+11%
Net Margin	28%	29%	+1pt
Basic EPS	€0.92	€1.07	+16%

Ryanair’s Michael O’Leary said:

“These strong H1 results reinforce the robust nature of Ryanair’s low fare, pan-European growth model even during a period which suffered a material failure in our pilot rostering function in early September. Prior to this event, we were on track to deliver strong H1 results during which we opened 3 new bases and 80 new routes. We took delivery of 35 new B737’s in the first 6 months of 2017, we stimulated 11% traffic growth with 5% lower airfares, and achieved an industry record load factor of 97% in the peak summer months.

Ancillary Revenue grew 14%. Customer spend rose 2% as more customers chose optional services such as reserved seats, priority boarding and car hire. H1 unit costs fell 5%, excluding fuel it was flat (but would have fallen 2% without the EU261 provision). Despite traffic growth of 11% our fuel bill fell 3%. Most other cost headings were broadly flat on a per passenger basis, other than our “Sales, Marketing & Other” which jumped 30% due to a one-off €25m EU261 provision, as we quickly addressed the needs of affected customers in September to recover the rostering failure, and eliminate any risk of further cancellations.

Our balance sheet remains strong. Operating activity in H1 generated over €935m of net cash. We used this for net capex of €675m, share buybacks of €639m, and debt repayments of €200m. Accordingly, net debt rose from €244m at 31 March to €600m at 30 September. We don’t plan any more near term buybacks as we work to finish the fiscal year with a broadly flat net debt/cash position.

Customer Initiatives

We continued in H1 to roll out customer experience improvements. Ryanair.com has become the world’s largest airline website with 94% of customers visiting directly rather than via search engines. My Ryanair has grown to over 30m members in September and we should grow to over 40m by March 2018. Over half our customers now choose their preferred seat and our “Plus” fares account for approx. 7% of all sectors sold. In H1 we successfully launched Ryanair flight connections at Rome Fiumicino and Milan Bergamo. We expanded our hotels service to 5 inventory providers offering over 250,000 hotels and 7.5m rooms worldwide, and we will shortly add a travel credit incentive to reward customers using our Ryanair Rooms service.

European Consolidation

The underlying trend towards consolidation among European airlines continues. Monarch (5m pax) went bankrupt in September, followed by Air Berlin (29m) in October and Alitalia (24m) remains in bankruptcy. There are other financially troubled EU airlines who will, we believe, follow them. We are responding to these opportunities by continuing to grow in Germany where Lufthansa’s purchase of Air Berlin gives them an anti-competitive 95% share of the

large German domestic market. We will add more aircraft to our UKP bases for S18 to take up any slack created by Monarch’s collapse, and we continue to grow strongly in Italy where we are poised to be the main beneficiary of the inevitable contraction in Alitalia’s short haul services. These trends, particularly where they allow high fare airlines like Lufthansa, BA and Air France to acquire local competitors, while constraining capacity and raising prices, can only be good for Ryanair’s yield and traffic growth, as our fleet rises to 600 aircraft, and our traffic grows from 129m to 200m p.a. by 2024.

Brexit

We remain concerned at the continuing uncertainty surrounding the terms of the UK’s departure from the EU in March 2019. There remains a worrying risk of a serious disruption to UK-EU flights in April 2019 unless a timely UK-EU bilateral is agreed in advance of September 2018. We, like other airlines, need clarity on this issue before we publish our summer 2019 schedules in mid-2018 and time is running short for the UK to develop a bilateral solution. We worry that the UK government continues to under-estimate the likelihood of such a flight disruption to/from the UK, an outcome that was highlighted by Air France’s CEO in an interview with The Observer newspaper on 22 October.

Pilot Rostering Failure & Recovery

In early September we suffered a material failure in the management of our pilot rostering function. We are not short of crews, with over 4,200 pilots (5.2 crews per aircraft) and have hired over 900 new pilots this year to date. We operated the peak summer schedule in July & August (12.5m customers monthly) without incident. However as we entered September, a series of poor planning decisions created a perfect storm of one-off pilot shortages due to:

• Over-allocated calendar months of annual leave to over half our pilots in September, October, November and December;
• a bottleneck of over 200 new recruits were delayed being released to line flying by mis-managed blockages in the completion of their base training; and
• an insufficient focus on short term pilot recruitment in summer 2017 to allow for a one-off spike in annual leave from September to December 2017 caused by our agreement with the IAA to transition over a 9 month period (April to December 2017), to a new-agreed-calendar year FTL cycle from 1 January to 31 December 2018.

This rostering failure caused punctuality in the first half of September to plummet to the low 70%. We responded on Fri 15 September by taking a painful decision (solely to protect the other 98% of our customers) to cancel 50 (2%) of our 2,200 daily flights for the last 6 weeks of September & October. Then on Wed 27 September we announced the grounding of 25 (6%) of our 400 aircraft fleet for the 5 month winter season from November to March 2018. These very difficult and disruptive decisions quickly restored our schedules to 90% punctuality for the 99% of customers who were unaffected by these disruptions, and eliminated any further rostering cancellations.

While we deeply regret these flight cancellations and winter schedule changes, and the disruption they caused to some 700,000 (0.5%) of our 129m customers, we have worked hard to re-accommodate or refund all affected customer requests within 18 days of notifying them. The overwhelming majority have chosen re-accommodation on alternative Ryanair flights, but we have also provided refunds, and met our EU261 obligations in full, at a cost of some €25m in H1. Additionally, we have issued every single disrupted customer a travel voucher worth €40 per sector (€80 return) redeemable in October for travel over the winter period.

This rostering failure has challenged us to address the competitiveness of our pilot pay, as well as pilot concerns about communications, career progression and basing. While our pay was already slightly higher than B737 competitor airlines, we could have responded sooner to a tightening market for experienced F.O’s with pay increases for our experienced pilots, reinforcing our long standing and successful ERC collective bargaining process, and improving the range and choice of bases and contracts we offer our pilots. We will now move from being “competitive” to offering materially higher (over 20%) pay with better career prospects, superior rosters, and much better job security than Norwegian, among others, can offer. We expect these measures, if/when accepted by all our pilot bases, will add some €45m to our FY18 crew costs (and up to €100m in a full year) but will not significantly alter the substantial unit cost advantage we have over all other EU airline competitors.

Dublin Captains (from Nov & all new joiners)					Stansted Captains (from Nov & all new joiners)
Pay Deal		Norweg	RYR		Pay Deal		Jet2	Norweg	RYR
Basic		92,400	84,650		Basic		92,000	82,200	74,000
Productivity		—	12,000		Productivity		—	—	12,000
Sector Pay		31,000	45,500		Sector Pay		9,500	24,900	35,600
Expenses		—	6,000		Expenses		—	—	6,000
Pension		4,600	8,000		Pension		9,200	5,500	8,000
		€128,000	€156,150				£110,700	£112,600	£135,600
22% more than Norwegian					22% more than Jet2
					20% more than Norwegian

We are investing in new operations management which will shortly be headed by Peter Bellew returning from his successful stint as CEO of Malaysia Airlines. We have added resources to our pilot recruitment, base manager and rostering teams so that we can respond quickly to the needs of our pilots and cabin crew, promptly address their requests, and work more closely with them to facilitate opportunities at those bases where they wish to live and develop their careers. The test of any management team, is the speed and effectiveness with which they respond to a crisis, and the pilot rostering failure in early September was just such a crisis. We have responded quickly to repair this failure, eliminate further cancellations and we are determined to invest the time, money and manpower to ensure that it never recurs.

Collective Bargaining – some facts

One of the predictable by-products of this September rostering failure is a renewed campaign of misinformation by competitor airline pilot unions. Since Ryanair has, for over 30 years, operated a sophisticated collective bargaining process, supported fully by our pilots and cabin crew – confirmed and validated by the Irish Supreme Court – the only way our existing 5 year base agreements can be changed (some of which run to 2020) is by negotiation between the airline and our base ERC’s. This has already taken place successfully at over 10 bases. The Stansted pilots have voted, in secret ballot, to reject this large pay increase and we will respect their wishes, and they will continue with the existing pay agreement at Stansted until 2020. We will engage with the Stansted ERC to understand any concerns they may have, even while we add over 30 new pilots at Stansted in November on these new higher pay rates. If Stansted pilots wish to reconsider or revote, they may do so at any time through their ERC. However, we will not, and cannot, be forced to meet with any outside group such as the so called EERC which like REPA (2004) and RPG (2012) is a front for competitor airline pilot unions (BALPA, IALPA, ECA and even more bizarrely some U.S. pilot unions).

Our People:

I sincerely want to thank all our people for their help and support over what has been a very difficult 4 week period in September. Our pilots, cabin crew, customer handling and customer service teams have responded brilliantly to a very difficult situation that was not of their making. Thousands of our pilots and cabin crew have volunteered to work days off to ensure that disruption to our customers was minimised. Our customer service teams have worked late and over weekends to re-accommodate those customers who were disrupted and have dealt with over 700,000 requests in just 18 days, a phenomenal performance of which we are extremely proud.

I’m sorry that our people have had to listen to misinformation about Ryanair promoted by competitor pilot unions, however we have been here before, and we will be again. We understand that the reason they wish to denigrate Ryanair is because their airlines cannot compete with us. As usual when these union airlines fail, such as Monarch, Air Berlin and Alitalia in recent months, their pilots all come to Ryanair seeking jobs that pay up to €175,000 p.a., deliver a double bank holiday weekend every week, with the best promotions record and, the best job security in Europe. We will continue to work hard to deliver for our people, our customers and our shareholders while these competitor unions will continue to rail and fail.

Outlook:

Having grown H1 traffic by 11%, the grounding of 25 aircraft means we will slow H2 growth to approx. 4%. As a result, full year traffic will slow from 131m to 129m customers.  We are 2% better booked than this time last year, but at lower fares. We now expect FY18 fares will fall by -4% to -6%, which is slightly better than previous guidance (-5% to -7%).  Ancillary spend per customer should rise by 1% this year.

Ex-fuel unit costs will be adversely impacted by €25m in non-recurring EU261 costs and some €45m of additional pilot costs (higher pay if accepted by our pilots, recruitment and training in H2) arising from the September rostering failure. We now expect full year unit costs to fall by c. 2% this year (ex-fuel unit costs will be up 3%).

Based on the above, and with the usual caveat about limited H2 yield visibility, we see no reason to alter our full year PAT guidance which remains in a range of €1.40bn to €1.45bn. This guidance, as always, remains heavily dependent on close-in H2 bookings, the absence of any further security events, ATC strikes or negative Brexit developments.”

Ryanair today (17 Oct) announced that Peter Bellew would re-join Ryanair as Chief Operations Officer. Mr. Bellew who is currently the CEO of Malaysia Airlines will take over responsibility for all Ryanair’s flight operations, ground operations and engineering but with a specific responsibility for pilot production, training and career development with a mission to ensure that the pilot rostering failure which Ryanair suffered in early September will never be repeated.

Mr. Bellew, who previously worked in Ryanair until 2014, latterly as Director of Flight Operations, will join the Ryanair team in Dublin from Friday 1^st December next.

Ryanair’s Michael O’Leary said:

“We are pleased to welcome Peter back to Ryanair. Having worked previously in a senior role in our Operations team, Peter has an unrivalled knowledge of our business model and how we maintain controlled growth, with industry leading punctuality, for the benefit of our customers and our people. Peter will lead a significant transformation in the way we reward and interact with our pilots, improve their working environment and career development over the coming years as we grow the fleet to some 600 aircraft and expand our traffic, at lower fares, to 200m customers p.a.”

Peter Bellew said:

“I am excited to return home to Ryanair and take up the challenge to grow the operation sustainably.  I look forward to working with all the team and all the crews I know so well to further develop our growth to 600 aircraft over the next 6 years.”

Ryanair today (16 Oct) updated its progress on the schedule change of 18,000 (2%) of its 800,000 flights between November and March, with 97% of customers’ refund or re-routing requests now completed, and urged the final remaining customers to make contact as soon as possible.

For Sept/Oct cancellations (announced 18 Sep):

• All 315,000 customers received email notices
• Over 313,000 re-routings or refunds (99.4% of customers) have been processed
• The remaining 2,000 customers (0.6%) have yet to contact Ryanair

For winter schedule changes (announced 27 Sep):

• All 400,000 customers have received email notices
• Over 384,000 re-routings or refunds (96% of customers) have been processed
• The remaining 16,000 (4%) have yet to contact Ryanair

 

Like other airlines, Ryanair was badly affected by another unjustified French ATC strike on Tuesday 10 Oct.  But, over the last 7 days, Ryanair’s first wave punctuality has remained extremely high at 95% on-time (98% excluding Tuesday 10^th). Out of 15,000 flights operated last week, only 8 flights (in addition to the 344 French ATC strike cancellations) were cancelled, and all of these were due to adverse weather conditions  (see below).

PUNCTUALITY & CANCELLATIONS

Oct			1st wave on-time	Daily Cancellations
Mon	9		97%	0
Tue	10		82%	344 (French ATC Strike)
Wed	11		97%	1 (Weather)
Thu	12		98%	0
Fri	13		98%	0
Sat	14		98%	4 (Weather)
Sun		15	97%	3 (Weather)
Ave			95% (98% excl. Tue)

 

Ryanair’s Kenny Jacobs said:

“We have now processed 96% of refunds or re-routing requests from customers affected by our winter schedule changes and we urge the remaining 16,000 customers to contact us as soon as possible to finalise their arrangements. We once again apologise to all customers affected by these cancellations and winter schedule changes.

These painful and deeply regretted winter schedule reductions have restored our industry leading punctuality with 95% of our first wave flights departing on-time last week (98% excluding Tuesday, which was badly affected by the unjustified French ATC strike), which means customers can now book our low fare flights confident that there is no danger of further roster related flight cancellations.”

Over 860 Pilots Hired By Ryanair In 2017

Ryanair today (12 Oct) announced that 45 new pilots have joined the airline, as Ryanair Chief Pilot, Ray Conway, presented the 45 new recruits with their ‘Wings’ at a ceremony at Ryanair’s Dublin Offices. This brings the total number of new pilots who have joined to over 860, since 1^st Jan this year.

Ryanair’s Chief Pilot, Ray Conway said:

“Ryanair continues to hire and train the best pilots on a weekly basis, as we expand our fleet and our world class team of pilots. The ladies and gentlemen that fly for Ryanair are the best in the business and it’s no surprise that we continue to attract hundreds of pilot applicants from other airlines, who join Ryanair for our industry leading pay, excellent working conditions, unrivalled career progression and brand new aircraft.

I am pleased to welcome 45 new pilots to Ryanair today, bringing to 255 the number joining in the past three months alone, with 867 hired this year. I look forward to welcoming many more as we grow our route network, fleet and passengers numbers over the coming months and years.”

Ryanair today (9 Oct) updated its progress on the schedule change of 18,000 of its 800,000 flights between November and March as follows:

 

For Sept/Oct cancellations (announced 18 Sep):

– All 315,000 customers received email notices

– Over 311,000 re-routings or refunds (99% of customers) have been processed

– The remaining 4,000 customers (1%) have yet to contact Ryanair

 

For winter schedule changes (announced 27 Sep):

– All 400,000 customers have received email notices

– Over 360,000 re-routings or refunds (90% of customers) have been processed

– We expect this to rise to over 95% (over 380,000) this week

– The remaining 20,000 (5%) have yet to contact Ryanair

 

Over the last 7 days, Ryanair’s first wave punctuality has remained extremely high at 97% on-time. Out of 15,000 flights operated last week, just 23 (21 of these due to a handlers strike in Pisa) were cancelled (see table below).

PUNCTUALITY & CANCELLATIONS

Oct			1st wave on-time	Daily Cancellations
Mon	2		96%	22 (21 Pisa strike, 1 weather)
Tue	3		98%	0
Wed	4		97%	0
Thu	5		99%	0
Fri	6		97%	0
Sat	7		99%	0
Sun		8	96%	1 (weather)
Ave			97%

 

Ryanair’s Kenny Jacobs said:

 

“99% of the customers affected in September and October have now been re-accommodated, and the remaining 1% (less than 4,000 customers) are urged to get in contact regarding their rebooking or refunding options.

We apologise to them and the 400,000 further customers affected by our winter schedule reductions. By the end this week, we will have processed over 95% of these customers’ refunds or re-routing requests.

Our painful and deeply regretted winter schedule reductions have restored our industry leading punctuality with 97% of our first wave flights departing on-time last week, which means customers can now book our low fare flights confident that there is no danger of further roster related flight cancellations.”

Ryanair today (3 Oct) released September traffic statistics as follows:

• Traffic grew 10% to 11.8m customers
• Load factor rose 2% points to 97%
• Rolling annual traffic to September grew 12% to 127.3m customers

 

	Sept 16	Sept 17	Change
Customers	10.8M	11.8M	+10%
Load Factor	95%	97%	+2%

 

Ryanair’s Kenny Jacobs said:

 

“These figures include the 2,100 flight cancellations announced for September and October. We have now refunded/re-accommodated 98% of customers who were impacted in September and October. The remaining 2% of affected customers have yet to contact us. We again sincerely apologise to our customers for these deeply regretted cancellations.”