Ryanair today (20 May) reported a full year profit of €1.02bn (excl. Lauda). Strong traffic growth, up 7% to 139m, was offset by a 6% decline in fares. Strong ancillary growth (+19%) was offset by higher fuel, staff and EU261 costs.

 

Full-year Results (IFRS)*	Mar. 31, 2018	Mar. 31, 2019	% Change
Guests	130.3m	139.1m	+7%
Load Factor	95%	96%	+1%
Revenue	€7.15bn	€7.56bn	+6%
PAT	€1.45bn	€1.02bn	-29%

* excl. Lauda €139.5m exceptional start-up loss (FY19).  Group traffic (incl. Lauda) was 142m

 

Ryanair’s Michael O’Leary said:

“As previously guided, Ryanair (excl. Lauda) reports a full year after tax profit of €1.02bn.  Short-haul capacity growth and the absence of Easter in Q4 led to a 6% fare decline, which stimulated 7% traffic growth to over 139m (142m guests incl. Lauda).  Ancillary sales performed strongly up 19% to €2.4bn, which drove total revenue growth of 6% to €7.6bn.

 

FY19 highlights include:

• fare fell 6% to just €37
• Traffic grew 9% to 142m (incl. Lauda)
• Ancillary revenue rose 19% to €2.4bn
• end fleet grew to 455 B737 & 19 A320 aircraft
• 406 new routes and 9 new bases launched
• Ryanair Sun (Buzz) traded profitably in Yr.1
• Purchase of Lauda completed in Dec. with an exceptional Yr.1 loss of €139m
• UK AOC received in Dec.
• Union agreements concluded in most major markets
• Over €560m returned to shareholders via buybacks

Revenue

Revenues rose 6% to €7.6bn due to 7% higher traffic, a 6% cut in ave. fares to €37, while  Ryanair Labs continues to stimulate ancillary sales growth with spend per guest up 11% to over €17.  Priority boarding and reserved seat services grew strongly.  Ryanair Labs continues to improve our digital platform (website, app & 3^rd party ancillary plug-ins).

 

Cost Leadership

Ryanair has the lowest unit costs of any EU airline, and the cost gap with EU competitors continues to widen. FY19 was a year of investment in our people, our support systems and our business as we grow to 200m guests p.a. by 2024.  Ex-fuel unit costs rose 5% (better than previously guided 6%) due to €200m higher staff costs (incl. 20% pilot pay increases) and €50m higher EU261 costs due to the repeated ATC staff shortage disruptions in FY19. As weaker European airlines are sold or fail, airports are competing to attract Ryanair’s efficient, high load factor, traffic growth.  Our airport costs are 35% lower than our nearest competitor. During FY19 our oil bill increased by €440m. We are 90% hedged for FY20 at $709 per tonne and 35% hedged for Q1 FY21 at $654.

 

Group Airlines

In S.2018 we launched Ryanair Sun (now rebranded “Buzz”), our Polish AOC, with 5 B737 aircraft offering charter flights to/from Poland.  Buzz has taken over Ryanair’s scheduled bases in Poland and will operate a fleet of 25 aircraft in FY20 (incl. 7 for charters).  The Buzz management team successfully delivered a modest profit in their first year of operations.

In December 2018, Lauda (an Austrian AOC) became a wholly owned subsidiary of the Ryanair Group. We consolidated 3m customers in its first year of operations to March 2019 but suffered exceptional start-up losses of €139.5m, mainly due to the very late release of its S.2018 schedules, very low promotional fares, expensive short-term aircraft leases and an unhedged fuel position. Lauda enters its second year with a larger (lower-cost) fleet of 23 A320 aircraft, and a target of just over 6m guests p.a. They have signed agreements to grow this fleet to 35 x A320 aircraft for S.2020 and by year 3 (FY21) we believe Lauda will grow to carry over 8m guests p.a. and will be trading profitably.

 

Higher oil prices and lower fares have seen a wave of EU airline failures including Primera (UK & Spain), Small Planet, Azur and Germania (Germany), Sky Works (Switz.), VLM (Belgium), Cobalt (Cyprus), Cello & Flybmi (UK) and WOW (Iceland).  Flybe (UK) was sold, while both Alitalia and Thomas Cook airline are currently for sale.

Ryanair closed unprofitable bases in Bremen & Eindhoven and we cut aircraft numbers in Niederrhein, Hahn and the Canary Islands. Norwegian has closed multiple bases (many where they compete with Ryanair), including Rome, Las Palmas, Palma, Tenerife, Edinburgh & Belfast, and they will cut their Dublin base from 6 to 1 aircraft in October. Wizz (Poznan), Lufthansa (Dusseldorf) and EasyJet (Oporto) have also announced base cuts and/or closures in recent months. We expect further consolidation and airline failures in winter 2019 and again into 2020 due to over-capacity, weaker fares, and higher oil prices particularly among those airlines who are significantly unhedged, or unable to hedge.

Boeing 737 MAX

We have delayed the delivery of our first 5 B737-MAX aircraft to Winter 2019 (subject to regulatory approval by EASA). We continue to have utmost confidence in these aircraft which have 4% more seats, are 16% more fuel efficient and generate 40% lower noise emissions. They are hedged at an average €/$ rate of 1.24 out to FY24, and will deliver significant unit cost savings for the next 5 years, although the delayed deliveries in 2019 means that we will not see any meaningful cost benefit until FY21.

 

Balance Sheet & Fleet

The Group’s BBB+ rated balance sheet is one of the strongest in the industry.  Almost 95% of our 455 aircraft fleet is owned, with over 63% debt free. At year end the Group had €3.2bn gross cash. Ryanair generated almost €2bn net cash from operations in FY19, but spent over €1.5bn on capex (primarily aircraft, simulators, engines & hangars), returned €560m to shareholders in share buybacks, and repaid more than €400m of debt.  As a result, year-end net debt rose slightly to €450m.  We recently concluded a low-cost, €750m unsecured (5-year) bank facility.  This facility, coupled with strong operating cashflows, will fund this year’s peak capex of c.€2bn, maturing secured debt and other general corporate purposes.  We are also in advanced negotiations to sell 10 of our oldest B737s for over $170m before the end of March 2020.

 

Shareholder Distributions

The Board has approved a €700m share buyback which will commence later this week and run over the next 9 to 12 months.  We expect to split this approx. €500m/€200m between ADR’s and ordinary shares, although the Board has discretion to revise this allocation.  This latest buyback will bring to almost €7bn of the funds returned to shareholders since 2008.

 

FY20 Guidance

While we separately disclosed Lauda’s year 1 start-up loss as exceptional in FY19, their FY20 results will not be split out in the Ryanair Group income statement.  FY20 guidance is therefore for the consolidated Ryanair Group.

 

Our outlook for FY20 remains cautious on pricing. Traffic will grow by 8% to 153m. Assuming revenue per pax (“RPP”) growth of 3%, we are guiding broadly flat Group profits. This will range from €750m if RPP rises 2%, up to €950m if RPP rises 4%.  While H1 bookings are slightly ahead of last year, fares are lower and we expect this trend will continue through S.2019. We have zero H2 visibility.  Costs will increase as our full-year fuel bill jumps by another €460m.  Ex-fuel unit costs will rise by just 2%, mainly due to stronger sterling, the absence of Lauda prior-year cost comparisons for most of H1 and delivery delays of the B737 MAX aircraft this year. This guidance is heavily dependent on close-in peak summer fares, H2 prices, the absence of security events, and no negative Brexit developments.”