Ryanair has warned that rising interest rates and the credit crunch due to the US sub-prime mortgage crisis will affect the leisure travel business.
Speaking at the announcement of the airline's latest results, deputy chief executive Michael Cawley said that younger people - particularly those with mortgages - will have less disposable income to spend on flights. But he said that dip could be partially offset by older people with fewer borrowings who may be able to travel more.
Ryanair believes there is significant scope to increase its market share across Europe from 8% of total short-haul traffic to 11% by 2012. But Mr Cawley specifically ruled out any further expansion of services from Dublin and Cork, saying costs at these Irish airports were simply too high.
Ryanair reported a 24% rise in half-year profits - broadly in line with analysts' expectations - and raised full-year guidance as it pointed to brighter prospects for the winter. The airline said that profit after tax in the six months to the end of September rose to €408m from €329m the same time last year.
Ryanair also reported a 20% increase in the number of passengers carried in the three month period, up from 22.1m in 2006 to 26.6 million in 2007. Unit costs increased by 5%, mainly due to higher fuel, staff and airport costs.
The carrier, which has warned repeatedly that business during the European winter months will be tough, said it still expected ticket prices to drop in the six months to the end of March but that the fall in passenger yields would be at the lower end of the 5-10% range previously indicated.
'As a result of these better winter yield forecasts and the costs savings which we continue to realise, we now believe that full year net profit will rise by 17.5% to approximately €470m', Ryanair said. It had forecast growth of 10% in July, when the company, which often comfortably beats its initial guidance, raised its full-year net profit growth goal from 5%.
Analysts had widely expected the airline to improve guidance after strong summer sales were buoyed by the airline's biggest-ever ticket sale and a lowest fare price promise to passengers.
Ryanair, which makes the bulk of its profits in its second quarter as it coincides with the busy European summer months, said revenues in the six months rose 24% on the year to €1,554 billion, up from €1.256 billion.
Ancillary revenues from non-core services jumped 54% to €252m. Ancillaries now account for just over 16% of total revenues as the airline makes steady progress towards its 20% target. Income from activities such as in-flight sales, hotel bookings and travel insurance are expected to be a major driver of future growth for the airline.
The company said it would test a new in-flight mobile phone service on 25 aircraft before the end of March 2008. It also said it will open four new bases this winter, at Alicante and Valencia in Spain, Belfast City and Bristol in the UK and will also start over 130 new routes across Europe.
Meanwhile, Ryanair also announced today that it carried 4.52 million passengers in October - a 21% rise from the same time last year. Its load factor - a measure of how well a carrier is filling seats - stood at 85% last month, which was up from 83% a year earlier.
Shares in Ryanair closed down 21 cent at €5.55 in Dublin.
