Ryanair has reported profit of €1.45 billion for its full financial year to the end of March, up 10% on the previous year. However, it is forecasting a lower profit for the current trading year.
Darren McKinley, a senior equity analyst with Merrion Capital, who specialises in the aviation sector, said the results were better than expected, but the forward guidance was weaker. "Profits are expected to fall by €100m this year. It's good for customers as the airline expects to absorb a lot of the additional costs, but it's a poor outcome for investors."
It was a landmark year for the airline with the mass flight cancellations announced last Autumn and as it agreed to recognise unions for the first time in its existence. "So far, it's only agreed terms with unions in the UK and Italy. That's about 45% of the workforce. They are two important markets. It's yet to agree terms with other smaller markets. It will add €100-€125m in additional labour costs on an annual basis. It will add €200m in 2019 when you include additional labour costs for its growth plans."
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Darren McKinley said the flight cancellations cost the airline about €50m between compensation and flight vouchers. However, he said it must be viewed in the context of the higher labour costs that arose from the whole cancellation issue.
He also said the airline had a fuel hedging policy in place to help mitigate against increased fuel prices in the next year. "Crude prices have increased by about 60% over the last year. We expect their bill to increase by 20% as a result of a good hedging policy. The additional cost will be of the order of around €400m in 2019 alone."
Mr McKinley said he expected the share price to fall in the short term given the cautious guidance for the year ahead. "So long as it can keep to long term guidance, there's an upside in the longer term," he concluded.
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MORNING BRIEFS - There is something of an easing in trade tensions between the US and China in prospect with both sides saying they will hold off on import tariffs for the time being. China has agreed to buy $200 billion worth of goods and services from the US, thereby reducing the significant trade imbalance between the sides.
*** The dollar index - which measures the US currency against peers - is at its highest level this year. China has agreed measures to reduce the trade deficit with the US, thus mitigating trade tensions. This morning the euro is trading at $1.17 cents and 87.4 pence sterling.
