(Alliance News) - Ryanair Holdings PLC on Monday said it returned to profit in its recently concluded financial year, benefitting from robust demand after the lifting of Covid-19 travel restrictions and some protection from higher fuel prices.
"After the challenges of the pandemic and Russia's invasion of Ukraine, which both heavily weighed on passenger traffic, Ryanair has enjoyed an impressive annual performance thanks to a recovery in demand and 'fortuitous fuel hedging', said Victoria Scholar, head of investment at interactive investor.
The Dublin-based budget airline swung to a pretax profit of EUR1.44 billion in the financial year to March 31, from a loss of EUR429.8 million the year prior. Total revenue more than doubled to EUR10.78 billion, from EUR4.80 billion a year before.
Liberum analyst Gerald Khoo said the "convincing" return to profitability reflected the lifting of pandemic travel restrictions.
"Revenue growth from higher passenger numbers was the main driver of the significantly improved performance. Naturally, operating costs rose significantly too, but unit costs fell as a result of the growth," Khoo said.
"Compared with our forecasts, the main areas of outperformance were scheduled revenues and interest, with slight shortfalls in ancillary revenues and staff costs."
Load factor improved to 93% from 82%, as customer numbers rose by 74% to 168.6 million - which was also 13% ahead of financial 2020's levels, before the Covid-19 pandemic, Ryanair noted.
Total operating costs rose 75% to EUR9.20 billion, mostly due to higher fuel costs, which more than doubled to EUR3.90 billion.
Peel Hunt said Ryanair's financial 2023 results were "fractionally" ahead of its expectations and at the top end of the guidance range.
"The outlook for financial 2024 has fuel costs increasing by more than EUR1 billion, higher than the EUR600 million we assume, and a rise in ex-fuel unit costs compared to our flat trajectory," said Peel Hunt analyst Alexander Paterson.
For the current year, Ryanair expects its fuel bill to rise by over EUR1 billion, due to higher oil prices, but its jet fuel costs are almost 85% hedged, it said.
The airline also expects a "modest" increase in unit costs, excluding fuel, due to higher staff costs and increased en route charges.
Liberum's Khoo said Ryanair's guidance for the new financial year may be viewed as "cautious" by the market. "Full-year guidance of modest profit growth is more cautious than current consensus, although summer 2023 demand remains robust with fares tracking higher than last year," he said.
"Management sees a modest year-on-year increase in net profit. Current consensus of EUR1.53 billion implies 10% growth over the final consensus 2023 net profit forecast and 7% growth over the actual figure reported."
Ryanair's shares were 1.8% higher at EUR15.99 pence on Monday morning in London. Over the past 12 months, the stock is up 12%.
Liberum kept its recommendation at 'buy' for Ryanair, with an unchanged target price of EUR19.
"The usual premium to its European airline peers is understandably reflective of the group's market-leading position, superior unit costs and strong balance sheet, with the latter amply demonstrated by the return to a net cash position a year ahead of expectations," Khoo commented.
"We consider the valuation to be reasonable relative to pre-pandemic levels," the Liberum analyst concluded.
By Heather Rydings, Alliance News senior economics reporter
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