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Ryanair feels first round of cancellation costs

The budget airline announced that flight cancellations during the second half of September resulted in €25m of one-off costs, though October cancellations have yet to be quantified
November 2, 2017

The first thing many shareholders will be looking for in the half-year results for Ryanair (RYA) is how much the flight cancellations in September and October have cost the budget airline. In the latter half of September, and through October, 50 flights were cancelled, or 2 per cent of the 2,200 routes flying during that period. Looking ahead, 25 planes out of the fleet of 400 will be grounded for the winter season. So far there’s been a €25m (£22m) one-off cost to reschedule affected passengers in September, and a further €45m is expected to be added to full-year crew costs as Ryanair moves to offer “materially higher pay” for its pilots compared with competitors.

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The scheduling failure caused punctuality to fall to 70 per cent during the first half of September, but "difficult and disruptive decisions" taken in the wake of the problems restored punctuality to 90 per cent for the 99 per cent of customers not affected by cancellations. Despite the disruption, Ryanair carried 11 per cent more passengers than the previous year, though the winter grounding of 25 aircraft means full-year traffic will reduce from 131m to 129m customers. Average fares fell by 5 per cent, but more customers chose to spend on extras like reserved seats. This helped net profit improve by 11 per cent to €1.3bn on a relatively flat margin.

Never one to mince words, chief executive Michael O’Leary took the results as an opportunity to reiterate his position on several issues affecting the airline. He called Lufthansa’s purchase of most Air Berlin’s operations “anti-competitive” given its now 95 per cent share of the German market, but added that Ryanair would continue to grow in Germany in spite of this. The airline will also look to pick up some slack created by the collapse of Monarch, as well as in Italy where Ryanair is poised to be the “main beneficiary” of the contraction in Alitalia’s short-haul services. Overall, Ryanair is aiming to have a fleet of 600 serving 200m customers by 2024. Mr O’Leary pressured the UK to come to a deal on aviation with the EU before September next year so that summer 2019 scheduling will not be affected.

Analysts at Liberum expect adjusted pre-tax profits of €1.57bn in the year to March 2018 giving EPS of 117¢, compared with €1.47bn and 105¢ in FY2017.

RYANAIR (RYA)   
ORD PRICE:1,657¢MARKET VALUE:€ 19.6bn
TOUCH:1,656-1,658¢12-MONTH HIGH:1,978¢LOW: 1,250¢
DIVIDEND YIELD:NILPE RATIO:14
NET ASSET VALUE: 400¢NET DEBT:13%
Half-year to 30 SeptTurnover (€bn)Pre-tax profit (€bn)Earnings per share (¢)Dividend per share (¢)
20164.131.3192.3nil
20174.431.45107nil
% change+7+10+16-
Ex-div:na   
Payment:na   
£1=€1.14