Ryanair reports bumper profit on 'favorable' fuel hedges, sees major industry consolidation

Ryanair connected Monday posted a full-year nett net of 1.43 cardinal euros ($1.55 billion), aided by resurgent postulation and fares, on with favorable lipid hedging positions.

Despite a unsmooth archetypal 4th successful 2022 arsenic a effect of Russia's penetration of Ukraine, question request rebounded implicit the people of the year. The Irish low-cost bearer reported a 74% summation successful full-year postulation to 168.6 cardinal customers, portion fares were up 10% connected pre-Covid levels.

Operating costs roseate 75% to 9.2 cardinal euros arsenic a effect of a 113% summation successful substance costs, but the hose said "favorable" hedges helped offset this, portion portion costs came successful astatine 31 euros per passenger, considerably little than different European rivals.

"Our manufacture starring substance hedging (over 80% hedged astatine approx. $64bbl) contributed importantly to the last FY23 nett outcome, redeeming the Group implicit €1.4bn," CEO Michael O'Leary said successful Monday's net report.

Airlines hedge against the hazard of imaginable increases successful lipid prices by buying a definite magnitude of substance via guardant contracts astatine a fixed price, for transportation successful the future.

International benchmark Brent crude was trading astatine conscionable implicit $75 per tube connected Monday morning.

Ryanair is 85% hedged astatine $89 per tube this year, and institution Chief Financial Officer Neil Sorohan told CNBC connected Monday that this volition adhd astir $1 cardinal other to this year's substance bill. But helium said Ryanair is assured it tin screen the outgo summation and turn profits "modestly" connected a year-on-year basis.

"Our equilibrium expanse is 1 of the strongest successful the manufacture with a BBB+ recognition standing and €4.7bn gross currency astatine year-end, contempt an €850m enslaved repayment successful March 2023," O'Leary said successful the report.

"Almost each the Group's B737 fleet are owned and 99% are unencumbered, which importantly widens our outgo advantage, arsenic involvement rates and leasing costs proceed to emergence for competitors."

Ryanair earlier this period signed an statement to acquisition 300 caller Boeing 737-MAX-10 aircraft — 150 steadfast orders and 150 aboriginal options — with phased deliveries scheduled betwixt 2027 and 2033. The purchase, delayed implicit a terms quality successful 2021, relates to Ryanair's ambition to transportation 300 cardinal passengers per annum by 2034.

"Apart from delivering important gross growth, the further seats (coupled with greater fuel, c and sound efficiency) volition further widen Ryanair's sizeable unit-cost vantage implicit each European rival airline," O'Leary said successful Monday's report.

CFO Sorohan said the airline's debased outgo basal is its biggest vantage arsenic it seeks to grow its beingness and marketplace stock passim Europe, but said the biggest hazard to this maturation strategy was the aviation manufacture itself.

"Something ever goes incorrect each fewer years but due to the fact that we person the equilibrium sheet, due to the fact that we person the outgo basal that we have, we'll beryllium capable to upwind immoderate storms travel our way," helium added.

Consolidation 'inevitable'

Capacity crossed European airlines has undergone a "systemic change" successful airy of the Covid-19 pandemic, Sorohan said, since galore airlines were forced to downsize. Meanwhile, OEMs (original instrumentality manufacturers) are struggling to conscionable request and leasing companies person been deed by sanctions connected Russia.

But information shows that question is precocious connected people's priorities, Sorohan said, which is wherefore Ryanair feels comfy placing a 300-aircraft bid this period and mounting retired specified ambitious postulation maturation targets.

However, helium stressed that consolidation crossed the manufacture successful Europe is "inevitable" — and successful information has "already started."

"Norwegian are fractional the size they were, but if you look astatine Italy, 40% has been consolidated from ITA, the erstwhile Alitalia, into Lufthansa with a presumption to getting to 100%. TAP successful Portugal is up for sale, inevitably immoderate capableness volition travel retired connected the backmost of that, and there's much of this to go," helium said.

"I wouldn't beryllium amazed to spot 2 of the different low-cost carriers successful Europe being consolidated successful the adjacent mates of years. I deliberation that's inevitable arsenic good that you're going to spot much of that coming unneurotic and we determination much similar the U.S. model, with conscionable 4 oregon 5 ample carriers efficaciously flying 80% of the postulation astir Europe."

Larger European erstwhile "flag carrier" airlines suffered a important deed during the pandemic, with a fig propped up by arguable authorities assistance from their respective governments.

The EU General Court earlier this period annulled the German government's 6 cardinal euro recapitalization bundle to Lufthansa (initially approved by the European Commission) and the Swedish and Danish governments' 1 cardinal euro bundle for SAS, ruling that the authorities assistance unfairly tilted contention towards Ryanair's rivals.

"We've seen a systemic alteration successful capacity, and I deliberation we volition beryllium near with immoderate of the historical ample emblem carriers — Air France KLMs, Lufthansas — but yet short-haul, point-to-point, volition beryllium thing that Ryanair volition beryllium a cardinal subordinate in," Sorohan added.