DUBLIN (Reuters) - Ryanair reported its first fall in profits in five years on Monday on intense competition in European short-haul, but said higher average ticket prices this summer would help lift profits by up to 20 percent in the coming year.
The Irish airline earned 523 million euros (426.36 million pounds) after tax in the year ended March 31, a fall of 8 percent on the previous year.
But Ryanair’s share price rose 5.5 percent as it forecast its profit in the current year year could climb to 620 million euros and the fall last year was slightly better than feared when the airline gave its second profit warning of the year in November.
Rivals last year said Ryanair’s first profit warnings in a decade were the result of it being forced to cut ticket prices after losing business to competitors seen as being more friendly to customers.
In response Chief Executive Michael O’Leary in September reversed decades of famously austere service, adding seat allocations, easing restrictions on hand luggage and cutting penalty charges such as for failing to print out online boarding passes.
“While disappointing that profits fell 8 percent ... we reacted quickly to this weaker environment last September by lowering fares and improving our customer experience,” O’Leary said in a statement.
“We expect this combination of a strong first half but a weaker second half will generate a significant rise in after-tax profits”, he said.
Ryanair shares were up 6.4 percent at 6.75 euros by 1037 BST, although that was still 14 percent below their all-time high of 7.82 euros hit before last year’s profit warning.
While the after-tax profit of 523 million euros was behind last year’s 569 million, it was ahead of guidance given late last year of 500 million to 520 million.
It was also ahead of an average forecast of 515 million euros given in a company poll of more than 20 analysts.
O’Leary said profits in the current year should be between 580 million and 620 million euros, an increase of between 11 and 19 percent.
That was below the average of 634 million given in the Ryanair poll but many analysts see Ryanair as being routinely cautious in forecasting future profits.
“Their guidance is conservative. But I think the market will take that guidance as dependent on (fare) yields falling in the winter and they say they have zero visibility,” said Stephen Furlong, an analyst with Davy Stockbrokers in Dublin.
Ryanair expects to see average fares increase 6 percent in the key summer months compared to the same period a year earlier. Rival easyJet last week forecast growth in revenue per seat yields “in the low single digits” for the same period.
Ryanair’s average fares will fall by between 6 percent and 8 percent in the six months to March as the first of 180 new Boeing jets are delivered, Millar said.
The airline expects passenger numbers to increase 4 percent to 84.6 million in the current year, consolidating its position as Europe’s largest airline by passenger numbers.
Reporting by Conor Humphries; Editing by Greg Mahlich