Ryanair set to hit profit targets after costs boost

Ryanair said it expected full-year unit costs, excluding fuel, to fall by 4%
Ryanair said it expected full-year unit costs, excluding fuel, to fall by 4%

Ryanair is expected to hit full-year profit targets when it reports to the market this week after having benefited from a higher-than-expected drop in unit costs.

The budget airline will release annual earnings on Tuesday, with consensus forecasts pointing to a pre-tax profit of f1.315 billion (£1.13bn) for the 12 months to the end of March.

In February, Ryanair said it expected full-year unit costs, excluding fuel, to fall by 4% compared with forecasts for a 3% fall made after the first half of the financial year.

Unit costs are defined as total operating costs for the company divided by the number of passengers.

Beaufort Securities said it was encouraged by Ryanair’s ability to offer lower fares while retaining net profit guidance.

“The key differences for Ryanair is its capability to continue lowering its unit costs, while delivering ‘lowest passenger costs’ amongst its EU peers, at the time of traffic growth and when competitors are forecasting flat or rising costs.

“This gap between Ryanair and its rivals will enable the group to maintain momentum and continue winning market share.”

However, in its third-quarter results released in February, Ryanair reported an 8% drop pre-tax profits to f95m (£81m).

It said average fares fell 17% to f33 per passenger in the three months to December as it ramped up competition with rivals, with prices set to go even lower.

The carrier said the sharp decline in sterling following the Brexit vote ate into profits.

Sector peer easyJet has also felt the pinch of the Brexit-hit pound and late timing of Easter, evidenced by the £236m pre-tax loss in the six months to March 31, which compared with an £18 million loss in the same period last year.