Ryanair Holdings Plc, Europe’s largest discount airline, will pay its first-ever dividend after reporting a full-year profit because of declining fuel costs.
Net income in the 12 months through March 31 was 305 million euros ($370 million) compared with a net loss of 169 million euros a year earlier, the Dublin-based carrier said today in a statement. Sales rose 2 percent to 3 billion euros.
Ryanair’s profit contrasts with the performance at full- service carriers British Airways Plc and Air France-KLM Group, which both reported losses for the period. Ryanair said it plans a special dividend totaling 500 million euros in October, its first payment to shareholders since the company sold stock in 1997, after deciding last year against expanding its fleet.
“The chasm between their business model and the rest of the airline industry is remarkably stark,” said Joe Gill, an analyst at Bloxham Securities in Dublin who recommends buying Ryanair stock. “The big surprise, though, is the timing of the special dividend. I guess they are more confident with their cash-flow predictions.”
Ryanair plans to make the payout in October, subject to shareholders’ approval. The carrier said it may provide a further 500 million euros to investors in fiscal 2013, in the absence of aircraft purchases.
Passenger numbers this year will probably rise 11 percent to 73.5 million travelers, while profit may increase by as much as 15 percent to 375 million euros, the airline said.
Ryanair rose as much as 6.5 percent to 3.60 euros and was up 1.2 percent as of 10:29 a.m. in Dublin trading. The stock has gained 3.8 percent this year.
The airline’s negotiations with Boeing Co. about a possible order for 200 planes broke down in mid-December as the companies failed to agree on unspecified conditions after settling on a price for the aircraft. The collapse prompted Ryanair to curtail its growth plan and provide cash to investors.
Payout ‘Appropriate’
“It doesn’t look like we’re going to make a deal to buy planes in the near term, so it was appropriate to return money to shareholders,” Chief Financial Officer Howard Millar said in a phone interview today.
The carrier’s sales were crimped at the start of this fiscal year after ash from the eruption of Iceland’s Eyjafjallajökull volcano closed European airspace for six days in April, grounding 100,000 flights. A second wave of ash in May closed terminals in Ireland and Scotland before spreading as far south as central Spain, the Canary Islands and Morocco.
Disruption from the ash cloud caused Ryanair to cancel more than 9,400 flights for 1.5 million passengers as of May 18, the company said. Ryanair estimated the cost of the cancellations at about 50 million euros. The airline, along with other European carriers including British Airways, has criticized regulators for being overly cautious in their approach to monitoring the ash cloud and shutting down airspace.
‘Unnecessary’ Disruptions
“The Icelandic volcanic-ash ‘monitoring’ led to repeated, unnecessary, closures of large swathes of European airspace,” Chief Executive Michael O’Leary said in the statement.
Ryanair’s fuel costs fell by 29 percent to 894 million euros. The carrier also benefited from buying hedging contracts to lock in lower costs for fuel as the price of crude oil tumbled in the second half of 2008.
The airline said today that it has extended hedging to cover 90 percent of the financial year ending in 2011 at a price of $730 per ton, and 50 percent for the following year at $750 a ton. That compares with about $690 a ton in northwestern European trading at the close of trading on May 28.
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