LONDON -(Dow Jones)- Ryanair Holdings PLC (RYA.DB), Europe's largest low-cost carrier, Monday said its full-year net profit would be toward the top end of current expectations after its third-quarter loss narrowed as it flew a million more passengers than a year earlier and average fares rose.
The Irish carrier said it had been hit by December's bad weather and air traffic controller strikes that caused it to cancel 3,000 flights, but that was more than offset by an overall increase in passenger numbers and as it added some longer routes that attract higher fares.
It said profit in the fourth quarter will benefit from new routes to be launched in February and March because fewer planes will be grounded compared with the third quarter.
Chief Financial Officer Howard Millar said he also expected fares to rise as competitors started to raise ticket prices.
In November, Ryanair forecast a full-year net profit for the year to March 31 of between EUR380 million and EUR400 million and now expects it to hit the top end of the target.
For the three months to Dec. 31, Ryanair posted a net loss of EUR10.3 million, down from a deficit of EUR10.9 million a year earlier. Millar declined to say how much the 3,000 flight cancellations had cost the airline. In the year-earlier period, it had suffered 1,400 cancellations.
Revenue rose 22% in the third quarter to EUR746 million as traffic jumped 6% and average fares rose 15%. One way it has generated additional revenue has been through new routes, the majority with little to no competition.
Ryanair Deputy Chief Executive Michael Cawley said he expected to close 10% of new routes within 12 months of opening them and the airline wasn't afraid to try new routes even if they proved unsuccessful.
Ancillary sales, or income other than fares, grew 20% to EUR167 million, Millar said.
For Ryanair, like low-cost rivals, ancillary revenue is a key part of business as it allows airlines to keep ticket prices low. However, Ryanair, which is the most aggressive airline at starting new revenue-generating initiatives, has also got into trouble over some of its measures.
Millar said Ryanair was continuing to look at other opportunities to expand ancillary revenue but it was happy with added extras representing about 20% of total revenue. He declined to elaborate on any opportunities the airline was considering.
Chief Executive Michael O'Leary said the airline is set to benefit from its fuel hedging strategy after fuel costs jumped 37% in the third quarter. He said while current jet fuel spot prices are about $890 per ton, Ryanair is 90% hedged for the fourth quarter ending 2011 at $750 per ton, and 80% hedged for fiscal year ending 2012, at an average price of $800 per ton.
The airline's total unit costs rose 15%, reflecting a 14% jump in flight hours and a 7% increase in the average length of journeys flown.
At 1251 GMT, Ryanair shares traded up EUR0.05, or 1.4%, at EUR3.67 in Dublin, one of the few of Europe's airlines to trade higher Monday.
Even though Ryanair is an Irish carrier, it has hubs across Europe and only a small part of its fleet operates to and from the country. O'Leary said the collapse of Ireland's economy would have little impact on the airline's growth plans or profitability.
Cawley said the carrier was talking to Russian and Chinese aircraft manufacturers about potential orders, but that the Chinese were at least a couple of years away from producing a 150- to 200-seat aircraft that would suit its needs. In September, Ryanair said it was keen to buy 300 aircraft.
While talks appear to be at an inquisitive stage, Cawley said any decision would need to be financially viable and meet fuel-efficiency needs. It will pay a further EUR500 million dividend in 2013 if a deal couldn't be reached.
Cawley added Ryanair continued talks with Boeing Co. (BA) but saw downward pressure on prices for the Airbus 737 as its more fuel-efficient aircraft, A320neo, comes into play. Airbus, a unit of European Aeronautic Defence & Space Co. NV (EAD.FR), previously has refused to entertain negotiations with Ryanair, leading to bulk orders with Boeing.
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