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New-look Ryanair see price pressure ease

Monday, February 03 10:03:36

Ryanair reported strong forward bookings and an easing of intense price competition among European airlines today, raising hopes it can quickly regain height with a new customer-friendly image after a profit warning spooked markets last year.

Shares in the Irish airline, Europe's largest by passenger numbers, opened up 6 percent after it said it was already seeing improved demand for tickets following the changes to how it treats customers announced late last year.

Ryanair lost 35 million euros ($47.2 million) after tax in the three months to Dec. 31, its worst performance in its seasonally weak third quarter since 2008.

But the loss was in line with the warning last year and it reaffirmed the airline's forecast for a profit of between 500 million euros and 520 million for the full year ending in March.

"Market pricing remains soft but is no longer declining," Chief Executive Michael O'Leary said. Average fares will fall 8 percent in the first three months of 2013 rather than the 10 percent previously predicted, he said.

Ryanair's shares were trading up 4.6 percent at 6.60 euros by 0900 GMT, having opened up 6 percent, well above the one-year low of 5.33 euros hit after the November profit warning.

"There had been an expectation that there might be a further downgrade. But the tone of the statement is quite positive looking into next year," said Donal O'Neill, an analyst with Goodbody Stockbrokers.

Ryanair flew 6 percent more passengers in the last three months of 2013 compared with a year earlier, but revenue was flat due to the fall in ticket prices.

British rival easyJet by comparison increased revenue 7.7 percent on passenger numbers growing by 4.2 percent in the same period.

After being voted the worst of the 100 biggest brands serving the British market by readers of consumer magazine Which?, Ryanair said last year it was cutting baggage and boarding card fees, allowing passengers to bring a second carry-on bag and introducing assigned seating on all planes.

Deputy Chief Executive Michael Cawley said the changes had not yet had an impact on profit, but that there were signs the strategy was starting to bear fruit.

"There has been a very positive reaction ... particularly in terms of forward bookings which we have never had as substantially ahead," Cawley said.

The company's marketing spend is set to triple to 35 million euros this year, but that this would be dwarfed by savings from airport costs, he added.