02-Nov-2010 4:02 PM

Ryanair falls on 'mixed bag' of 2Q financials; Air Berlin gains on strong 2Q results

Global LCC share prices were mixed on Monday 01-Nov-2010, as wider indexes mostly gained during trade. LCC news was dominated by the release of financials for Europe’s largest and third-largest LCCs, Ryanair and Air Berlin. Both achieved strong growth in key indicators on the back of recovering demand for travel in the region.

airberlin results strong as demand bounces back

Shares in airberlin closed 3.9% higher as the airline announced EBIT increased 45.5% in 3Q2010 to EUR171.7 million. airberlin, a future oneworld member, announced yesterday it plans to spend up to EUR125 million on the buy back of a convertible bond issue and issue new bonds as part of plans to reduce net debt. airberlin stated it enjoyed "increasingly positive" passenger demand during the quarter.

A trader in Frankfurt stated Air Berlin’s “share price [has] lagged the good development of the airline sector this year and may have some share price potential.”

Skymark expects profit growth in FY2011

Japan’s Skymark Airlines gained 5.7%. The carrier, upon the release of its financial results for the six months ended Sep-2010, stated it expects to report a 109% increase in net profit to USD68 million in FY2011, with a recurring profit of USD107 million (+194% year-on-year) and an operating profit of USD112 million (+190%) on revenues of USD698 million (+36%).

The carrier reported a net profit of USD34 million in the six months ended 30-Sep-2010 (+38.5%) with an operating profit of USD72.7 million (+168%) and a "recurring profit" of USD34 million (+38.5%) on revenues of USD329 million (+26.6%).

The Nikkei continues to be dragged down by concerns over the outlook for earnings due to the strong yen. Skymark Airlines, however, is a beneficiary of the stronger yen.

Ryanair falls sharply on 2QFY results

Ryanair was the talk of the town in Dublin on the release of its 2QFY2011 results. The LCC was among the most-traded stocks on the ISEQ and despite impressive growth in key indicators, the share price tumbled 5.3% in New York as results fell short of analyst expectations.

Net profit in the quarter, typically Ryanair’s strongest, increased 32% to EUR313 million on revenue of EUR1.3 billion (+30%). The net profit result was below analysts' expectations of EUR350 million.

Andrew Lobbenberg from RBS described the figures as a "mixed bag", with the LCC’s improved full-year outlook countered by an unexpected rise in unit costs, which rose 17% in quarter. Lobbenberg stated such increases are “not meant to happen at Ryanair". Analysts expect a small profit in 3Q and a loss in 4Q at the LCC over the typically weak winter period. Ryanair raised its full-year profit forecast to EUR380-400 million from EUR350-375 million.

CEO Michael O’Leary added the LCC continues to gain market share across Europe from the “big three high-fare flag carrier groups led by Air France, BA and Lufthansa”. Despite better-than-expected forward bookings for the winter season, Ryanair remains "cautious" going forward as it has “little visibility on fourth-quarter yields".

Selected LCCs daily share price movements (% change): 01-Nov-2010