Ryanair’s 1QFY2014 net profit falls, but 2Q will be key to the full year

As flagged by Ryanair in May, its 1QFY2014 net profit fell as a result of higher fuel costs and lower average fares (-4%), the first year-on-year fall in average fares in 14 quarters. With 90% of its FY2014 fuel bill hedged at USD980 per tonne, the key unknown variable for the full year is the development of average fares.

Ryanair says yields on close-in summer bookings have been weak recently, but it expects them to increase in 2Q. Moreover, ancillary revenue growth was strong (+25%) and this should also continue into 2Q. As is usual at this stage of the fiscal year, it made no change to its FY2014 net profit target, which is lower than market consensus forecasts.