Ryanair raises annual profit forecast again but says it has 'zero visibility' on end-of-year bookings - and expects a fare war

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Irish airline Ryanair has again nudged up its annual profit forecast after posting soaring first half profits, although its shares fell as, despite this, it said it still has ‘zero visibility’ on the fourth quarter.

Ryanair saw its first half profits jump 37 per cent to €1.08billion (£770million) after what it called a ‘very rare’ series of favourable events.

The budget carrier saw its passenger numbers increase by 13 per cent to 58 million in the six months to the end of September, carrying more than 10 million passengers in July alone.

Ryanair revised its full year passenger target up by one million to 105 million, notably up on last year's 90.5 million total. It said that would likely lift profits to the upper end of a €1.175billion to €1.225billion range.

Taking off: Irish airline Ryanair saw its first half profits jump 37 per cent to €1.08billion (£770million) after what it called a ‘very rare’ series of favourable events

Europe's largest airline by passenger numbers raised its full year profit forecast by 25 per cent in early September as lower fuel costs and poor weather in northern Europe boosted ticket sales.

It said its load factor - how full each flight is - rose by 4 per cent in the first half to 93 per cent, meaning there were less empty seats on its planes.

But the airline said today’s raised guidance depends on the strength of its bookings in the fourth quarter, which it admits it has ‘almost zero visibility on’.

Strong growth: Ryanair boss Michael O'Leary put the airline's strong first half performance down to a combination of miserable UK weather driving people abroad, fuel savings and a strong pound

Ryanair boss Michael O'Leary put the strong first half performance down to a combination of miserable UK weather driving people abroad, fuel savings and a strong pound.

He said: ‘We have enjoyed a bumper summer due to a very rare confluence of favourable events including stronger sterling, adverse weather in northern Europe, reasonably flat industry capacity and further savings on our unhedged fuel.’

However, he added, that fares sold had softened in recent weeks and that he would not be surprised if there was a fare war in the new year, forecasting average fares would fall 4 per cent in the first three months of 2016.

O'Leary said: ‘We are already reducing our prices ... and in recent weeks we have seen most airlines reduce their prices.’

He also pointed to the success of the airlines ‘Always Getting Better’ customer experience improvement programme, which he said helped drive stronger forward bookings and boost traffic growth.

Looking beyond the current year, Ryanair predicted it would fly 180 million passengers a year by 2024 - 20 million more than previously forecast, due to higher than expected load factors.

Those passenger numbers would give the carrier almost a market share of around 24 per cent in Europe, up from around 14 per cent currently.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: ‘Ryanair continues to ratchet up pressure on rivals, again raising guidance. Key half year metrics have risen across the board, with its rejuvenated customer offering staying core.

‘Factors outside of its control such as poor weather in Northern Europe and the strength in the pound have also contributed, while the downturn in the price of oil benefited its unhedged fuel costs.

‘Planned fare reductions in the fourth quarter help underlie targeted traffic growth, with the non-grounding of aircraft in the winter period this year aiding group capacity.’

But, he added: ‘Less favourably, outlook comments highlight almost zero fourth quarter visibility, lower fuel costs are also aiding rivals while the weaker euro is generally bad news for the broader European airline industry, given costs in US dollars.’

Ryanair shares were 1 per cent lower, down €0.14 at €13.35 in early trading in Dublin and London.

Bowman said: ‘For now, and following an 80 per cent plus gain in the share price over the last year, some early profit taking comes as no surprise, although analyst opinion remains firmly anchored to a buy.’

Rival airlines British Airways-owner IAG, Germany’s Lufthansa and Air France-KLM last week all reported strong quarterly results on strong demand for summer travel and cheaper fuel.