Shares of European low-cost carrier Ryanair Holdings plc (RYAAY) climbed over 7% on Nasdaq to end the Dec 4 trading session at $68.08. The northward movement seems to be an outcome of the company’s decision to hike its profit forecast for fiscal 2015 (ending Mar 31, 2015) for the second time in the space of one month. In fact, this is the third time in the year that the company has raised its profit forecast for fiscal 2015.
Did the November Performance Lead to the Guidance Hike?
Driven by its customer friendly “Always Getting Better” scheme, the Ireland-based airline reported solid traffic data for the month of November. The carrier’s traffic climbed 22% to 6.35 million passengers in the month. Load factor (percentage of seats filled by passengers) climbed to 88% from 81% a year ago. Seat capacity increased 13% year over year in Nov 2014.
Following the strong numbers, the company now expects its traffic for fiscal 2015 to be marginally more than 90 million customers (previous guidance: 89 million). Moreover, the impressive performance in the first month of its expanded winter schedule prompted the company to raise its full year profit (after-tax) projection to the range of €810 million and €830 million from the €750 million–€770 million range guided last month.
The company, however, stated that the fulfillment of its raised profit forecast is dependent on the bookings and yields in the final quarter of fiscal 2015 (Jan–Mar). The carrier also stated that it currently has very little visibility regarding the factors. We note that the company had made a profit of €523 million in fiscal 2014.
Ryan Air – More Customer-Friendly Now
The better-than-expected performance of Ryanair in November this year completes a perfect reversal of fortunes for the Irish airline company. In 2013, the company had undergone troubled times due to lower passenger numbers. To come out of the woods, the company undertook multiple customer friendly measures like allowing more carry-on baggage, introducing allocated seating and reducing penalties.
Moreover, in May 2014, Michael O’ Leary, the chief executive officer of the company, launched its new website which has simplified the procedure to book flight tickets. Moreover, regular Ryanair travelers can store information pertaining to their travel documents and payment card on the site.
The carrier, which is already operating on a number of new routes to expand its business, is looking to expand further and fly on business-popular routes. In a bid to expand further, Ryanair placed an order to The Boeing Company (BA) to purchase 100 737 MAX 200 aircraft from the latter. Ryanair has options to purchase another 100 aircraft (read more: Boeing Rises on $22 Billion 737 MAX 200 Order from Ryanair).
Zacks Rank
Ryanair carries a Zacks Rank #3 (Hold). Better-ranked stocks in the airline space include SkyWest Inc. (SKYW) and Southwest Airlines Co. (LUV). Both these stocks sport a Zacks Rank #1 (Strong Buy).
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