Ryanair puts expansion ahead of profit with Boeing jet binge

Bloomberg

Ryanair Holdings Plc plans to accelerate its European expansion to take advantage of financial woes at regional competitors and reduce its reliance on an
uncertain UK market.
Europe’s biggest discount carrier is in talks with Boeing Co. to add two or three more 737 jets to its existing delivery schedule while extending leases on 10 other planes through 2019, Ryanair said in a statement. The moves will help fuel growth in Italy, Germany, Poland and Romania, where airlines including Air Berlin Plc and Alitalia SpA are restructuring operations amid steep losses.
“There’s a huge amount of opportunities out there across Europe as we grow and one of the limiting factors continues to be deliveries of the aircraft,” Chief Financial Officer Neil Sorahan said in a phone interview. “We’ve said to Boeing, if they see gaps in their schedule and have additional aircraft, we’ll take them.”
Ryanair has been cutting costs and slashing prices to undercut rivals on regional routes, while expanding its transatlantic partner network to feed into the lucrative long-haul segment. Its strategy brings its business model closer to traditional network carriers after a previous focus on bare-bones point-to-point travel. This weekend’s massive cancellations at British Airways could also be a boon for Ryanair.
The Dublin-based carrier will add 47 more planes by March 2018, excluding any additional jets it can pick up from Boeing. That will bring the discounter’s total fleet to 427 jets, even as the carrier is due to start taking 100 737 Max 200s, a more fuel efficient version of Boeing’s short-haul workhorse, from fall 2019.
Still, Ryanair’s aggressive expansion comes with fares under pressure as low fuel prices encouraged airlines to add capacity. Low-cost rival EasyJet Plc is also bulking up its fleet. The London-based carrier earlier this month upgraded an order for 30 Airbus SE narrow-body aircraft to the biggest A321 variant.

Profit Growth
Rising demand in the past year helped push Ryanair’s net income for the fiscal year ended March 31 to 1.32 billion euros ($1.47 billion) from 1.24 billion euros a year earlier, according to the statement. Passengers increased 13 percent to 120 million, bolstering profit despite a 13 percent drop in fares.
The slide in ticket prices should ease to between 5 percent and 7 percent this year as supply better matches demand. The airline predicted an increase in fiscal 2018 earnings of about 8 percent to between 1.4 billion euros and 1.45 billion euros.
Lack of clarity on whether the U.K. will opt to remain in Europe’s open skies agreement could cause “significant disruption” of flights between the two regions for months after Brexit takes effect in March 2019, the company said.
“In the absence of such certainty, or direction, we will continue to pivot our growth away from the UK in 2017 and 2018 to capitalize on the many growth opportunities elsewhere in
Europe,” Ryanair said.