Ryanair raised its forecast for annual profit nearly 20% Monday because of a surge in its winter reservations and announced it would lower fares by as much as 10% over the coming year to take additional market share from its struggling air carrier rivals.
This improved profit guidance comes after the largest discount-carrier in Europe slashed its fees, boosted its budget for marketing and improved its Internet site after outspoken CEO Michael O’Leary admitted an excess in cost cutting was beginning to scare away customers.
The airline now says it profit after taxes for the one-year period ending in March of 2015 will be 750 million euros to 770 million euros, which was up from the forecast previously of 620 million euros to 650 million. It was ahead of estimates by analysts of 694 million euros equal to $867 million.
Rivals that have higher airfares such as Air France and Lufthansa have each lowered forecasts for profit the past few days due to increased competition and costs.,
CEO O’Leary said the company enjoyed a bumper six months and guidance had to be boosted as the visibility became clearer for the second six months.
It said it was simply a matter of keeping low prices and improving service.
Ryanair shares increased by 9% on Monday morning and is 36% higher over the last 12 months. easyJet its rival was up over 2.5% in early trading as well.
The sale of more than 2 million tickets than had been planned for winter travel, will consolidate the position of the Irish airline as the largest air carrier in Europe by numbers of passengers, boosting it numbers of the year to 89 million or over 8.5% more than the previous year.
The discount carrier said it was planning to cut its fares by as much as 5% over the next three months through December and by 10% for the three months starting next year.
The new fare for business class unveiled during the summer, which allows users to receive an array of perks for just 50 euros more, is expected to drive bookings in the usually weaker winter season, said O’Leary.
Get Analysts' Upgrades and Downgrades Daily - Enter your email address below to receive a concise daily summary of analysts' upgrades, downgrades and new coverage with MarketBeat.com's FREE daily email newsletter.