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Ryanair on course to hit profit targets as it seeks new markets.

Byline: Sion Barry Business Editor

Ryanair is expected to hit fullyear profit targets when it reports to the market this week, after having benefited from a higherthan-expected drop in unit costs. The budget airline will release annual earnings tomorrow, with consensus forecasts pointing to a pre-tax profit of PS1.13bn for the 12 months to the end of March.

In February Ryanair said it expected full-year unit costs, excluding fuel, to fall by 4% compared with forecasts for a 3% fall made after the first half of the financial year.

Unit costs are defined as total operating costs for the company divided by the number of passengers.

Beaufort Securities said it was encouraged by Ryanair's ability to offer lower fares while retaining net profit guidance.

"The key differences for Ryanair is its capability to continue lowering its unit costs, while delivering 'lowest passenger costs' among its EU peers, at the time of traffic growth and when competitors are forecasting flat or rising costs.

"This gap between Ryanair and its rivals will enable the group to maintain momentum and continue winning market share."

However, in its third-quarter results, released in February, Ryanair reported an 8% drop in pre-tax profits to PS81m.

It said average fares fell 17% to 33 euros per passenger in the three months to December, as it ramped up competition with rivals, with prices set to go even lower.

The low-cost carrier added that the sharp decline in sterling following the Brexit vote ate into profits.

Sector peer EASYJET has also felt the pinch of the Brexit-hit pound and late timing of Easter, evidenced by the PS236m pre-tax loss in the six months to March 31, which compared with an PS18 million loss in the same period last year.

But, like Ryanair, EASYJET managed to maintain its full-year expectations.

Ryanair is seen to be on track for further growth in the next financial year, with full-year 2018 analyst consensus at PS1.25bn.

The company said in its thirdquarter results that it expected pricing to "continue to be challenging" but it would "respond to these adverse market conditions with strong traffic growth and lower unit costs."

"We expect our load factor active/ price passive strategy will win market share from all higher-cost EU competitor airlines, while we continue to open new markets."

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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Date:May 29, 2017
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