Higher fares prompt Ryanair Holdings Plc (LON: RYA) to lift its earnings forecast.
The shares of Ryanair (LSE: RYA) (NASDAQ: RYAAY.US) dropped €0.10, or 2%, to €5.40 during early London trade this morning despite the Irish airline revealing its third-quarter profits had soared 21%.
Ryanair, which claims to be "Europe's only ultra-low cost carrier", said earnings had increased from €14.9m to €18.1m during October, November and December. Passenger numbers gaining 3% to 17.3 million and average fare prices rising 8% helped revenues advance 15% to €969m.
The third-quarter performance ensured Ryanair's nine-month results showed turnover up 15% to €4,075m and earnings up 10% to €614m.
Ryanair's chief executive, Michael O'Leary, said:
"Our Q3 profit of €18m was ahead of expectations due to strong pre-Christmas bookings at higher yields. The 8% rise in average fares reflects our improved customer service, record punctuality and the successful roll out of our reserved seating service."
Ryanair claimed this morning that its "industry-leading" customer service ensured 93% of its flights arrive on time, less than four flights in every 1,000 are cancelled and less than one per 3,000 passengers report a lost bag.
The airline also said a survey of 10,000 passengers during December indicated 83% being "satisfied or very satisfied" with their flight and 95% saying "Ryanair provides excellent value for money".
Ryanair's happy passengers prompted the airline to lift its full-year earnings guidance from €505m to €540m, equivalent to about €0.37 per share. The revised projection now values the airline at 14.6 times current-year profits.
Of course, whether Ryanair's positive third quarter, its current €8bn market cap and "industry-leading" customer service now combine to make the share a buy is up to you.
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> Maynard does not own any share mentioned in this article.