Shares in budget airline Ryanair (RYA) soared 6.7% to a 12-month high of €16.25 after it upgraded its full year earnings forecast to over a billion euros.

In a trading update, Ryanair said its Christmas and New Year period was ‘stronger than expected’ thanks to better close-in bookings at higher than expected yields.

The airline added that forward bookings for January to April are running 1% ahead of this time last year, which it thinks will result in slightly better than expected average fares in the fourth quarter of its financial year.

Full year group traffic figures are also expected to be 1m ahead of previous guidance, now growing up to 154m passengers annually.

PROFIT UPGRADE LIFTS RIVALS

Thanks to the better Christmas/New Year travel period and stronger forward bookings in Q4, Ryanair has raised its full year profit after tax guidance to €950m-1.05bn, compared with €800-900m previously, and said it expects to finish the year close to the mid-point of this new range.

Encouraged that other airlines might also have benefited from similar trends over the Christmas/New Year period, investors chased shares in Ryanair's big rival Easyjet (EZJ) up 4% to £15.00 while Wizz Air (WIZZ) gained 5.2% to £40.60.

British Airways owner International Consolidated Airlines (IAG) also climbed 4.8% to 665p, while on the continent shares in Lufthansa and Air France KLM also recorded gains.

LAUDA STRUGGLES ON PRICING

Ryanair’s Austrian subsidiary, Laudamotion, continues to struggle however with average fares now set to be lower than expected, despite strong traffic growth.

It blamed the decline on ‘intense price competition with Lufthansa subsidiaries in both Germany and Austria who are engaged in below cost selling.’

Lauda’s net loss for the year will therefore widen from under €80m to around €90m. However struggles here have seemingly not had much of an impact on the wider business.

'VERY ENCOURAGING... FOR NOW'

AJ Bell investment director Russ Mould called today's update ‘very encouraging’ but cautioned that the picture could look ‘a bit less rosy’ come the summer.

Mould said, ‘Investors’ attention will always be grabbed by a big number and Ryanair has duly delivered, raising the upper end of its full year profit guidance above the €1bn mark.

‘Despite the uncertainty created by Brexit and mounting concerns about the environmental impact of flying, it seems plenty of people fancied jetting away over Christmas and the New Year.’

He he cautioned that, despite the collapse of Thomas Cook last year, 'competition remains an issue in other markets, while rising staff costs and a volatile fuel bill are continuing pressures on the company’s low-cost model.

‘This is a critical point given how much of the business's success has been built on keeping a very tight hand on the purse strings.

‘The picture could look a bit less rosy in the summer due to further delays in the delivery of grounded Boeing 737 Max planes, which will stunt passenger growth.’

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Issue Date: 10 Jan 2020