Ryanair announces €400mn share buyback as it raises profit forecast

A surprise €400m share buyback scheme has been unveiled by Ryanair after the airline raised profit guidance for 2015.

Ryanair, the low-cost airline, recently announced an unexpected €400 million share buyback plan that comes not long after raising its profit forecasts for the full year. The airline said that due to a rise in the number of passengers and lower fuel prices.

In light of the improved business environment, Ryanair said it would be raising its full year profit guidance to between €840 million and €850 million, compared to previous estimates of around €810 million to €830 million.

Ryanair’s forecasts are overly modest

The airline’s new forecasts are much improved and stem from updates such as announcing takings of €49 million in pre-tax profits in the third quarter through to the end of 2014, that's a huge €84 million improvement when compared to the €35 million loss recorded in the same time of the previous year.

Furthermore, some experts are predicting that there remains scope for profits to exceed the updated forecasts.

In fact, Ryanair are being “overly cautious” with their estimates on growth, according to Mark Irvine-Fortescue, an analyst at Jefferies. Mr Irvine-Fortescue said he expects "stronger operators like Ryanair to be relative winners from low fuel".

Rapidly changing reputation as budget airline

Ryanair has been rapidly overhauling its reputation as a no-frills budget airline in order to tap into the corporate market, a plan that is evidently successful when examining the figures. Passenger numbers were boosted by up to 14 per cent to 20.8 million people during the third quarter to the end of 2014, according to Ryanair’s chief executive, Michael O’Leary. Moreover, during the same period revenues grew by around 17 per cent to €1.13 billion, quite a significant increase.

"These strong results confirm that our Always Getting Better customer programme and our expanded business schedules, coupled with our substantial fare and cost advantage over competitor airlines is drawing millions of new customers to Ryanair," said Mr O'Leary.