Ryanair Increases Profit Forecast as Budget Airlines Continue to Excel

Ryanair has increased its profit forecast for 2014 after a hugely successful first-quarter financial performance.

The first three months of the year saw the budget airline increase its profits by 152%, year-on-year. A large reason behind the rise was the early Easter this year, with traffic growing to 24.3 million and revenues up 11%.

"Our four new bases at Athens, Brussels, Lisbon and Rome are performing strongly, as customers switch to Ryanair's lower fares and our industry leading customer service. Our strategy to raise forward bookings continues to drive higher load factors and we expect to release our summer 2015 schedule in mid-September, some three months earlier than last year," said CEO Michael O'Leary.

O'Leary predicted that the second half of the year would see rivals reduce their fares in response to Ryanair's strong forward bookings and that he expected full-year traffic to rise by 5%. Overall, the company expects a 21% rise in annual net profits.

Last week, rival Easyjet announced a full-year profit forecast increase of between 14% and 19%, while US carriers American Airlines and United Airlines also reporting extremely strong accounts.

Some of Ryanair and EasyJet's more traditional European rivals have not enjoyed such successful years to date. Earlier in July, Air France-KLM issued a profit warning, revising down its earnings forecast for the year from €2.5bn to between €2.2bn and €2.3bn.

Similarly, Lufthansa issued a profit warning in June, saying it would not reach its financial targets this year or next, blaming competition and a three-day pilot strike.

Stephen Furlong, airlines analyst at Davy Stockbroking in Ireland, told IBTimes UK that competition in connecting classes, particularly on long-haul Transatlantic and Asian routes, are making things difficult for those traditional airlines.

It can be viewed as a victory for the no-frills model of aviation.

"Ryanair is gaining market share and has also been targeting a form of evolution in the model. It is keeping costs low, but improving the product. EasyJet is doing something similar," Furlong said.

Ryanair is looking to launch a more executive-style service, which would offer flyers seat allocation, flexible booking, fare changes and higher frequency flights along popular business routes.

The International Air Transport Association (IATA) is confident that despite the worrying reports from Air France-KLM and Lufthana, higher passenger volumes are helping spur an uptick in the commercial fortunes of the industry at large.

And the governing body will no doubt welcome any form of good news in what has been a horrendous year for aviation.

The disappearance of Malaysia Airlines Flight MH370, the shooting down of Malaysian Airlines Flight MH17, the Air Algérie Flight 5017 crash in the Sahara and the TransAsia Airways Flight 222 crash in Taiwan have all featured prominently in the headlines in recent months.

The IATA has said that it will do all in its power to improve airline safety. The authority's chief executive Tony Tyler said: "Many people will understandably be asking questions about aviation safety. The greatest respect that we can pay to the memory of those involved is to leave nothing unturned in our quest to understand the cause and to take steps to ensure that it is not repeated."