DUBLIN, May 20 — Ryanair CEO Michael O’Leary said today that a “recessionary feel around Europe” could be a factor in slower-than-expected growth in airfares as the low-cost carrier posted record annual profits slightly ahead of expectations.
O’Leary warned two weeks ago that summer fares would likely be lower than the 5 per cent to 10 per cent rise it expected as recently as late April. The airline said today its fresh forecast of flat to modest year-on-year peak summer price growth was “heavily dependent” on last-minute summer bookings.
Ryanair shares, which fell sharply and led European airlines lower when O’Leary gave the surprise May 7 warning, were down 0.9 per cent at 18.18 euros in early trading. Rival easyJet was also more cautious with its outlook last week.
“It is a bit surprising that pricing hasn’t been stronger and we’re not quite sure whether that’s just consumer sentiment or recessionary feel around Europe but we still see peak travel demand certainly through July and August being strong,” O’Leary said in an investor presentation.
“And if we have to discount or cut fares to fill to 94 per cent load factor in April, May and June then so be it.”
O’Leary’s surprise stems from the fact that delays in new aircraft deliveries and a lack of spare parts has constrained capacity in Europe, something airline executives expected to lead to further fare increases during another busy northern hemisphere summer.
Ryanair’s average fares rose 21 per cent in its financial year ended March 31.
Chief Financial Officer Neil Sorahan told Reuters that the airline had to reduce fares in particular for mid-week flights in April and May to boost demand and while the trend may continue into June, it should improve once school holidays begin.
Boeing improvements
The Irish airline, Europe’s largest by passenger numbers, also said it would be 23 jets short of the number Boeing was due to deliver by the end of July and there remained a risk — although “unlikely” — that deliveries could slip further.
Sorohan said the new Boeing production team in Seattle was delivering planes with “a bit more consistency” and if things went well it could receive two or three more jets by the end of July.
O’Leary said Ryanair will receive “modest” compensation from Boeing for the delays but that the confidential amount does not reflect the quantum of losses suffered from having to recently cut its forecast traffic growth for the year to end-March 2025 to 198 million to 200 million passengers from 205 million.
Ryanair flew a record 184 million passengers to the end of March this year, contributing to the 34 per cent year-on-year increase in annual profit to €1.92 billion (RM9.7 billion)
The result was slightly ahead of the €1.905 billion profit expected in a company poll of analysts. Ryanair cut its after-tax profit forecast to a range of €1.85 billion and €1.95 billion in January after some online travel agents suddenly stopped selling its flights.
It said it was too early to be able to provide sensible or accurate after-tax profit guidance for the current financial year.
Ryanair also announced a €700-million share buyback, its first since the Covid-19 crisis and the same amount as the airline’s last major buyback in 2019.
“While the buyback is good news and shows confidence, and while FY24 is broadly in-line with most parts of FY25 guide as expected, we fear the further softening of pricing commentary may win the day,” analysts at Deutsche Bank wrote in a note. — Reuters
