European air fares will continue rising as carriers limit seats and face the possible grounding of aircraft over technical issues, according to Ryanair.
The Irish airline giant said on Monday that profits after tax rose 59 per cent to €2.18 billion in the six months to September 30th, the first half of its financial year, from €1.37 billion during the same period in 2022.
Speaking to analysts after reporting the results, Michael O’Leary, the group’s chief executive, said rivals had yet to recover their full pre-Covid capacity while an issue with engines could ground some of their planes next year.
He predicted that these factors would continue to put “strong upward pressure on pricing” next year. He noted that in the run up to Christmas, Ryanair’s own average fares were likely to be ahead of the same period last year by a mid-teens percentage.
Ireland has won the corporation tax game for now, but will that last?
Corkman leading €11bn development of Battersea Power Station in London: ‘We’ve created a place to live, work and play’
Elf doors, carriage rides and boat cruises: Christmas in Ireland’s five-star hotels
One in four PAYE workers are overpaying tax. Can you claim money you’re owed?
Ryanair believes that a technical issue that requires inspection of Pratt and Whitney GTF aircraft engines could have a bigger impact than the industry has acknowledged.
Mr O’Leary pointed out that the Pratt and Whitney is fundamentally an Airbus engine, while Ryanair flies Boeing 737s. “We expect material grounding of competitors’ aircraft in 2024,” he said.
Meanwhile, delays at manufacturers Airbus and Boeing, which supplies Ryanair, mean that both will continue to struggle to meet orders, leaving airlines short of aircraft.
EU plans to phase out carbon emission allowances for airlines, beginning next year, could also contribute to pressure on ticket prices, Mr O’Leary said.
[ Ryanair hints it may leave Irish Stock ExchangeOpens in new window ]
However, he pointed out that Ryanair had a significant cost advantage over rivals, which was continuing to grow, while its capacity had already overtaken pre-Covid levels.
This would allow it to continue selling seats on its aircraft at lower fares that its rivals, Mr O’Leary stressed.
Ryanair has ordered 57 new Boeing 737 Max “game-changer” jets for next summer, although delays at one of the aircraft manufacturer’s suppliers could see this fall short by around 10, according to its chief financial officer, Neil Sorahan.
“That still means we will have at least 47 new aircraft for the peak summer months,” he said.
Mr Sorahan added that he was in regular contact with Boeing to see what could be done to get the ordered jets as possible delivered.
Ryanair expects profits to reach between €1.85 billion and €2.05 billion in its current financial year, which ends on March 31st.
“This guidance remains highly dependent on the absence of any unforeseen adverse events, for example such as Ukraine or Gaza, between now and the end of March 2024,” Mr O’Leary cautioned in a statement.
“We are seeing strong pricing in quarter three,” he told analysts later. “We had a very strong midterm break in October and we have strong forward bookings into Christmas.”
He pointed out that the group had less visibility over the traditionally slower three months to March 31st, which is the final quarter of its financial year.
Ryanair expects to lose money during this quarter, although Mr O’Leary noted that the Easter holiday next year would include the last week in March.
Closer to home, the airline wants to see a planning condition limiting Dublin Airport to 32 million passengers a year lifted.
Mr O’Leary also warned that there would be a lull in Ryanair’s expansion between 2025 and 2027, during which time it could take aircraft out of “more expensive airports like Dublin” and move them to cheaper bases.
