Shares in Ryanair fell by more than 17 per cent in Dublin on Monday after the airline said it expects air fares to be “materially lower” across its crucial summer season when compared with last year, continuing a trend that almost slashed profits at the carrier in half over the period between April and June.
The airline reported a 46 per cent fall in after-tax profit to €360 million – well below the €538 million profit forecast in a company poll of analysts – for what is the first quarter of its financial year.
Average fares per passenger fell 15 per cent in the quarter from a year earlier as the airline was forced to engage in “more price stimulation than we had previously expected”, chief executive Michael O’Leary said in a statement.
“While second quarter demand is strong, pricing remains softer than we expected, and we now expect second quarter fares to be materially lower than last summer (previously expected to be flat to modestly up),” Mr O’Leary said, referring to the July to September quarter when Ryanair typically makes most of its profit.
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Neil Sorahan, Ryanair’s chief financial officer, said demand remains strong but seasonal factors impacted pricing over the period while consumers pared back spending somewhat compared to recent years. “We had anticipated that April would be a hard sell,” he said, because part of the Easter break fell into March.
“And I think consumers, while they still want to travel and to get out and see Europe, they’re just a little bit more frugal in how they’re doing that and so this is going to be a good summer for the consumer.”
Analysts at stockbroker Davy said the wider airline industry “appears to be going through some volatility”.
“If last year the buzzword was ‘revenge travel’, then this year it would appear to be more ‘normalised demand’,” Davy said.
Against this backdrop, Davy has cut its estimates for full-year net income at Ryanair by 15 per cent.
Traffic grew 10 per cent to 55.5 million and Ryanair said it still expects full-year traffic to grow by 8 per cent, subject to no “worsening Boeing deliver delays”, Mr O’Leary said.
In an update on the aircraft-maker’s delivery schedule, Ryanair said it expects to take possession of four more Boeing Max 737-8200 “Gamechanger” planes by the end of July. This will bring to 160 the number of aircraft Boeing has delivered to Ryanair so far under the contract between the two companies, 20 behind schedule.
“We continue to work with Boeing and have noted an improvement in the quality and frequency of deliveries during the first quarter,” Mr O’Leary said. “While there remains a risk that Boeing deliveries could slip further, our focus has now turned to ensuring timely delivery of our remaining 50 Gamechangers.”
Ryanair also said it expects European short-haul capacity to remain “constrained for some years” due to a number of factors including Airbus’s A320 engine issues and consolidation within the industry. The airline highlighted Lufthansa’s proposed takeover of ITA Airways, which was recently approved by the European Commission, and IAG’s delayed takeover of Air Europa. – Additional reporting: Reuters
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