Ryanair Reports Slump

Irish airline Ryanair reported a profit slump in the third quarter of the 2023/2024 financial year due to rising costs and cut its forecast for the year. 

The group’s net profit fell 93% to 15 million euros from 211 million in the same period last year despite a 17% increase in turnover to 2.7 billion euros, according to a press release. 

The result, explains the company, was affected, among other things, by the increase in fuel costs and by the increase in salaries and airport taxes. «While traffic and fares increased year-on-year, in the run-up to Christmas and New Year occupancy rates and returns were lower than expected in response to Ryanair’s sudden (but welcome) withdrawal» from «pirate» online agency sites travel» at the beginning of December. 

The company had reported last month that some sites were selling Ryanair flights by inflating the prices of tickets or services.

In recent days, Ryanair signed an agreement with two new sites – LoveHoliday and Kiwi.com – which promise not to charge passengers additional costs.

The airline group still expects a total of 183.5 million passengers transported, or +9%, for the entire financial year, despite “slightly lower occupancy rates in the third quarter and delays in deliveries” of the Boeing aircraft ordered, specifies the Press release.

The entry into force of an agreement on the salary increase for pilots and the end of free carbon credits will also weigh on the performance of the fourth quarter “traditionally the weakest.” 

The company, therefore, reduces its profit forecasts after taxes to a range between 1.85 and 1.95 billion euros compared to the previous 1.85-2.05 billion, specifying that these expectations largely depend on «factors unforeseen negative events such as the war in Ukraine, the conflict between Israel and Hamas and further delays in Boeing deliveries.

The company expects a summer season with strong demand, with fares still rising below 10%, less than last year when increases were around 15%. An increase due to the reduced capacity of seats offered in Europe at 91%-92% pre-Covid, lower than 93% last year as an effect, according to the carrier, of the ongoing consolidation process, of the 10% stoppage of the Airbus fleet for P&W engine problems and delays in aircraft deliveries.

On Boeing’s delays and the Alaska Airlines accident, in a call with analysts, Michael O’Leary said that “Boeing must improve the quality of its products,” confirming his support for the CEO of the American manufacturer David Calhoun and the group board. 

The low-cost carrier, which has an order for 300 Boeings, received 12 Boeing 737 8-200s in the last quarter and expects to receive 50 more by June 2024, lower than its forecast of 57 deliveries. “Boeing has improved the quality of its aircraft in recent months and has increased the number of engineers overseeing the aircraft’s pre-delivery processes.”

These delays have forced the company to postpone the publication of flights for the next summer season and this will have an impact on bookings calculated in approximately 2 million fewer passengers with a forecast of 200 million passengers in the summer of 2025 against the previous forecast of 205 million. Ryanair expects to end fiscal 2024 next March with 183.5 million passengers.

Lately, several American airline CEOs showed dissatisfaction with Boeing and United Airlines CEO Scott Kirby hinted that he might review his order for 250 of the 737 Max-10, the latest and most popular variant.

Not yet certified of the Max family O’Leary supported by the CFO, Neil Sorahan said that “if United were to cancel the order we are ready to replace it”.

Under current plans, the company doesn’t expect to receive the first Max 10 until 2027, but Ryanair’s CEO said he will talk to Boeing about bringing forward deliveries if other airlines back out.

Due to the rising cost of fuel, the CFO said the company has extended the expiration of hedging contracts: 65% of fuel for the next fiscal year starting in April is hedged at $79 a barrel.

According to UBS analysts, «Stocks have entered a bearish trend due to weaker third quarter results and outlook. However, decisions taken to limit fuel costs for 2025 could be a support.

The first dividend after the COVID crisis of 0.175 euros will be paid to shareholders on February 28. Net liquidity is equal to approximately 0.2 billion euros in a seasonal period.