Ryanair, Europe’s largest carrier by passenger numbers, has reported weaker than expected profits for its first financial quarter. The airline has attributed this to a need to “stimulate” flight sales in the face of heightened consumer caution.
According to the company, it engaged in more discounting than anticipated in the three months leading up to the end of June. This resulted in an average fare decrease of 15%, leading to a 46% decrease in profit after tax, which came in at €360m (£303m). Market analysts had predicted a figure of over €530m.
In addition, Ryanair reported a 10% decrease in revenue per passenger, with ancillary revenue remaining flat. Operating costs also had a negative impact, rising by 11% due to higher wages offsetting lower fuel bills.
These results have caused a significant drop in the company’s share price, which was already down by 13% prior to the release of the results. On top of this, the stock lost an additional 12% at the open.
Ryanair’s Group Chief Executive, Michael O’Leary, warned shareholders that fares over the key summer holiday months would be significantly lower than expected due to the weakened consumer backdrop. He also stated that prices were continuing to decline and could potentially be down by as much as 10% over the June-August period.
O’Leary emphasized that it was too early to forecast profit for the full financial year, which ends on March 31st, 2025, due to the current state of flight prices. The airline also stated that it has yet to determine the cost of the recent global IT meltdown that affected thousands of flights worldwide.
Ryanair has also faced other operational challenges, such as the impact of air traffic controller strikes in France. Despite these obstacles, the airline is running a record summer program, though its growth ambitions have been impacted.
One factor contributing to this is the delay in deliveries of Boeing 737 MAX 8 aircraft, which would improve the airline’s efficiency. Ryanair expects to be 20 aircraft short of its contracted deliveries from Boeing by the end of this month. However, the planemaker has stated that production volumes have been affected by quality concerns, leading to a delay in deliveries.
In conclusion, Ryanair has reported weaker profits than expected for its first financial quarter, due to the need to stimulate flight sales and the current state of the aviation market. The company is facing operational challenges and uncertainties, making it difficult to forecast profit for the full financial year.
