Ryanair Lowers Summer Fares Outlook After Earnings Slide — Update

By Pierre Bertrand

Ryanair cut its pricing outlook for the summer season after first-quarter ticket prices and earnings tumbled.

Europe's largest airline by passenger numbers said it is experiencing weaker-than-anticipated consumer spending, with pricing in the second quarter now seen "materially lower" than last summer, adding to weak fares in the prior quarter.

Ryanair previously expected second-quarter fares to be flat to modestly up on the year.

"The pricing development continues to deteriorate," said Chief Executive Michael O'Leary in a pre-recorded presentation post result. "We have tried over weeks and weekends to close off some cheap seats and price passengers up, but meeting resistance, and we're opening up lower cost seats again."

The news sent shares in Ryanair lower and dragged other airline stocks down. At 0822 GMT, Ryanair shares traded 13% down. Low-cost peers easyJet, Jet2 and Wizz Air were down 7%, 5.8% and 6.6%, respectively.

In May, the budget carrier warned that first-quarter fares required more price cuts than the prior year, and on Monday reported that average fares fell 15% in the three months to the end of June, while revenue per passenger fell 10%.

Though ancillary revenue rose 10% in the quarter, ancillary revenue per passenger remained flat, Ryanair said.

The company, which earlier this month said passenger traffic grew 11% in June, flew 55.5 million passengers in the quarter, a 10% on-year increase. Its load factor, a measure of how full its planes are, slipped to 94% from 95% a year ago.

Operating costs rose 11% to 3.26 billion euros ($3.55 billion). Net profit nearly halved to EUR360 million from EUR663 million a year earlier, while revenue fell 1% to EUR3.63 billion.

Analysts at JPMorgan and Bernstein said the result missed profit expectations by 33%.

"The softer pricing outlook for Ryanair will likely lead to the whole sector being weak, and call into question where the 'bottom' is in terms of demand/consumer weakness, lower pricing and ultimately estimate downgrades," JPMorgan analysts Harry J Gowers and Shikha Khurana said in a research note, adding that the company's price decline in the first quarter was deeper than expected.

Looking ahead, it said first-half results would be "dependent on close-in bookings and yields in Aug. and Sept."

The company maintained its fiscal-year guidance for passenger traffic growth of 8%, or 198 million to 200 million passengers, assuming no worsening of Boeing delivery delays.

Write to Pierre Bertrand at pierre.bertrand@wsj.com

(END) Dow Jones Newswires

July 22, 2024 04:53 ET (08:53 GMT)

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