Ryanair expects slump in air fares over key summer months

By Louis Goss

Ryanair shares slump 12%

Ryanair Holdings on Monday said it expects its air fares this summer will be "materially lower" than last year, in an announcement that caused its share price to plummet on fears the post-COVID boom in the airline industry is over.

The Irish airline's warning came as it also posted a sharp 46% drop in its fiscal first-quarter profits, to EUR360 million ($392 million), as a combination of 11% higher costs and 15% lower air fares hit its bottom line.

The budget airline's lower fares in the first quarter offset the benefits of an increase in passenger numbers, leading to a 1% drop in Ryanair's revenue in the second quarter, to EUR3.63 billion.

The results saw Ryanair fell well short of expectations, with analysts having expected the airline to generate revenue worth EUR3.86 billion and profits of EUR547 million, according to FactSet.

Ryanair said a combination of higher staffing costs and costs associated with the Boeing delays had also pushed up its operating costs in the first quarter of the year by 11% year-on-year, to EUR3.26 billion.

Ryanair (IE:RYA) (RYAAY) shares, listed on the Euronext Dublin stock Exchange, fell 12% on Monday having lost 24% of their value over the previous 12 months.

Ryanair's warning hit other airline stocks, with easyJet shares down 6%, and British Airways owner International Consolidated Airlines Group (UK:IAG) falling 3%.

The ultra-low cost airline - which was first established in 1984 - said it now expects the slump in air ticket prices will continue into the key summer months, as the company also said it has "almost zero" visibility on ticket prices for the second half of the year.

"While Q2 demand is strong, pricing remains softer than we expected, and we now expect Q2 fares to be materially lower than last summer (previously expected to be flat to modestly up)," Ryanair CEO Michael O'Leary said.

Airlines had previously benefited from a boom in air travel in the aftermath of COVID-19 driven by a release of pent-up demand -- following years of restrictions on international journeys -- which pushed up ticket prices.

Ryanair said its average fares in the first quarter of the year fell 15%, from average prices of EUR49.07 in the three months ending in June 2023 to EUR41.93 in the quarter ending in June this year.

The low-cost said it expects its passenger numbers to grow 8% across the full-year 2025, to 200 million, subject to no further delays from Boeing.

Analysts at J&E Davy, led by Stephen Furlong, said: "The market appears to be going through some volatility. If last year the buzzword was 'revenge travel,' then this year it would appear to be more 'normalized demand.'"

-Louis Goss

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07-22-24 0421ET

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