Ryanair has experienced a significant downturn, closing 16% in the red on Euronext Dublin following a recent adjustment to its outlook for near-term airfares. This shift comes in response to a notable drop in attributed profit and operating revenue reported for the first fiscal quarter. The Irish low-cost airline has now adjusted its summer fare projections, anticipating a 'materially lower' outcome compared to the previous year.
This stands in contrast to their earlier expectations of fares remaining 'flat to modestly up.' The overarching reason for this adjustment lies in the strong demand being counterbalanced by pricing that has not met prior forecasts. Despite this grim outlook for airfares, Ryanair maintains its optimistic stance regarding the full-year projections for fiscal year 2025, anticipating an 8% growth in passenger traffic, potentially reaching up to 200 million passengers.
This optimistic foresight is reliant on the assumption that there will be no further setbacks regarding Boeing aircraft deliveries. The airline has admitted that it remains 'too early' for a clear profit outlook for the period; several external factors weigh heavily, including ongoing international conflicts, staffing shortages within European air traffic control, and existing capacity limits. Additionally, Ryanair’s CEO, Michael O'Leary, addressed the airline’s strong fuel hedge position, which has been extended to cover 75% of its fuel needs for 2025 and 45% for 2026.
This strategy is expected to buffer the company against extremes in fuel price fluctuations. When discussing the current market landscape, O'Leary highlighted the anticipated constraint in European short-haul capacity. Operators using A320 aircraft are navigating significant repairs, while original equipment manufacturers (OEMs) are grappling with delivery issues.
Moreover, ongoing consolidation in the airline sector is expected to further tighten capacity. O'Leary confidently stated that these constraints, coupled with Ryanair's substantial cost advantage, solid financial standing, and low-cost aircraft acquisition plans, lay the groundwork for a decade marked by profitable growth, potentially reaching 300 million passengers by FY34. In the three-month period ending June 30, Ryanair’s attributed profit to equity stakeholders plummeted to €360 million from a previous €662.9 million.
This substantial decrease was largely attributed to an earlier Easter holiday and weaker-than-expected pricing, which collectively impacted their annual traffic growth, which reached 55.5 million passengers, reflecting a 10% increase. The total operating revenue slightly fell to €3.63 billion, down from €3.65 billion the year before.
Analysts from Bernstein noted that Ryanair's net profit for the fiscal first quarter fell short of expectations, dipping by 33% to €360 million, compared to €538 million previously predicted. They identified declining fares and deteriorating booking trends as the primary culprits behind this unexpected downturn.
In particular, they indicated a notable 15% year-over-year decrease in close-in bookings following a prior increase of 19% in the fourth fiscal quarter. The analysts warned of a continuing trend where the fare environment for close-in bookings may worsen. As the market watches Ryanair's next moves, its ability to adapt to the fluctuating fare landscape will be crucial to its ongoing success and stability in the highly competitive airline industry..