Image source, Getty Images
- Author, Lora Jones
- Role, Economic journalist
Ryanair expects summer fares to be significantly lower than last year after the budget airline’s profits fell by almost 50%.
The airline said “thrifty” passengers were cutting back on travel while the timing of the Easter holiday had also hit profits, with pre-tax profit falling 46% to €401m (£338m) in the three months to June 30 compared with a year ago.
Average passenger fares fell by 15% during that period and the carrier said it expected to offer more discounts in the coming months.
“Rates are now significantly lower than they were a year ago and prices… continue to deteriorate,” its chief executive Michael O’Leary said in a presentation announcing his latest results.
Shares in Ryanair and other airlines fell sharply as experts questioned whether the wider sector would be hit by customers’ budgets being squeezed during the peak summer travel period.
Ryanair said it now expected fares between July and September to be “significantly lower” than last year, rather than “flat or slightly higher” as it had previously forecast.
Ryanair’s typical fare in June was €41.93, down from €49.07 the previous year.
Chief Financial Officer Neil Sorahan said he thought consumers were simply “a little more frugal, a little more careful” with their money.
He added that after two years of growth in travel demand, “there is a bit of resistance.”
Last minute bookings
Despite the drop in profits, Ryanair’s passenger numbers increased slightly, limiting the fall in its overall revenue to just 1%.
However, the weak results could suggest that the post-pandemic price boom that airlines enjoyed may be coming to an end, with other carriers recently warning of falling ticket prices.
Ryanair said on Monday that its performance for the rest of the summer was “totally dependent” on more last-minute bookings, particularly those in August and September.
Customers are generally waiting longer than usual to book their summer holidays, which appears to be partly due to the lingering effects of the cost of living crisis.
In early July, Jet2 announced that there would be only “modest” price increases this summer, amid a wave of late bookings to its European destinations.
Lufthansa also highlighted “negative market trends”, while Air France-KLM warned of a financial impact after fewer people than expected booked flights to Paris for the upcoming Olympics.
Ryanair’s share price fell 17% on Monday, while other airlines including EasyJet and Wizz Air saw their share prices fall.
Airlines including Ryanair are facing a surge in air traffic controller strikes causing delays and cancellations, said Dan Coatsworth, investment analyst at AJ Bell.
“The final blow was dealt by the global IT crisis last weekend, which affected flights worldwide,” he added.
“The more people are informed about delays and cancellations, the more likely it is that some of the people who book last minute will not bother. They might think it’s too complicated and so they will spend their holidays at home.”
Mr O’Leary also said on Monday that planemaker Boeing had warned him in recent days that some deliveries of 737 Max planes scheduled for next spring would be delayed until summer 2025, potentially straining Ryanair’s capacity during that key trading period.
Its expansion plans have been hampered by delays in production of new planes, while Boeing has faced scrutiny over its production methods and quality control processes.
In January, Boeing found itself in crisis when a door panel on one of its planes exploded shortly after takeoff, forcing the plane to land.
The company continues to face investigations and legal action following the incident in January on the flight operated by Alaska Airlines.
Ryanair said on Monday that it was continuing to work with Boeing and had seen an “improvement in the quality and frequency of deliveries.”