Ryanair said its profits almost halved between April and June and warned that fares this summer will be “significantly lower” than last year.
Europe’s largest airline announced a spring quarter profit of 360 million euros (303 million pounds), down 46% from the same period last year, despite passenger numbers rising 10% to 55.5 million.
The low-cost airline’s shares fell 12.5% in opening trade on Monday after the dismal financial results fell short of analysts’ expectations.
The news appeared to have a knock-on effect on shares of other listed airlines, with easyJet down 7.5%, Wizz Air down 6.3% and IAG, which owns British Airways and Iberia, down 3.3%.
Shares also fell after an IT outage at Microsoft on Friday hit airports and airlines around the world, causing the cancellation of more than 5,000 flights.
Ryanair said its average fare fell from €49.07 to €41.93 year-on-year, but that rising passenger numbers meant total revenue fell by just 1% to €363 billion.
The company said demand was strong this summer and passenger numbers are expected to rise 8% overall for the year, but that “prices have remained softer than expected.”
“Freight rates in the second quarter were [July to September] “We expect revenue in the first half of the year to be significantly lower than last summer,” the company said, “however, our final results for the first half will depend entirely on last-minute bookings and revenue in August and September.”
“Last minute bookings” refers to customers who wait much longer than usual to book summer flights.
“Lower airfares are good for travellers but bad for airlines trying to rebuild their finances after the pandemic,” said Dan Coatsworth, investment analyst at AJ Bell. “Airlines will be under added pressure to keep seats staffed and planes full to maximise their revenue potential. Travel demand has recovered since the pandemic, but travellers are reluctant to book too far in advance – this could be because they feel the pressure of lingering high interest rates or because they are waiting for bargains.”
Ryanair Chief Executive Michael O’Leary said a 15% fall in average fares in the most recent quarter could be due to a “recalibration” in the market after double-digit increases in ticket prices in recent years.
He added that Ryanair had repeatedly faced resistance from customers when it tried to raise prices and would aggressively sell lower-cost tickets to keep demand high.
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Leeds-based travel company Jet2, which flies to more than 65 European destinations from 12 UK airports, said this month that customers had faced “moderate” price increases this summer as it adapted to a shift to later bookings.
Ryanair also said on Monday it had been hit by limited air traffic control capacity caused by a range of factors, including strikes overseas and the need to increase spacing between planes to ensure safe landings during extreme weather.
“During the last 10 days of June, air traffic control capacity in Europe was significantly degraded, causing numerous flight delays and cancellations, particularly during the first wave of morning flights,” O’Leary said, adding that this summer had been the worst they had experienced so far for air traffic control delays.
“[This makes it] It is now more urgent than ever for the new European Commission and Parliament to deliver long-delayed reform of Europe’s desperately inefficient air traffic control services.”
Mr Coatsworth said the more holidaymakers see and read about the problems with international travel, the more likely they would choose to book a staycation in the UK instead.
“The more people know about delays and cancellations, the more likely it is that many potential last-minute bookers won’t bother,” he says. “They may think it’s too much of a hassle and will just holiday at home. To make matters worse, the airline industry could take the rest of this week to recover from the global IT crisis.”
