DUBLIN – Sharp falls in Ryanair (NASDAQ: RYAAY) ticket prices seen earlier this summer have eased significantly and Chief Executive Michael O’Leary is optimistic fares will return to growth next summer due to capacity constraints, he said on Monday.
The airline, Europe’s largest by passenger numbers, reported an 18% fall in after-tax profit for the six months to the end of September, the first half of its financial year, as average fares fell 10%.
But that masked an improvement from a fall of 15% in the first quarter to a fall of 7% in the second and a forecast of under 5% in the current quarter, which ends on December 31. – with O’Leary saying a fall midway between zero and 5% was a “reasonable possibility”.
“We’ve strong bookings, the price declines are moderating,” he told a call with analysts.
“We’ve had a fraught summer on pricing … but I think it’s reasonable to expect that pricing will move modestly upwards for the next summer or two in a heavily constrained marketplace.”
O’Leary said Ryanair had cut its passenger target for the year to March 2026 to 210 million from 215 million due to Boeing (NYSE: BA) delivery delays, confirming plans reported by Reuters earlier this month, but said a fall in capacity could actually boost profitability.
Ryanair’s share price, which fell 3% in early trading after the capacity cut was announced, was up 0.2% at 1242 GMT, following the analyst call.
O’Leary said around half of the fall in fares this summer was probably due to the impact of high interest rates on consumers and half due to the decision by several online travel agents to stop selling Ryanair flights in early December following legal and regulatory pressure.
Chief Financial Officer Neil Sorahan told Reuters that the issue with travel agents was “pretty much behind us now” due to new agreements with 90% of them.
BOEING DELAYS
The cut to passenger forecasts for next year is based on the assumption that Boeing delivers 15 of 29 737 MAX aircraft that were due to arrive by next summer, but “there is a high risk around that number” due to a strike at Boeing, Sorahan said.
In pre-recorded comments, O’Leary described the delays as “a pain in the backside”.
On Friday, Boeing (NYSE: BA) shares gained 3.5% on bets that the planemaker’s U.S. West Coast factory workers will approve a new wage offer and end a seven-week strike that has halted jet production.
O’Leary said he had no idea if Boeing workers would accept the deal and said Boeing management had told him the chances were “50-50”.
(Source: Reuters)
