Ryanair Sees 46% Decrease In Q1 Profit To €360 Million

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Ryanair Holdings plc announced a first-quarter profit of €360 million, down from €663 million in the same period last year. Despite a robust increase in passenger traffic, with a 10% rise to 55.5 million customers, the profit was impacted by the fact that half of the Easter period fell into the previous year’s fourth quarter and lower-than-anticipated airfares for the current quarter.

Q1 Highlights include:

– Traffic increased by 10% to 55.5 million, despite facing delays in Boeing deliveries.
– Revenue per passenger decreased by 10%, with average fares dropping by 15% and ancillary revenue remaining stable.
– The fleet included 156 B737 “Gamechangers” out of a total of 594 aircraft as of June 30, which is 20 aircraft short of the budgeted number.
– A record-breaking summer schedule was launched, introducing 5 new bases and over 200 new routes for Summer 2024.
– Several “Approved OTA” partnerships were established to enhance consumer protection.
– Fuel hedging has been extended: 75% of FY25 fuel needs are secured at under $80 per barrel, saving over 450 million euros, and about 45% of FY26 needs are hedged at $78 per barrel.
– Over 50% of the 700 million euros allocated for share buybacks has been completed.

Fleet & Growth: As of June 30, the Ryanair Group’s fleet included 156 B737 Gamechangers. We anticipate this number will rise to over 160 by the end of July, though this is still 20 aircraft short of our contracted deliveries for Summer 2024. We are collaborating closely with Boeing and have observed improvements in the quality and frequency of deliveries throughout Q1. Although there is a possibility of further delays in Boeing deliveries, our priority remains ensuring the timely arrival of the remaining 50 Gamechangers before Summer 2025.

European short-haul capacity is expected to remain tight for several years due to significant engine repairs needed for A320s, ongoing delivery delays from OEMs, and continued airline consolidation. This includes Lufthansa’s recently approved acquisition of ITA (Italy), IAG’s postponed acquisition of Air Europa (Spain), and the forthcoming sale of TAP (Portugal). These capacity constraints, combined with our notable unit cost advantage, robust balance sheet, low-cost aircraft orders, and industry-leading on-time performance, will support a decade of profitable low-fare growth, aiming to reach 300 million passengers by FY34.

Q1 FY25 Business Review

Revenue & Costs: In Q1, our scheduled revenue decreased by 6% to €2.33 billion. Although traffic grew by 10% to 55.5 million passengers, our customers benefited from lower fares, which were reduced by 15%. This reduction was partly due to the absence of Easter in the first half of March and a higher level of price stimulation than initially anticipated. Ancillary sales rose by 10% to €1.30 billion, translating to approximately €23.40 per passenger. Consequently, total revenue saw a slight decline of 1%, settling at €3.63 billion. Operating costs rose by 11% to €3.26 billion, just surpassing the rate of traffic growth. Fuel hedge savings helped to counterbalance the increase in staff and other costs, which were partially driven by delays in Boeing deliveries.

For FY25, we have hedged 75% of our fuel volumes at just under $80 per barrel and 85% of our euro/dollar operational expenses at $1.11, securing savings of over €450 million. We have also leveraged the recent drop in oil prices to boost our FY26 fuel hedging to nearly 45% at around $78 per barrel. This robust hedge position provides a buffer against significant fuel price fluctuations.

Balance Sheet & Liquidity: Ryanair boasts one of the most robust balance sheets in the industry, holding a BBB+ credit rating from both S&P and Fitch. At the end of the quarter, we had €4.49 billion in gross cash, despite spending €0.50 billion on capital expenditures and €0.25 billion on share buybacks. Net cash increased to €1.74 billion as of June 30, up from €1.37 billion on March 31. Our fleet of 566 owned B737 aircraft is completely unencumbered, enhancing our cost advantage over competitors who face higher leasing and financing expenses.

Shareholder Returns: In May, Ryanair initiated a €700 million share buyback program. To date, over 50% of this buyback has been completed. Upon its conclusion, Ryanair will have distributed more than €7.8 billion to shareholders since 2008. A final dividend of €0.178 per share is scheduled for payment in September.

Ryanair’s American Depositary Shares (ADSs) are listed on NASDAQ. Following a recent review, the Board has approved an adjustment to the ADS ratio, changing it from the current 5:1 to 2:1, meaning one ADS will represent two Ordinary Shares. This adjustment will be officially announced and implemented in the coming weeks and will require no action from ADS holders. The change aims to align the Ryanair ADS price with current market standards. With the reduced ADS price, these shares are expected to attract more investors, potentially enhancing ADS liquidity.

Outlook: For FY25, we anticipate an 8% increase in traffic, reaching 200 million passengers, assuming no further delays in Boeing deliveries. As previously indicated, we expect a modest rise in unit costs this year. This increase will be driven by higher ex-fuel expenses, including wage and productivity boosts, increased handling and air traffic control fees, and the impact of multiple B737 delivery delays. However, these costs will be significantly counterbalanced by savings from our fuel hedges and increased net interest income, strengthening Ryanair’s cost advantage over competitors.

While demand in Q2 remains robust, pricing is softer than anticipated. We now project Q2 fares to be notably lower compared to last summer, contrary to our earlier expectation of stability or modest increases. The final outcome for H1 will heavily depend on close-in bookings and yield performance in August and September. As is typical at this time of year, visibility for Q3 and Q4 is minimal, with Q4 not benefiting from last year’s early Easter. It is too early to offer precise PAT guidance for FY25, though we aim to provide an update with our H1 results in November. The ultimate FY25 result will hinge on avoiding any adverse developments throughout the year, particularly given ongoing conflicts in Ukraine and the Middle East, recurring air traffic control staffing issues, capacity constraints, or further Boeing delivery delays.