Jan 29, 2024

Ryanair Lowers Profit Guidance on Fuel Costs, Online Demand

Kate Duffy, Bloomberg News

Passengers board an aircraft, operated by Ryanair Holdings Plc, on the tarmac at London Stansted Airport, operated by Manchester Airport Plc, in Stansted, UK, on Monday, Nov. 6, 2023. Ryanair will pay out a dividend of €400 million ($430 million) and plans to hand over about a quarter of annual profit to shareholders as Europe's biggest discount airline benefits from growing traffic. , Bloomberg

(Bloomberg) -- Ryanair Holdings Plc said its battle with so-called “pirate” websites is hurting profit, as the discount carrier lowers fares to keep its planes full.

The shares fell on Monday after Dublin-based Ryanair trimmed its earnings forecast, citing the added impact of rising fuel costs. It now expects profit of up to €1.95 billion ($2.11 billion) for the fiscal year ending in March — almost 5% below the €2.05 billion previous top-end of its range.

The company, a big customer for Boeing Co. planes, sounded a reassuring note about 737 Max aircraft deliveries for the coming summer high season. Ryanair is already seeing better quality out of the planemaker’s Seattle factory, and doesn’t foresee added disruption to its delivery schedule, Chief Financial Officer Neil Sorahan said in a Bloomberg TV interview.

A more immediate concern is the unexpected decision by online travel agencies such as Booking.com in December to remove unsanctioned Ryanair listings. While the carrier said the move was welcome — Ryanair says the sites add unwarranted charges — it forced the airline to cut prices over the short term. The disruption hurt revenue, and load factors slipped during the third quarter.

“That probably cost us one or two points on load factors — and fares,” Sorahan said.

Profit after tax came in at €15 million in the third quarter, down from €211 million in the same period last year. While rising fuel costs have also been “a big headwind,” the company is well hedged going forward, Sorahan said.

The current fourth quarter is typically the weakest period for Ryanair, which makes most of its money during the peak summer travel season. The airline said it will benefit from the Easter holiday falling in March this year, but the timing won’t fully offset the weakness in demand.

The low end of the full-year profit forecast remains at €1.85 billion, Ryanair said Monday in a statement.

Ryanair fell as much as 3.9%, among the biggest declines in the Stoxx Europe 600 Index. The shares lost 3.3% to €18.19 at 8:09 a.m. in Dublin.

Boeing Planes

Sorahan said Ryanair would happily snap up any extra Boeing jets after airline chiefs criticized the US planemaker for quality lapses following the in-flight blowout of a fuselage panel on a Boeing 737 Max 9 jet earlier this month.

American Airlines Group Inc. Chief Executive Officer Robert Isom said Boeing needs to get its act together while United Airlines Holdings Inc. removed the as-yet uncertified Max 10 model from internal plans after delays.

Bloomberg News reported last week that United was looking for ways to get out at least part of its Max 10 order, and Boeing rival Airbus SE is working to free up delivery slots to accommodate the marquee customer.

“If they don’t want their Max 10s or otherwise, we’ll take them,” Sorahan said. “The price is right, we’re very happy with this aircraft, we’d love to get more.”

O’Leary previously said he was unsure whether the Max 10 would gain regulatory certification by the end of this year. However, Ryanair remains supportive and said it will stick with an all-Boeing fleet.

Sorahan said he was “reasonably confident” that 50 out of the previously planned 57 Max 8 jets would be delivered by summer, consistent with earlier expectations.

Website Skirmishes

Ryanair’s full-year guidance could still be thrown off by unforeseen twists, including the Israel-Hamas conflict, the war in Ukraine and potentially further delivery delays from Boeing. The company is also seeing a cost impact from the phasing out of free carbon credits for airlines in Europe.

The company has been fighting with what it calls “unscrupulous” online travel agencies for years, which use bots to scrape Ryanair fares and repackage then with add-ons. After legal skirmishes, the company has now reached deals with some of these players, including with Loveholidays.com and Kiwi.com.

Read more: Ryanair in Deal With Online Travel Firm After Legal Skirmishes

“We’ve seen a marked change in the attitude of these OTA pirates,” Ryanair CEO Michael O’Leary said in a company presentation. “We were approached by some of the bigger ones.”

What Bloomberg Intelligence Says:

“Removal of its flights from online travel agents risks a slightly more negative impact than anticipated on 2H load factors, and thus yields, as higher wages and fuel prices further pressure cost-per-passenger.”

— Conroy Gaynor, BI industry analyst

Ryanair’s earnings follow discount rival EasyJet Plc, which last week reported strong summer bookings and passenger revenue. Meanwhile, Wizz Air Holdings Plc said capacity would remain flat year-on-year in the first half of fiscal 2025 as the carrier has been forced to ground dozens of planes due to engine issues.

The tight capacity will help boost summer fares throughout Europe, Sorahan said.

--With assistance from Tom Mackenzie.

(Updates with today’s trading from second paragraph)