Despite 7.6 million more passengers than in the same period last year, Ryanair’s losses for the first quarter of its financial year 2022 have deepened. On July 26, the carrier reported a €243 million net loss compared to €-185 million for the April-June quarter last year. Ryanair blames the loss on Covid-19 that “continued to wreak havoc” and put fares under significant pressure. Loss Ryanair deepens as fares come under pressure.
Total revenues increased from €125.2 million to €370.5 million, with ancillary revenues exploding from €24.5 million to €178.6 million or €22 per passenger. That’s not surprising, as last year the Irish low-cost flew only 0.5 million passengers during the first lockdown of 2020 compared to 8.1 million in Q1 this year. Of these, 5.3 million were carried alone in June.
As operations went into top gear again, expenses for fuel, airports, and handling, and route charges also increased by 116 percent to €675 million, resulting in an operating loss of €304.5 million versus €187.6 million last year.
CEO Michael O’Leary identified two major factors that contributed to the higher loss. Most flights over the Easter period were canceled and the easing of travel restrictions in May and June by the UK and Irish governments was slower than expected. At the same time, crews were kept current. To stimulate traffic, Ryanair significantly lowered its ticket prices, which, of course, negatively impacted yields.
Since the UK announced it would lift all restrictions from July 19, there has been a surge in bookings for Q2 of two million per week. For July, the airline expects to carry around nine million passengers and ten million in August, which will be the highest level since February 2020 when it carried 10.5 million. September and October levels are also very strong.
No visibility as bookings are close in
As bookings remain close in and fares come under pressure, Ryanair says it has no visibility on the remainder of FY22. “Not because we don’t see the traffic recovery, but because it is very difficult to determine at what price and what yields”, said O’Leary. Passengers carried for the full year could increase to between 90-100 million, slightly better than previous guidance of 80-120 million. As it said in May, it could end the year at a very small loss or at break even.
The airline expects to benefit from “materially lower intra-European capacity for the foreseeable future” as competitors like easyjet, TAP Portugal, and Alitalia reduce fleets. But the success of this depends on rising vaccination rates within Europe and no new mutations. This hopefully will result in a similarly strong recovery as has been seen in the US. O’Leary was full of praise for the European Digital Covid Certificate that facilitates safe traveling.
Ryanair ended the quarter with €4.06 billion in liquidity. Including assets, this is €13.04 billion. It issued a €1.2 billion unsecured bond in May and repaid an €850 million bond in June. Net debt was reduced from €2.28 billion to €1.66 billion.
MAX fuel burn gains exceed expectations
The airline group has taken delivery of the first three Boeing MAX 8200s in June for Ryanair, while nine more are expected to have been delivered by the end of July for Ryanair and Malta Air. Buzz will get its first 8200 in the autumn. O’ Leary is hopeful that he will have sixty 8200s by summer 2022. The airline has 210 on order as it placed a follow-on order for 75 in December. They are all up for delivery over the next four years.
Initial operations in June have seen that fuel burn gains of the MAX exceed the sixteen percent that was expected beforehand. O’Leary said that he expects to start negotiations with Boeing on an order for the MAX 10 by the end of the year, but he repeated that he will only buy aircraft when the price is right for him.
O’Leary hit out at the European Commission and the recently announced ‘Fit for 55’ policy package that ends free allowances under the Emission Trade System (ETS) and will introduce taxation on kerosene from 2023. While Ryanair fully supports initiatives to get to zero emissions in 2050, O’Leary said the proposal results in double taxation. The airline already pays some €630 million per year for ETS and now passengers are confronted with another tax on intra-European flights. “The EU is again designing tax proposals which tax only its own citizens on short-haul flights but are exempting long-haul flights that account for the majority of EU emissions or 55 percent. And none of these taxes are being invested in sustainable aviation fuels. That’s fundamentally wrong.”