The return of Asian traffic to Europe and a particularly strong transatlantic market will likely see robust demand for Ryanair from Easter in its Q1 FY24 through the summer period. With other airlines still at lower capacity compared to pre-pandemic levels and Ryanair up, the Irish airline group thinks it is well-positioned to benefit from demand “and hopefully from higher fares”, CEO Michael O’Leary said during today’s Q3 FY23 earnings call. Ryanair expects to benefit from Asian and transatlantic traffic.
Ryanair already saw strong demand in the third quarter, which runs from October through December. October and Christmas traffic was good and in a quarter with almost no disruptions, it helped push total revenues up to €2.312 billion from €1.470 billion. Revenues from 38.4 million passengers (previous year: 31.1 million) were up to €1.447 billion from €788.1 million. Ancillary revenues like priority boarding, preferred seating, and onboard spending rose to €866 million from €682 million or €22.50 per passenger. Load factors were at 93 percent, up from 84.
Operating costs were up 36 percent to €2.2 billion from €1.6 billion, with fuel costs up 52 percent to €908 million and staff costs up by an identical level to €293 million due to pay restoration of staff salaries. Ex-fuel, costs were up by 26 percent to €30 per passenger. The result was an operating profit of €161.7 million compared to €-116.7 million last year. Profit after tax was €211.1 million or €202.1 million if a market-to-market loss on jet fuel caps was included, but was way better than the €-95.8 million reported in Q3 FY22.
After many quarters of stimulating traffic with low fares, airfares were up by fourteen percent over the pre-Covid period in Q3. It all helped to grow market share in some key markets, with Italy now at over forty percent from 26, Poland at 38 from 27 percent, Ireland at 58 from 49 percent, and Spain at 23 from 21 percent. Forward bookings are still close-in, although demand for Easter in April is robust. Ryanair, Malta Air, Buzz, and Lauda plan to operate 230 new routes, bringing the total to 2.450. Ryanair opened new basis in Belfast, Lanzarote, and Tenerife, but closed one at Brussels Charleroi after the airport announced significant cost increases.
Providing there are no headwinds or adverse news coming from the war in Ukraine or Covid, Ryanair expects a full-year profit after tax of between €1.325 and €1.425 billion as it said in its latest update on January 4. This is up from the November guidance of €1.0 and €1.2 billion. It reiterates its guidance to carry 168 million passengers in FY23, growing to 185 million in FY24. It is too early to provide guidance for the next financial year.
MAX deliveries might be pushed out
That growth is subject to deliveries from Boeing. The MAX 8200 fleet grew by eleven aircraft in Q3 to 84, providing a net fuel consumption benefit over the 737-800 fleet. The first NGs have received the MAX scimitar winglets that should reduce fuel burn per aircraft by 1.5 percent. Michael O’Leary counts on the delivery of forty MAX until this summer to bring the fleet to 124, but production issues at Boeing could slip some deliveries beyond the summer: “Boeing have recently improved in the rate and flow of deliveries but we still think they are facing challenges. We aren’t sure if we will get to the 124 aircraft by the end of April. At the moment, we are planning for about 114 through the peak-summer months. If we can get more of those aircraft before the end of May, we will take them, but if they dribble into late June or July, we won’t take those deliveries and dispose of them until the winter.”
Ryanair ended the quarter with €4.1 billion in liquidity and net debt of €0.96 billion, up from €0.5 billion at the end of Q2 thanks to €1.3 billion in capital expenditures. The group reaffirmed it will repay €1.6 billion in bonds in March and August. Capex will increase to €2.0 billion in FY23 and to €2.5 billion in FY24, which will be financed from its cash position. The carrier is 88 percent hedged for fuel for Q4 at $71 per barrel, sixty percent for HY1 at $90, and 53 percent for HY2 of FY24. The lower costs per barrel give it a cost advantage this winter and next summer.
In order to be prepared for the summer growth of ten percent, Ryanair has enrolled over 1.000 cadets in its pilot schools and continues training new cabin crew. It will create some 6.000 new jobs. That also includes non-aviation positions, including 150 IT specialists.
