Piotr Mitelski Comp 1
Ryanair announced its best-ever annual results, with passenger and revenue growth offset by higher operating costs. However, Europe’s biggest airline by passenger volume guided to softer pricing for the current quarter. Ryanair reported €1.92bln net profit for FY24, up from €1.43bln in FY23. Operating revenues rose 25% YoY to €13.4bln. Passenger volume drove revenues up 32% to €9.1bln, with ancillary revenues up 12% to €4.3bln. Operating costs rose 24% to €11.4bln, and operating profit was up 31% to €2.1bln.
Ryanair carried 184 million passengers, 23% higher than pre-COVID. That averages over half a million passengers per day. The better traffic numbers plus higher fares helped the cost spike: operating costs were up 24% YoY, while fuel costs rose 32%. Ryanair’s average fare rose 21% in the financial year, but Michael O’Leary, the airline’s CEO, is concerned about this summer. “It is a bit surprising that pricing hasn’t been stronger, and we’re not quite sure whether that’s just consumer sentiment or recessionary feel around Europe, but we still see peak travel demand certainly through July and August being strong,” O’Leary said in an investor presentation.
Rising fuel costs are partly driven by slower deliveries in much more fuel-efficient MAX 8-200s. Ryanair noted that it expects 23 fewer deliveries this year than it planned for by July. O’Leary noted that Ryanair expects “modest” compensation from Boeing for these delays. We have stated previously that the compensation typically comes in the form of discounts on future deliveries. Ryanair assesses that this compensation does not offset losses from cutting traffic growth.
Despite the uncertainty, Ryanair announced a €700m share buyback program, as well as plans to pay down bonds and increase dividends.
In summary, the pricing uncertainty will be felt by all airlines in the Eurozone. Ryanair’s slow deliveries are matched by its competitors, whether operating Boeing or Airbus, facing the same issues. That means seat supply will likely remain only slightly higher than last year. With a limited supply, if Europeans decide to travel even later in the summer, Ryanair is likely to benefit. As the lowest-cost operator, it can drive traffic demand better than its competitors. The dividend increase and share buyback demonstrate strategic confidence.
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