UPDATE – The recovery of air travel remains so fragile and financial headwinds are so strong that Ryanair only can say that it hopes to return to “reasonable profitability” in the current FY23. Close-in bookings, low fares, high fuel prices, and significant risks from the war in Ukraine and Covid are all disclaimers in its guidance for the new financial year, Ryanair said on May 16 in its FY22 results presentation.
The fragility was confirmed with the emergence of Omicron in December 2021 and the Russian invasion of Ukraine in February, which had an immediate effect on bookings and yields, notably around Easter. The high fuel prices forced Ryanair to reduce fares to stimulate travel. Fares are expected to remain under pressure, as has happened in previous quarters. While Ryanair is optimistic that it will recover passenger numbers to 165 million from 97.1 million last year, visibility is too limited right now to provide accurate profit guidance for FY23.
“There is no doubt that traffic is recovering. We have seen in recent months stronger traffic and higher load factors but most of that has been driven by lower fares. In the current first quarter, fares will be below 2019 levels. There is a prospect that fares in the September quarter could be ahead of 2019 but that recovery is fragile and could be subject to damage quite significantly by adverse news flows”, said Michael O’Leary in a prepared presentation. “But we expect Ryanair to grow faster in a recession, as has happened before after 9/11, the Gulf war, and in previous economic crises.”
Full-year loss reduced to 355 million
Ryanair reduced its FY22 net loss to €-355 million from €-1.015 billion in FY21. The operating loss was €470.1 million versus €839.4 million. Operating expenses soared to €5.3 billion from €2.5 billion, with fuel costs up by 237 percent to €1.8 billion and airport handling charges also much higher as traffic increased.
Total revenues tripled to €4.8 billion from €1.6 billion, of which €2.652 billion is from passenger revenues (FY21: €1.036 billion) and €2.148 billion from ancillary revenues (€599.8 million). To stimulate travel, Ryanair lowered its fares by an average of 27 percent to €27. The carrier earned on average €22 from ancillary revenues from priority boarding and seat reservation. Load factors were up to 82 percent from 71 percent last year.
Ryanair bolstered its liquidity to €3.6 billion by the end of March compared to €3.2 billion a year earlier. Including its assets/fleet, total liquidity stood at €15.2 billion. Net debt was reduced to €1.45 billion from €2.28 billion, with a target to get to net-zero debt in FY25 despite the high level of capital expenditure on the fleet. The carrier remains committed to restoring in the next three years the five to twenty percent pay cuts for its staff that were imposed at the start of the Covid crisis, but negotiations with unions and workforce representatives have yet to produce agreements on certain markets. The quicker Ryanair returns to profitability, the quicker the airline will restore the pay cuts. The airline says it has no staff shortages but is worried by labor issues at airports and at air navigation service providers.
Ryanair seeking up to fifty second-hand Boeing and Airbus aircraft
The airline group expects to grow the number of Boeing MAX 8200s for Ryanair, Buzz, and Malta Air from 61 by the end of March to seventy this summer, up five from its previous schedule. This has been at Boeing’s request. Another 55 should join until the coming winter, although Ryanair – like other customers – is struggling to get the aircraft on time over supply chain issues. Reliability and fuel consumption of the MAX has exceeded expectations while passenger and crews offer positive feedback
To cope with short and medium-term growth between 2026-2030, Ryanair has submitted requests for proposals for up to fifty second-hand, O’Leary said. The airline is in “advanced discussions with a number of lessors on both Airbus and Boeing second-hand aircraft.” But Ryanair prefers to add more MAX to the fleet, especially the MAX 10. O’Leary said that he hopes that Boeing “can finally return to the table” after Ryanair terminated the talks last year when Boeing was asking too high prices for the aircraft. O’Leary said in March that he was in no hurry to get a deal. Boeing needs to “up its game” and win more new orders or risk that Airbus will have it for lunch.
Just as he did exactly a year ago, O’Leary went public with more critical comments on Boeing later today on CNBC. He said he found it hard not to agree with recent comments from Avolon’s Domhnal Slattery and ALC’s Steven Udvar-Hazy, who criticized Boeing for having lost its focus and urgently needs to reinvent itself. “Boeing needs a management reboot”, O’Leary told CNBC, not just for the MAX but to restart the 787 program as well. He reaffirmed his disappointment that Boeing hasn’t come forward to resume discussions on the MAX since Ryanair walked away from the table in September.
Ryanair claims to have grown its market share in various key markets. (Ryanair)
The MAX fleet with its high-density cabin should contribute to a capacity increase to 115 percent of 2019 levels this summer, with 770 new routes added and fifteen new bases opened. Ryanair expects to gain a forty percent market share in Italy, twenty percent in Austria (Vienna), and improve further on the thirty percent in Hungary, “the home of our so-called low-cost competitor.” (Wizz Air). Its share in Ireland is currently at 55 percent, that in Poland at 35 percent.
For all airlines, high fuel prices are a big concern, but less so for Ryanair. For FY23, the airline is in a good position as it has hedged eighty percent of fuel for mid-sixty to a mid-seventy dollars per barrel with swaps and caps. “This gives us a huge competitive advantage”, said O’Leary, who added that the remaining twenty percent still needs to be sourced at current high prices. For FY24, ten percent of fuel costs are hedged. The airline has hedged 85 percent of its carbon credits for FY23.
