Ryanair benefitted from a strong Q2 to record a €225 million profit compared to a €225.5 million loss last year. However, its half-year result produced a €47.6 million loss. The airline’s results remain under pressure as yields are low and the low-cost carrier needs to offer tickets at reduced prices to stimulate demand. This trend makes that Ryanair is up for a challenging winter season.

Besides the Q2 €225 million net profit, the operating profit was €254 million versus just €10.8 million for the June-September quarter last year. Total revenues were €1.784 billion, with ancillary revenues again performing strongly from €360.9 million last year to €703 million this Q3.

On the back of a weak Q1 with a net loss of €243 million, Ryanair produced a net loss between April and September of €47.6 million. This compares to €-410.5 million in 2020. The operating loss for HY1 was €50.5 million compared to €-176.8 million. Revenues ended at €2.154 billion versus €1.176 billion.

Ryanair carried 39.1 million passengers in the first six months of its financial year 2022, compared to 17.1 million in the same period last year. Q1 was impacted by travel restrictions and, as a result, many cancelations around Easter. Q2 was much better as demand increased and traveling became easier thanks to the Digital Covid Certificate in July. But as in Q1, bookings remained close-in and Ryanair needed price stimulation with reduced fares to stimulate demand. Load factors were on average 79 percent in HY1 but consistently over eighty percent from July onwards. 

Demand needs further price stimulation

While October and Christmas bookings are strong, Michael O’Leary said that the visibility of the winter 2022 season remains low. Yields and ticket prices continue to be challenging. Another factor is rising fuel prices. Ryanair has hedged only seventy percent of fuel in HY2 and eighty percent for HY1 FY23. With the uncertainties of the Covid-crisis in mind when it had to ground its fleet against huge hedging losses, Ryanair didn’t want to hedge at 90-95 percent anymore. Instead, it is preferring fuel swaps and modest use of caps. These caps are for $62-72 per barrel, well below the current $80. However, this could pose a risk if fuel prices remain high next year.

Ryanair is expecting to end FY22 with a low 100 million in passengers carried, up from its previous guidance of 90-100 million but lower than the 80-120 million that was announced earlier this year. The net loss should be “a modest €100 to €200 million” but only if the roll-out of vaccinations continues and no new Covid-cases emerge.

“We work hard to rebuild load factors. In fact, we are already well over eighty percent and see ourselves back at over ninety percent in the summer of 2022. But outside of these peak periods like November, the second half of January, the first half of February, yields will be tough. We will be engaging a lot of price discounting to get people back moving and restore confidence into the intra-EU air travel”, O’Leary said.

During HY1, Ryanair announced over 560 new routes as part of the 2.400 routes offered and opened fourteen new bases. The carrier agreed on new base deals with eleven airports and signed long-term extensions with five airports, including London Stansted, Manchester, East Midlands, Charleroi (Belgium), and Bergamo (Italy).
For summer 2022, the carrier will open new bases in Cork, Newcastle, Venice, and Vienna.
At the Austrian capital, Ryanair will base eleven aircraft “as both Wizz Air and Austrian are in retreat.” The strengthening of Vienna fills the void left after plans to build Vienna into a strong hub for its subsidiary Lauda collapsed in 2019.

Italy will also become even more important, with 21 extra aircraft based at seven airports in the country “to ensure that airfares to and from Italy remain low, even as Alitalia (ITA Airways…) has its capacity.” Ryanair will also add more capacity to Portugal, Poland, and Ireland, its home country being stimulated by demand and lower airport charges. Ukraine is set to become an important market next year.

Growth to 225 million passengers in 2026

At its recent annual general meeting, Ryanair adopted a revised strategy that targets aggressive growth for the next five years. Instead of going for 200 million passengers in March 2026, it has now upped its game to get to 225 million passengers. This compares to 149 million in 2019. Ryanair sees an opportunity for this extra growth as other carriers have planned a reduction in capacity while various countries like Ireland, Italy, and Morocco are stimulating tourism to restore traffic. To cater to this demand, the carrier will hire 5.000 employees over the next five years to staff its rapidly growing fleet.

Ryanair will take delivery of 210 Boeing MAX 8200s through 2026. It has now eight in service and expects to grow this number to 65 by next summer. Although load factors are not high enough to benefit from the four percent higher seat capacity of the 8200 over the 737-800, O’Leary is satisfied with the reliability, fuel consumption, and customer feedback of the MAX. The airline sold ten 737-800s of the oldest in Q2, with eight of them to be retired by the summer of next year.

“Boeing needs to come back to the table”

On the failed negotiations on a MAX 10 order after Boeing raised aircraft prices, O’Leary said that “Boeing needs to come back to the table. They need an order from Ryanair. But frankly, we have enough aircraft for the next four to five years. We will wait until Boeing gets competitive on pricing again before we place another order. (…) Boeing is losing customers all over the place and the one large customer they have outside North America, Ryanair, was very close in active negotiations for the MAX 10. But Boeing walked away from discussions. They were looking for a price increase at a time when prices should be falling if Boeing is to recover its production.” He referred to Jet2’s decision to opt for the Airbus A320neo for the same reason and also mentioned IAG, which according to O’Leary has walked away from an order for 200 MAX (announced at the 2019 Paris Airshow as a Letter of Intent) in favor of Airbus.

Ryanair ended September with €4.24 billion in cash. Adding assets of €7.6 billion of its ninety percent unencumbered fleet makes €14.07 billion in total. The carrier issued a €1.2 billion unsecured bond in May while repaying an €860 million 2014 loan in June and a £600 million ‘Covid loan’ to the UK in late October. The net debt stood at €1.5 billion. Capital expenditure for FY22 will be around €1.2 billion including maintenance and €2.3 billion in FY23. It will finance its existing MAX order from its balance sheet and high credit rating but likely also by issuing new bonds, doing sales and leasebacks, and through so-called Jolco financing deals.

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