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May 21, 2024
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The news from Ryanair is going to scare its competitors.  Ryanair reported a 7% increase in H1 profits to €1,168m as AGB and lower fares delivered 12% traffic growth to 65m customers and a 2% jump in load factor to 95%.  Average fares fell 10% to €50, but H1 unit costs also fell by 10% (ex-fuel down 5%).   The airline’s growth was spread widely across Europe as it opened 73 new routes and six new bases. This winter it will take delivery of 31 new 737-800s and will open six more bases in Bucharest, Bournemouth, Hamburg, Nuremberg, Prague and Vilnius.
Ryanair 737MAX200
As competitors scale down their business, well funded Ryanair is moving into the gaps.  Airports have little choice.  This trend is encouraging more primary airports to incentivize Ryanair to grow while incumbents cut back. The shift in Ryanair’s growth from secondary to primary airports continues, and at the end of 2016 for the first time Ryanair will operate to a majority of primary (105) rather than secondary (95) airports.  Ryanair has essentially forced airports to face reality and cut their costs.  The long term implications of this are going to be very interesting.

Particularly scary for the competition is Ryanair’s rude health.  Ryanair’s balance sheet remains one of the strongest in the airline industry. At the end of September it had net cash of €77m despite having spent over €600m on CAPEX, €200m on debt repayments and €468m on share buybacks during the half year. The airline completed its seventh share buyback in June at a cost of €886m, bringing total returns to shareholders since 2008 to over €4.2bn. The airline claims it will continue to return surplus funds to shareholders subject to market conditions as long as it remains profitable, cash generative, and can fund  CAPEX and other operational requirements.  With this in mind, the Ryanair Board authorized a further share buyback of up to €550m over the four month period from November 2016 to February 2017. Ryanair expects to split this 50/50 between ADR’s and ordinary shares, to ensure continued its 50% EU ownership requirement.

Ryanair goes on to say they expect to carry just over 119m customers in 2017 and this growth requires it to raise long term traffic forecast by over 10% from 180m to over 200m customers annually by March 2024.  This news has to leave many airline executives across the EU very uncomfortable – they cannot stop Ryanair and their own costs are simply not competitive.  Legacy carriers are in big trouble.  Especially if Ryanair enters the long haul market as many expect. Despite the uncertainty of Brexit, Ryanair believes that it can deliver profitable growth across the EU by controlling costs, lowering airfares, and maximizing load factors.
The news has to leave Boeing pleased as Ryanair is built on the 737.  Of course this will add to pressure at easyJet and Airbus to try to match this growth.  As these two big LCCs fight for market share, you know that they can only grow the market so much.  Most of their increased share is going to come from the legacy carriers with have costs that reflect their business models.  The next decade is going to become even messier for EU airlines.  If so many EU airports have already given up the fight against Ryanair, the rest of the industry will probably also cave.
author avatar
Addison Schonland
Co-Founder AirInsight. My previous life includes stints at Shell South Africa, CIC Research, and PA Consulting. Got bitten by the aviation bug and ended up an Avgeek. Then the data bug got me, making me a curious Avgeek seeking data-driven logic. Also, I appreciate conversations with smart people from whom I learn so much. Summary: I am very fortunate to work with and converse with great people.

1 thought on “Ryanair’s 200m scary passenger goal

  1. And they show little sign of sliding into complacency, lethargy and ultimately stagnation leading to decline.

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