Ryanair expects airfares to be much lower as profits tumble

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Ryanair said airfares in the key summer months would be “materially lower” than last year as quarterly profits at Europe’s largest low-cost carrier plunged.

Chief executive Michael O’Leary said on Monday that he expected the drop in fares seen during the spring to be sustained, the latest sign that the post-pandemic boom enjoyed by the airline industry has peaked.

The tougher backdrop now facing airlines drove Ryanair’s profits down 46 per cent to €360mn in the three months to the end of June, a far steeper drop than analysts and investors had expected. During the quarter, average fares fell 15 per cent to €49 per passenger.

“While Q2 demand is strong, pricing remains softer than we expected, and we now expect Q2 fares to be materially lower than last summer,” O’Leary said. The airline had previously guided for fares to be “flat to modestly up”.

Ryanair put some of the blame on the timing of the Easter holidays, but the worsening picture will deepen investor concern over the durability of a two-year travel boom that delivered record-breaking profits for many carriers.

Several airlines on both sides of the Atlantic have warned of pressure on ticket prices in recent weeks.

Lufthansa pointed to “negative market trends”, while Air France-KLM warned of a financial hit after fewer international tourists than expected booked to visit Paris during the Olympic Games.

The US airline industry has been forced to cut fares on domestic routes after overestimating the strength of demand.

“We had been concerned around Ryanair’s update today, albeit clearly not concerned enough,” said Neil Glynn, managing director of Air Control Tower, an aviation research company.

Ryanair said it expected full-year passenger numbers to grow 8 per cent to 200mn, in line with previous guidance, subject to no further significant delivery delays from Boeing.

The airline said it expected to be short of 20 Boeing 737 Max aircraft for the summer season, but welcomed “an improvement in the quality and frequency of deliveries” from the beleaguered US manufacturer in the first quarter.

Ryanair’s revenue in the first quarter fell 1 per cent to €3.65bn despite passenger numbers rising a tenth to 55mn from the same period a year ago. Operating costs rose 11 per cent.

Ryanair declined to offer financial guidance, and said performance over the rest of the summer was “totally dependent on close-in bookings and yields in August and September”.