Over the past three decades, Ryanair Holdings Plc built its model around cut-throat fares that ferried people across Europe for as little as the equivalent of a bus ticket. As travelers crowd back onto its planes following the pandemic, the Irish carrier has a word of caution for its customers: the days of ultra-low fares may well be over.
(Bloomberg) — Over the past three decades, Ryanair Holdings Plc built its model around cut-throat fares that ferried people across Europe for as little as the equivalent of a bus ticket. As travelers crowd back onto its planes following the pandemic, the Irish carrier has a word of caution for its customers: the days of ultra-low fares may well be over.
Speaking after the company reported near record-high profit, Chief Financial Officer Neil Sorahan said customers are willing to pay more for fares as bookings surge into the crucial summer period. That means that what was previously your typical €9.99 ticket may now cost twice as much, he said.
“The days of the 9.99s are possibly behind us for some time,” Sorahan said in an interview with Bloomberg Television.
Ticket prices across the industry have been edging higher, partly because of robust demand for summer getaways, and partly because of a scarcity of aircraft as airlines clamor to get hold of new models. Ryanair rival EasyJet Plc has upgraded its earnings forecast, saying people are prioritizing travel, and carriers from Deutsche Lufthansa AG to Air France-KLM have seen leisure customers crowd into the business-class section of the cabin, offering a respite as corporate travel still lags after the pandemic.
Ryanair on Monday reported profit after tax of €1.43 billion ($1.5 billion) for the fiscal year ended March 31, compared with a loss of €355 million a year earlier.
The Dublin-based carrier expects its fuel bill to be €1 billion higher in the current fiscal year, saying that higher revenue will make up for the jump. This month, the Irish discount carrier ordered as many as 300 Boeing 737 Max jets as it targets 30% of the European air-travel market by 2034.
Ryanair rose as much as 50 cents, or 3.2% to €16.14. The stock has gained 31% this year, compared with a 55% advance at EasyJet.
Cash Position
The carrier’s outlook for the current financial year displays a sense of confidence, Bernstein analyst Alex Irving said in a note to clients. “With a net cash balance sheet and cash from operations in our view likely to cover capex on an ongoing basis, we expect cash returns to follow next – though no news on that yet,” Irving said.
Ryanair’s cash position stood at €4.7 billion at the end of its fiscal year, and the company said it plans to retain “a broadly flat” net cash-to-debt position.
The CFO said he’s confident the company will hit its goal of transporting 185 million passengers this year, even after Ryanair cautioned in its statement that the number might be slightly lower because of delays at Boeing Co., the sole supplier of its aircraft. The airline ferried 168.6 million passengers in the fiscal year that just ended, a 74% jump.
“As things are trending, we’ll hit the passenger numbers but as always, we’ll be load active, yield passive to achieve that,” Sorahan said.
Ryanair said ticket prices for the summer are trending higher than last year, with fares 10% above pre-Covid levels. Sorahan said ancillary revenue for services like priority boarding and in-flight food were “very strong”, rising to €23 a passenger from €19 pre-Covid.
Boeing Glitches
Ryanair is Boeing’s biggest buyer in Europe, having built its entire fleet of short-haul aircraft around the workhorse 737 model. Chief Executive Officer Michael O’Leary has been critical of the delays in deliveries of aircraft as Boeing grapples with manufacturing glitches on the jet.
The Covid-era shutdown of some European carriers and scaling back at others has created openings for Ryanair. Sorahan cited growth in domestic flying in Italy — where Alitalia was succeeded by the smaller ITA — in Greece and other sun spots in Europe driving demand this summer.
Longer term, Sorahan expects the carrier to grow in Germany, Morocco and Scandinavia.
–With assistance from Dani Burger.
(Updates share price in seventh paragraph.)
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