Ryanair Warns of an 'Inflection Point'

Fares are solid, but the airline isn't seeing the close-in bookings it sought. Also: CEO Michael O'Leary shares opinions on M&A, and on online travel agencies that scrape Ryanair's fares.

Dear readers,

Have we reached the post-Covid peak for European airlines?

It's a question Ryanair Group CEO Michael O'Leary asked Monday on his company's fiscal year 2024 first quarter earnings call. Ryanair made plenty of money (€663 million, or about $734 million U.S.) between April and May. And the current quarter, which covers the summer peak, also should be strong as Europeans (along with American and Asian visitors) fly Ryanair for their summer holidays. Yet, you may remember in May, on the last earnings call, Ryanair executives said they would evaluate whether this summer would be solidly profitable or a historic winner based on the strength of last-minute bookings. Those lucrative late-bookers have not materialized.

"I'm a little bit cautious," O'Leary told analysts on Monday. "The close-in stuff has been a little bit weaker for the last four or five weeks. I don't see a reason why at the back end of August or the September bookings will be dramatically different."

Fares remain "marginally higher" than they were in 2022, according to a Ryanair press release, and O'Leary said on the call he's not "overly worried" about demand trends. But he added that fares may have reached a point of "customer resistance," as some Europeans struggle with higher interest rates, bigger mortgage payments, and inflation.

"Load factors are high, but pricing might just be at that kind of inflection point where it begins to soften a little bit," O’Leary said.

Summer will be fine — it almost always is — but after the call, Ryanair stock fell 6 percent. Investors may have been spooked by some of the airline’s comments about the upcoming winter: specifically, that the airline may resort to "some fare stimulation" to fill seats during colder months when it will fly about 25 percent more capacity than before Covid.

Of course, in typical low-cost airline fashion, Ryanair spun the market softening as a positive, with O’Leary noting competitors will operate in the same conditions. Because other airlines have higher costs, they may experience more pain.

"I would welcome a softening in pricing," O'Leary said. "We've had a very strong recovery over the last two summers, but with Ryanair's much lower cost base, I think you're going to see us continue to take market share from competitors."

Read on to learn about Ryanair’s new fiscal year capacity guidance (hint: it’s lower), as well as some classic O’Leary takes on expansion in Albania, future Ryanair acquisitions, and sketchy moves from online travel agencies that scrape the airline’s content. Just a warning: you’ll read some naughty words (in direct quotes), and one overly vivid metaphor.