Ryanair warns of drop in air travel demand over next few months

Ryanair expects that even if there is an economic downturn, its low-cost model will protect it from financial strain
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During its latest results presentation for Q1 FY2024, Ryanair warned that it has noticed a slowing down of bookings during June and July 2023. 

According to Ryanair’s chief financial officer (CFO) Neil Sorahan, while demand remains “robust” and fares will be going up by “low double-digits” in Q2 FY2024 compared to Q2 FY2023, the low-cost carrier had noticed a softening in close-in bookings at the end of June and early July 2023. 

“We will be watching that very closely as we go into August and September [2023],” Sorahan said, adding that those months will be key to how H1 FY2024, a financial period between April 1 and September 30, 2023, “actually pans out”. 

However, Sorahan added that “as thing stand, booking and fares are ahead of last year”.  

Meanwhile, Michael O’Leary, the chief executive officer (CEO) of Ryanair, cliamed that the economic slowdown “will” affect Ryanair’s H2 FY2024, as the low-cost carrier has “ambitious growth targets”. 

“We are the only airline growing by 23% in Europe. That means we are trying to add about 30 to 40 million passengers to our pre-COVID volumes,” O’Leary commented.  

The Irish executive added that “passengers will need some price stimulation as we try to maintain that 25% growth into the second half of the year”. 

This will be particularly evident if Consumer Price Inflation (CPI), rising interest and mortgage rates. Still, O’Leary said he remained confident that Ryanair’s cost advantage would shield it from a potential downturn in H2 FYF2024, adding that an economic slowdown “would be good for Ryanair’s growth”. 

“Because people will keep flying. They will just become more price sensitive and therefore more and more people will switch to flying Ryanair in every market across Europe,” O’Leary explained. 

Expectations for the next few financial periods are further dampened due to Boeing delivery delays, with the Irish low-cost carrier lowering its previous FY2024 guidance of a total of 185 million passengers to around 183.5 million passengers “due to Boeing delivery delays in spring and in autumn 2023”. 

Record-breaking summer season 

But for now, Ryanair has boasted about its largest-ever summer schedule with more than 3,200 flights and 600,000 passengers daily. 

The airline ended Q1 FY2024 on June 30, 2023, with a net profit of €663 million ($734.1 million), considerably higher than €170 million ($188.2 million) in Q1 FY2023. According to Ryanair, the result was because of strong demand for flights during the Easter period, an additional holiday in the United Kingdom due to the coronation, and weak performance in Q1 FY2023 due to Russia’s unlawful invasion of Ukraine. 

During the three month-period, Ryanair carried 50.4 million passengers, earning €3.65 billion ($4 billion) in revenue with an average load factor of 95%. Its fleet totaled 558 aircraft, including 119 Boeing 737 MAX-8200 “Gamechangers”. 

In May 2023, Ryanair ordered 150 Boeing 737 MAX-10 aircraft with 150 options. If the company’s shareholders approve the order during the Annual General Meeting (AGM) in the fall of 2023, deliveries will be completed between 2027 and 2033. 

“While the cost gap between Ryanair and competitor airlines continues to widen, as previously guided, we expect to see an increase of approx. €2 in exfuel unit costs this year due to annualised crew pay restoration, higher crew ratios, increased ATC & route charges and the impact of Gamechanger delivery delays,” Ryanair concluded. 

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