Ryanair profit boosted 40% by European ‘reluctance’ to fly to US

Europeans who holidayed locally rather than travelling to the US helped Ryanair increase profits by 40% between April and September. 

The low-cost carrier said healthy demand over the summer months saw its fares rise 13%, as it increased annual passenger forecasts after finally taking delivery of long-awaited Boeing aircraft. 

“There’s been a reluctance” to holiday in the US, said group chief Michael O’Leary. “Transatlantic traffic, which is pricing up aggressively, has been very muted during the summer and more and more families are staying at home and holidaying in Europe, particularly in the Mediterranean.”

At the same time, he predicted a weakening UK economy would help the carrier, as British families became more cost-conscious when flying: “I think more and more people will switch down for travelling with Ryanair. We get more price sensitive, particularly families travelling for midterm breaks, Christmas, or their summer holidays.”

O’Leary also called on Stansted, Ryanair’s largest UK airport, to build a second runway to increase its capacity. The airport had “greenbelt land” around it and could build a new runway for “£500 million (€570 million) to £600 million (€684 million)”, he predicted.

Soaring revenues

In contrast, O’Leary did not expect Heathrow’s third runway would be built “in my lifetime, and not in my children’s lifetime”.

Revenues at the budget airline increased 13% to €9.82 billion in the first half of its financial year, compared with the same period last year.

Ryanair benefited from the timing of the Easter holiday, which fell into the first quarter of its financial year. Pre-tax profits came in at €2.89 billion, compared with €2.06 billion. 

Ryanair increased its passenger forecast for the year to 207 million, up slightly from its previous 206 million prediction, after strong demand and the earlier than expected delivery of some Boeing 737 Max 8 aircraft. 

The new planes will allow Ryanair to “selectively” add capacity over Christmas and New Year. The airline had previously flagged that growth this year would slow because of late aircraft deliveries from Boeing. 

Falling oil prices

Ryanair said that bookings for the coming quarter, including over Christmas, were slightly ahead of last year.

The company was also set to benefit from falling oil prices, and shifts in the US dollar, O’Leary said. 

It has hedged next year’s fuel at under $67 (€58) a barrel, compared with the $76 (€66) it is paying this year. “This will knock €650 million off our fuel bill next year,” he added.

However, Ryanair would use the savings to bolster its cash position ahead of the next travel shock – such as another pandemic or economic downturn – rather than using it to lower fares, O’Leary said. “We have significant capacity to further reduce air fares […] but I don’t see any reason to stimulate demand unless there’s some really deep economic shock or unforeseen event out there.” 

Ryanair had also fixed the exchange rate it would use when paying for the delivery of the first 50 Boeing 737 Max 10, O’Leary said. “These are huge cost savings that we’re trousering that give me enormous confidence for the next year.”

He said new aircraft, and strong demand, gave him confidence that the airline would grow to 300mn passengers annually within the next eight years.

Shares fell 1.6 per cent to €25.85 in morning trading in Dublin, but have soared 35% this year, valuing the company at €27.2 billion.