Airfare growth less than expected

Ryanair boss: It may be due to ‘recessionary feel’

DUBLIN – Ryanair CEO Michael O’Leary said on Monday that a “recessionary feel around Europe” could be a factor in slower-than-expected growth in airfares as the low-cost carrier posted record annual profits slightly ahead of expectations.

O’Leary warned two weeks ago that summer fares would likely be lower than the 5% to 10% rise it expected as recently as late April. The airline said its fresh forecast of flat to modest year-on-year peak summer price growth was “heavily dependent” on last-minute summer bookings.

With less than 50% of bookings made for July to September, the quarter the airline makes most of its profit, O’Leary said summer pricing could still “go either way.”

Ryanair shares, which fell sharply when O’Leary gave the surprise May 7 warning, were down 1.25% at 18.10 euros ($19.67) Monday. Rival easyJet was also more cautious with its outlook last week.

“It is a bit surprising that pricing hasn’t been stronger and we’re not quite sure whether that’s just consumer sentiment or recessionary feel around Europe but we still see peak travel demand certainly through July and August being strong,” O’Leary said in an investor presentation.

O’Leary’s surprise stems from the fact that delays in new aircraft deliveries and issues with engine parts has constrained capacity in Europe, something airline executives expected to lead to further fare increases during another busy northern hemisphere summer.

Ryanair’s average fares rose 21% in its financial year that ended March 31.

Chief Financial Officer Neil Sorahan told Reuters that the airline had to reduce fares in particular for midweek flights in April and May to boost demand and while the trend may continue into June, it should then improve.

O’Leary said the short-term weakness would not alter the outlook for the next two to three summers of constrained capacity pushing fares modestly higher. “I don’t believe the medium-term story has changed one whit,” he told an analyst call.

The Irish airline, Europe’s largest by passenger numbers, also said it would be 23 jets short of the number Boeing was due to deliver by the end of July and there remained a risk – although “unlikely” – that deliveries could slip further.

O’Leary said production quality was improving and in a potentially positive sign, Ryanair looks set to receive seven jets from Boeing in July versus the three it originally thought.

O’Leary said Ryanair will receive “modest” compensation from Boeing for the delays but that the amount does not reflect the quantum of losses suffered from having to recently cut its forecast traffic growth for the year to end-March 2025 to 198 million to 200 million passengers from 205 million.