Ryanair has announced significant fare reductions for the summer season after reporting a near 50% drop in profits.
The low-cost airline attributed the decline to frugal passenger spending and the timing of Easter holidays, with pre-tax profits plunging 46% to €401 million (£338 million) for the three months ending 30 June compared to the previous year.
During this period, average passenger fares decreased by 15%, prompting the airline to implement further discounts in the coming months. “Fares are now moving materially lower than the prior year, and pricing continues to deteriorate,” said CEO Michael O’Leary during a presentation on the company’s latest results.
Following the announcement, Ryanair shares, along with other airline stocks, experienced a sharp decline as market analysts raised concerns about the broader impact on the airline industry due to tighter customer budgets during the peak summer travel period.
Ryanair now anticipates that fares between July and September will be “materially lower” than last year, a significant revision from the previous forecast of “flat to modestly up.” The average fare in June dropped to €41.93 from €49.07 a year earlier.
Chief Financial Officer Neil Sorahan commented on the cautious consumer behaviour, noting that after two years of increased travel demand, there is now a “bit of pushback.”
Despite the profit downturn, Ryanair’s passenger numbers saw a slight increase, limiting the overall revenue decline to just 1%. However, the results indicate that the post-pandemic surge in airline pricing may be waning, with other carriers also warning of decreasing ticket prices.
Ryanair’s summer performance now heavily depends on last-minute bookings, particularly in August and September. The cost-of-living crisis is contributing to customers delaying their holiday plans.
Earlier in July, Jet2 indicated only “modest” price increases this summer, while Lufthansa and Air France-KLM also pointed to negative market trends and financial impacts from lower-than-expected bookings, including for the upcoming Paris Olympics.
Ryanair’s stock price fell 17% on Monday, with other airlines like EasyJet and Wizz Air also seeing declines. The industry is facing challenges, including air traffic control strikes and a global IT meltdown that caused widespread flight disruptions.
Additionally, Ryanair faces potential capacity constraints as Boeing has delayed some deliveries of the 737 Max planes until summer 2025. These delays have affected Ryanair’s expansion plans, compounded by Boeing’s ongoing production and quality control issues. Despite these setbacks, Ryanair noted an improvement in Boeing’s delivery quality and frequency.