Air Freight News

Ryanair flexes muscles to build post-pandemic lead over rivals

Ryanair Holdings Plc intends to pump more capacity into European markets in the coming months, keeping ticket prices low so it can overpower weaker rivals as travel rebounds in Europe.

The region’s biggest low-cost carrier said Monday that it expects to post a profit this quarter, even as it prioritizes filling planes until demand fully rebounds. The summer high season should help propel Ryanair to breakeven or leave it with a small loss for the year ending in March, assuming vaccine rollouts contain the pandemic, the company said as it posted a smaller-than-expected first quarter loss.

Ryanair is putting its strong balance sheet to work, hedging on fuel prices to hold down costs, expanding in places such as Italy, Scandinavia and Morocco, and rolling out a fleet of new Boeing Co. 737 Max planes it dubs “Gamechangers” for their ability to ferry passengers more efficiently across Europe. It’s betting rivals from network giants Air France-KLM and Deutsche Lufthansa AG to a restructured Alitalia SpA won’t be able to keep up.

“It appears that we are at a tipping point for Ryanair to rebound even stronger as the market leader post-pandemic,” Davy analysts Stephen Furlong and Ross Harvey said in a note to clients.

Dublin-based Ryanair said passenger numbers should exceed 90 million in fiscal 2022, after previously predicting they’d be closer to 80 million. Pre-pandemic, Ryanair ferried about 150 million people.

Summer Profit

Receipts from add-ons such as priority boarding and seat reservations will help support margins until demand recovers fully, Chief Financial Officer Neil Sorahan told Bloomberg Television.

“We would hope in Q2 that we make a profit,” he said. “A lot will depend on how that final outcome is, but we have a lot of hopes as we get into the autumn as well. Germany and central and Eastern Europe have been very strong.”

The loss of 273 million euros ($322 million) for the three months through June was slightly narrower than the 277 million-euro average estimate of analysts. Ryanair lost 185 million euros in the year-ago period as hoped-for Easter traffic failed to materialize.

Ryanair shares advanced 2.7% as of 9:28 a.m. in Dublin. The stock is little changed this year.

Lower Fares

Sanford C. Bernstein analyst Daniel Roeska said the passenger outlook bolsters evidence that “the recovery is real and happening right now,” while calling the fiscal 2022 outlook “cautious.” Though summer earnings will be vital, limiting winter losses will also be key, he said.

Ryanair said the chief focus now is on filling planes, and that it will cut fares to help occupancy attain pre-Covid levels. The first-quarter load factor was 73%, and Sorahan said the objective is to reach 90% or so over the fiscal year, with pricing strengthening toward the end of the period and into next summer.

In the meantime, Ryanair has been expanding its footprint. Recent deals have helped the Irish carrier double its capacity at Rome’s Fiumicino airport, add routes to Helsinki and prepare to launch bases in Turin, Italy, and Agadir, Morocco, over the winter.

To keep costs in check, Ryanair has locked in 60% of its anticipated fuel purchases for fiscal 2022 at $565 per metric ton, and is about 35% hedged for fiscal 2023 at $600, it said. Jet-fuel prices stand at about $628 per ton, according to the International Air Transport Association.

Ryanair has also started taking delivery of 210 Max jets, after ordering a special model that contains more seats, while using less fuel than earlier 737 versions. The company said this month it would hire 2,000 pilots over the next three years to fly them.

Britain, Ryanair’s biggest market, remains a question mark. Frequent changes to travel restrictions combined with costly testing requirements have led people there to travel less this summer, though even there things are “picking up again,” Sorahan said.

Bloomberg
Bloomberg

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© Bloomberg
The author’s opinion are not necessarily the opinions of the American Journal of Transportation (AJOT).

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