Ultralow fare pioneer Ryanair bids farewell to ultralow fares

Over the past three decades, Ryanair Holdings built its model around cut-throat fares that ferried people across Europe for as little as the equivalent of a bus ticket. As travellers crowd back onto its planes after the pandemic, the Irish carrier has a word of caution for its customers: the days of ultralow fares may be well behind us.        

Speaking after the company reported near record-high profit, CFO Neil Sorahan said customers are willing to pay more for fares as bookings surge into the crucial northern hemisphere summer period. That means that what was previously your typical €9.99 ticket may now cost twice as much, he said. 

“The days of the 9.99s are possibly behind us for some time,” Sorahan said in an interview with Bloomberg Television. 

Ticket prices across the industry have been edging higher, partly because of robust demand for summer getaways, and partly because of a scarcity of aircraft as airlines clamour to get hold of new models. Ryanair rival EasyJet has upgraded its earnings forecast, saying people are prioritising travel, and carriers from Deutsche Lufthansa to Air France-KLM have seen leisure customers crowd into the business class section of the cabin, offering a respite as corporate travel still lags after the pandemic. 

Ryanair on Monday reported profit after tax of €1.43bn for the fiscal year ended March 31, compared with a loss of €355m a year earlier. 

The Dublin-based carrier expects its fuel bill to be €1bn higher in the current fiscal year, saying that higher revenue will make up for the jump. Earlier in May, the Irish discount carrier ordered as many as 300 Boeing 737 Max jets as it targets 30% of the European air travel market by 2034.

Ryanair rose as much as 38c, or 2.4%, to €16.02. The stock has gained 30% in 2023, compared with a 57% advance at EasyJet.

Cash position

The carrier’s outlook for the current financial year displays a sense of confidence, Bernstein analyst Alex Irving said in a note to clients. “With a net cash balance sheet and cash from operations in our view likely to cover capex on an ongoing basis, we expect cash returns to follow next — though no news on that yet,” Irving said.

Ryanair’s cash position stood at €4.7bn at the end of its fiscal year, and the company said it plans to retain “a broadly flat” net cash-to-debt position. 

Sorahan said he is confident the company will hit its goal of transporting 185-million passengers this year, even after Ryanair cautioned in its statement that the number might be slightly lower because of delays at Boeing, the sole supplier of its aircraft. The airline ferried 168.6-million passengers in the fiscal year that just ended, a 74% jump.

“As things are trending, we’ll hit the passenger numbers. But as always, we’ll be load active, yield passive to achieve that,” Sorahan said.

Ryanair said ticket prices for the summer are trending higher than 2022, with fares 10% above pre-Covid-19 levels. Sorahan said ancillary revenue for services such as priority boarding and in-flight food was “very strong”, rising to €23 a passenger from €19 pre-Covid-19.

Ryanair is Boeing’s biggest buyer in Europe, having built its entire fleet of short-haul aircraft around the workhorse 737 model. CEO Michael O’Leary has been critical of the delays in deliveries of aircraft as Boeing grapples with manufacturing glitches with the jet.

The Covid-19-era shutdown of some European carriers and scaling back at others has created openings for Ryanair. Sorahan cited growth in domestic flying in Italy — where Alitalia was succeeded by the smaller ITA — in Greece and other sunspots in Europe driving demand this summer. 

Longer term, Sorahan expects the carrier to grow in Germany, Morocco and Scandinavia.

Bloomberg