Ryanair’s shares experienced a significant drop on Monday following the announcement of a 46% decline in quarterly profit after tax, accompanied by a warning of lower-than-expected fares for the upcoming summer months. The budget airline’s financial performance has raised concerns among investors and industry watchers alike.
A Concerning Decline in Quarterly Profits
Ryanair reported a profit after tax of 360 million euros ($392 million) for the three months ending June, marking the first quarter of their fiscal year. This figure represents a steep decline from the 663 million euros reported during the same period last year. At 10:18 a.m. London time, Ryanair shares had fallen by 13.59%.
Factors Behind the Profit Drop
The airline attributed this drop in profit to weaker-than-anticipated fares and the impact of the Easter season falling into the previous quarter. Despite these challenges, Ryanair saw a 10% increase in passenger traffic, reaching 55.5 million passengers during the quarter. The airline also highlighted that it is operating its “largest ever schedule” this summer, with over 200 new routes and five new bases. 
Expectations of Lower Fares
Ryanair Group CEO Michael O’Leary stated that while demand for the second quarter is strong, pricing remains softer than expected. “We now expect Q2 fares to be materially lower than last summer,” he said. This revision in fare expectations has added to the uncertainty surrounding the airline’s financial outlook.
Industry-Wide Impact
The news of Ryanair’s lower-than-expected profits and fare projections had a ripple effect across the European airline industry. Fellow low-cost carrier EasyJet saw its shares drop by over 6%, while Jet2 and Hungarian airline Wizz Air experienced declines of 4% and 6%, respectively. This widespread reaction underscores the interconnected nature of the airline industry and the broader market sentiment.
Looking Ahead: Uncertain Forecasts
O’Leary emphasized the difficulty in making precise forecasts for the remainder of the financial year. “As is normal at this time of year, we have almost zero Q3 and Q4 visibility,” he said. He also noted that the fourth quarter would not benefit from last year’s early Easter, adding further uncertainty. The company hopes to provide more detailed guidance at their half-year results in November.
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