Ryanair scales back traffic forecasts as wildfires weigh on airlines

Ryanair’s profit nearly quadrupled in the first quarter, but the airline warned of weaker than expected demand growth.

Earnings for the Irish low-cost airline rose 290 per cent to €663m (£573m) for the three months ending June, about €43m higher than an analyst poll had predicted.

Trade benefited from a stormy Easter followed by record passenger numbers in May and June.

The update increased pressure on its London-listed rivals, with the potential for weaker demand, further heightening concerns about the impact of wildfires on the continent.

Higher average air fares and additional sales increased revenue by just over €1 billion to €3.65 billion, outpacing the increase in operating costs, mainly driven by rising jet fuel costs.

More than 50 million people flew with Ryanair during that period, even after the airline canceled hundreds of flights due to French air traffic controllers’ strike over President Emmanuel Macron’s controversial pension reforms.

However, it has cut its annual passenger expectation from 185 million to 183.5 million due to delays in receiving new planes.

Boeing was due to deliver 51 jets to the company by the end of April, but supply chain issues meant the last didn’t arrive until July.

Ryanair further warned that some aircraft shipments expected by April 2024 could be hindered for up to two months.

But the company is plowing ahead with an expansion plan, following an order for 300 new Boeing 737-Max-10 aircraft, worth an estimated $40bn (£32bn) at list prices.

Subject to shareholder approval, these jets will replace Ryanair’s older 737NGs and form part of the airline’s goal of increasing its annual passenger numbers from 168 million to 300 million by 2034.

For the current summer season, the Dublin-based group plans to run its largest-ever schedule, with more than 3,200 daily flights carrying up to 600,000 daily customers.

Ryanair CEO Michael O’Leary said cost-of-living pressures such as rising mortgage rates may require some ‘fare stimulus’ to fill seat capacity this winter.

He also reiterated his call for ‘urgent reform of Europe’s inefficient ATC’ [Air Traffic Control] system,” which he said would “reduce flight delays, flight times and unnecessary carbon emissions.”

Ryanair petitioned the European Commission in May to protect ‘overflight’ – the ability of aircraft to fly over a country – during national air traffic control strikes following recent industrial action in France.

Last week, EasyJet blamed ‘unprecedented ATC disruption’ for canceling about 1,700 summer flights, affecting more than 180,000 passengers.

Both EasyJet and Ryanair continue to operate normal flights to bushfire-ravaged Rhodes, despite other airlines canceling all holiday trips to the island.

Shares of London-listed airlines and travel agencies fell Monday morning due to the fires Wizz Air Holdings Shares down 3.9 per cent to £25.64, EasyJet shares 2.65 percent lower at 463.4p and TUI shares Down 2.4 percent at 594.5p, placing them among the top ten biggest FTSE 250 fallers.

The Ryanair share was 2.8 percent lower on Euronext Dublin at € 15.98.

Danni Hewson, head of financial analysis at AJ Bell, said: ‘Reports from holidaymakers having to leave hotels and sleep in gymnasiums or on the streets could lead others to think twice about booking last-minute breaks for fear they too will be caught up in the chaos.

Falling share prices for Jet2, EasyJet and TUI, among others, suggest investors fear they will fall short of near-term earnings forecasts and may incur additional costs for operating repatriation flights to bring customers home.