Ryanair has revised its profit forecast downwards, citing changes in online travel agency (OTA) partnerships.
Increased costs and removed flights from OTAs have led Ryanair to lower their expected profits. Despite increased passenger numbers, financial targets were unmet.
Ryanair’s Profit Forecast Adjustment
Ryanair has adjusted its annual profit forecast due to unexpected market changes. The budget airline, renowned for its cost-cutting strategies, has been compelled to reduce its full-year profit expectations in response to the removal of its flights from several leading online travel agencies (OTAs). This strategic move resulted in a significant decline in third-quarter profit, falling to €15 million from a robust €211 million recorded in the same period last year. Despite a seven per cent increase in passenger numbers to 41.4 million, elevated fuel costs substantially offset revenue gains, highlighting the complex interplay of variables impacting the budget carrier’s financial performance.
Impact of OTA Flight Removals
The abrupt removal of Ryanair flights from OTA “pirate” websites, acknowledged by the airline, appears to have had a dual effect. While Ryanair observed increased traffic and fares relative to the previous year, the airline’s Christmas and New Year loads and yields were softer than anticipated. In response, Ryanair strategically lowered its prices. Despite an overall average fare rise of 13% to just over €42, much of the expected gain was diluted by the unexpected drop in last-minute bookings, attributed to the OTAs’ actions. The unexpected disruption led to logistical and economic challenges, compelling Ryanair to rethink its pricing strategies to maintain market competitiveness.
Financial Outcomes and Projections
The full-year net profit guidance for Ryanair has been revised to a narrower range of €1.85 billion to €1.95 billion. This adjustment from the previous projection of €1.85 billion to €2.05 billion underscores the airline’s cautious approach, factoring in prevailing uncertainties such as geopolitical tensions and ongoing aircraft delivery setbacks. Ryanair’s net profit for the first nine months, however, saw a year-on-year increase of 39%, reaching €2.19 billion. Despite these gains, CEO Michael O’Leary highlighted the necessity for Ryanair to focus on unforeseen adverse events, such as the Ukraine war and further Boeing delivery delays, which may continue to affect future earnings. Notably, Ryanair’s carryings are anticipated to rise nine per cent to 183.5 million passengers for the 12-month period.
Partnerships and Strategic Alignments
A significant development for Ryanair includes new agreements with OTAs Loveholidays and Kiwi, enabling their customers to book flights directly on Ryanair’s website, ensuring no inflation in prices for seats or ancillary services. This initiative is expected to enhance the customer service offering for both Loveholidays and Kiwi clients. Additionally, a partnership with SAP Concur facilitates automated expense and invoice management for corporate bookings directly through Ryanair’s site. O’Leary indicated that such strategic alignments are instrumental in providing enhanced service offerings, particularly for business travellers, and represent a forward-thinking approach in maintaining Ryanair’s competitive edge in the market. These partnerships aim to streamline operations and augment the airline’s value proposition.
Boeing Aircraft Issues and Quality Control
Ryanair’s ongoing collaboration with Boeing centres around minimising delivery delays and enhancing quality control following an incident with a Boeing 737 Max 9. Although this event caused a temporary setback, it is not expected to impact the Max 8 fleet or the Max 10 certification processes. Ryanair has conducted additional checks on recent B737 deliveries and reported improvements in quality, though acknowledges Boeing’s need for further enhancements. With Boeing’s commitment to increasing quality assessment resources in key locations, Ryanair supports these initiatives as they align with their objective of ensuring operational reliability. This continuous evaluation reflects Ryanair’s dedication to maintaining high safety and quality standards.
Future Market Outlook
O’Leary forecasts continued consolidation in the European airline market, highlighting potential takeovers and sales involving ITA in Italy, Air Europa in Spain, and TAP Air Portugal. Furthermore, O’Leary notes that Airbus A320 fleet groundings and aircraft delivery backlogs are likely to create constraints in short-haul capacity across Europe over the next three years. These challenges, coupled with Ryanair’s cost advantage and strong balance sheet, are anticipated to underpin long-term growth opportunities. The strategic goal is to expand Ryanair’s traffic to 300 million passengers annually by 2034, leveraging the airline’s substantial resources and efficiencies. O’Leary expresses confidence that these factors will catalyse a decade of profitable growth for Ryanair, asserting its position within the competitive airline industry landscape.
Despite facing unexpected challenges, Ryanair remains focused on strategic partnerships and market positioning.
The airline’s long-term vision includes substantial growth and maintaining competitive advantages amidst industry changes.
