Further price drops looming at Ryanair despite lower profits

Irish low-cost airline Ryanair saw profits nearly halve in the first quarter. Still, the airline expects ticket prices in the second quarter to remain lower than last summer, whereas previously, the company was still assuming stable or slightly higher prices.

Summer is a crucial time for airlines. It is the period when they make the most money.

€360 million profit

Profit for Ryanair, Europe’s largest airline, dropped to 360 million euros, mainly due to lower ticket prices. On average, those prices were 15% lower than a year earlier. A ticket for a Ryanair flight cost an average of €41,93 in the spring, while in spring 2023, the price was still €49,07.

Apparently, consumers are more cautious than thought, which is weighing on ticket prices, although Ryanair welcomed 10% more customers with 55,5 million travelers.

It’s the extras that pay off

During the remaining summer months, Ryanair expects prices to be significantly lower than last summer. The company must apply this policy to fill its planes because 10% off the price means 15% more tickets sold.

“By playing with that price elasticity, Ryanair fills its planes to a high occupancy rate of 94 to 95%,” says aviation economist Wouter Dewulf (UAntwerpen) in De Morgen newspaper. “It will always try to sell all the seats, at giveaway prices if necessary, and then make a profit on the many extras, such as extra hand luggage or your choice of seat.”

Still on target

On the stock market yesterday, Ryanair shares had already decreased up to 17%, accounting for the heaviest price fall in a single day since 2016. Investors were surprised by the magnitude of the drop in ticket prices. Other airline companies are also feeling the pain. EasyJet shares lost up to 8%, and Wizz Air shares almost 10%.

Most airlines have sharply increased capacity since the COVID-19 pandemic, which weighs on prices and, thus, profit margins.

Ryanair, anyway, remains on a target of an 8% increase in traffic compared to 2023, which must bring it to almost 200 million passengers, which would constitute a record.

However, Ryanair indicates that this will depend on 737 MAX deliveries, with only 12 deliveries this year compared to 35 contracted, especially since there remains a risk that Boeing deliveries will slow down further.