Ryanair's Profit Plunge Amid Rising Costs and Strategic Changes

Ryanair, the renowned low-cost airline, has encountered significant financial headwinds in its latest quarterly report. The airline experienced a staggering 93% decrease in profits, primarily due to a substantial 35% rise in fuel costs and overall operational expenses increasing by 26%. This decline has dramatically impacted Ryanair's revenues, which stood at €2.7 billion.

In the third quarter, Ryanair's after-tax profits plummeted to just €15 million, a stark contrast to the €211 million earned in the same period the previous year. Despite this quarterly dip, the airline's year-to-date profits have surged by 39% to €2.19 billion. This growth, however, has been overshadowed by the rising operational costs, with the fuel bill alone reaching €1.2 billion.

A pivotal factor in this financial downturn was Ryanair's decision to withdraw from third-party flight provider platforms like Booking.com, Kayak, and Kiwi in December. This move was expected to slightly decrease the load factor by 1-2% through January, although it wasn't anticipated to significantly impact the full-year earnings.

In response to these challenges, Ryanair initiated a price reduction strategy, slashing fares by 10% from January to March. This decision aims to mitigate the lowered yield and load factors expected to extend into the fourth quarter of 2023/2024. Consequently, Ryanair has adjusted its year-end financial guidance to between €1.85 billion and €1.95 billion, slightly down from the earlier projection.

CEO Michael O’Leary highlighted the uncertainty of the full-year result, noting its heavy dependence on avoiding unforeseen events like the Ukraine war, the Israel-Hamas conflict, and further delays in Boeing deliveries.

Despite these setbacks, Ryanair is not slowing down its expansion plans. The airline is set to launch 169 new routes, increasing its network to 2,600 routes across Europe and North Africa. This expansion includes domestic operations in Morocco, connecting 11 destinations. The airline's ambitious goal is to reach a full-year passenger number of 300 million by 2034.

However, Ryanair faces challenges with Boeing's 737 MAX program. Delays in aircraft deliveries have forced Ryanair to revise its traffic forecast for FY 2024/2025, expecting to be short of ten aircraft during the peak summer travel season. These delays have led to a reduction in the expected passenger figures for the next financial year to 200 million and an estimated 2.5% cut in end-of-year profits. O’Leary expressed concern over Boeing's quality control issues but remains open to incorporating Boeing's 737 MAX 10s into Ryanair's fleet in the future.