Passengers return to the skies but profits still likely to elude Ryanair

With fares remaining “well below” pre-Covid levels the budget carrier still expects to make a small loss, or to just break even, during the 12 months to the end of March 2022. Even so, analyst Richard Flood at Brewin Dolphin remained upbeat about the long-term prospects.

“Ryanair’s Q1 update confirms what we already knew – the summer of 2021 has got off to a slower start than hoped,” he said. “Ryanair, though, remains in rude health – both financially and operationally – and is poised like a stretched elastic band to benefit from the pent-up demand for travel and resume normal operations as soon as conditions allow.”

In his statement to shareholders, chief executive Michael O’Leary warned that the “tsunami of state aid from EU governments” to support insolvent flag carriers such as AirFrance/KLM, Lufthansa and Alitalia will “distort EU competition and prop up high-cost, inefficient flag carriers for many years”. He further predicted that capacity on routes across Europe will be “materially lower for the foreseeable future”.

Michael O’Leary said he is 'encouraged' by vaccination progress

The group has begun taking delivery of hundreds of new Boeing aircraft that it has dubbed “gamechangers”. With higher seating capacity and lower fuel burn than its existing fleet, Ryanair said these planes will give it a further edge over other European airlines for the next decade.

“They will enhance revenue opportunities with 4 per cent more seats, enabling the group to fund lower fares and capitalise on the many growth opportunities that are now available across Europe, especially where competitor airlines have substantially cut capacity or failed,” the company said.

As highlighted by commercial director Jason McGuinness during a trip to Edinburgh last week, Ryanair expects the five million passengers it carried in June to rise to nearly nine million in July, and reach 10 million in August provided there are no further Covid setbacks in Europe.

Mr McGuinness was speaking following the launch of Ryanair’s “recovery schedule” for Scotland which includes 245 weekly flights to 78 destinations, including three new routes from Edinburgh: Italy’s Naples, Knock in the Republic of Ireland, and Zadar in Croatia, all flying twice weekly.

READ MORE: Ryanair predicts 'quick' move by UK on easing barriers to travel

Ryanair flew a total of 8.1 million people across Europe between April and June of this year, up from just 500,000 in the same period last year amid the first wave of the coronavirus pandemic. However, losses increased by almost half to €273 million (£234m), up from €185m a year earlier.

The group said the cancellation of flights at Easter and delayed relaxation of government travel restrictions across the EU into May and June required “significant price stimulation” to encourage customers to book. And while revenues rose by nearly 200% to more than €370m in the first quarter, expenses such as fuel, airport and handling charges drove operating costs 116% higher to €675m.

Ryanair said that during the first quarter, its route development team negotiated lower airport costs, recovery incentives and the extension of “many” low-cost airport growth deals. The latter included extensions at London Stansted up to 2028, Milan Bergamo to 2028, and Brussels Charleroi to 2030.

Mr O’Leary added that the company is “encouraged by the high rate of vaccinations” across Europe.

“If, as is presently predicted, most of Europe’s adult population is fully vaccinated by September, then we believe that we can look forward to a strong recovery in air travel for the second half of the fiscal year and well into [summer 2022] – as is presently the case in domestic US air travel,” he said.