Ryanair reported a sharp drop in quarterly profit on Monday as rising fuel costs linked to tensions in the Middle East and weaker ticket prices weighed on earnings, sending the airline’s shares lower along with those of several European rivals.
The Irish low-cost carrier said after-tax profit for the three months ending June 30 fell 34% to €538 million, down from the same period last year and below analysts’ expectations of €579 million. Revenue edged up 1% to €4.38 billion from €4.34 billion, while passenger numbers increased 6% to 61.3 million.
Despite carrying more passengers, the airline said average fares declined by 6% during the quarter. Ryanair shares fell more than 7% in morning trading, while shares in Wizz Air, Lufthansa, Aer Lingus owner IAG and Air France-KLM also traded lower.
Chief Executive Michael O’Leary said higher fuel costs and weaker pricing were the main reasons behind the decline in earnings.
“The price of our 20% unhedged fuel doubled in the quarter and fares fell 6%, primarily we think due to the impact of the Middle East conflict and the timing of Easter,” O’Leary said.
Oil prices have climbed in recent weeks as military conflict between the United States and Iran intensified following the collapse of an interim ceasefire. US forces launched another round of strikes against Iran on Monday, marking the ninth consecutive day of military action, adding to concerns about energy supplies and pushing crude prices higher.
Ryanair said demand remains steady, but customers are booking flights closer to departure, making it difficult to predict pricing for the remainder of the summer. O’Leary said second-quarter fares are currently trending slightly below last year’s levels, with final results depending heavily on last-minute bookings.
The airline said it was too early to provide guidance for full-year profits because of uncertainty surrounding fuel prices, geopolitical tensions and booking patterns.
Chief Financial Officer Neil Sorahan noted that Ryanair remains better protected than many competitors because 80% of its fuel requirements through March are hedged at about $67 per barrel, well below recent market highs. He added that the airline also secured additional fuel hedging for the following financial year after the temporary ceasefire between the US and Iran, although that agreement has since broken down.
Sorahan said current weakness in fares may not last, pointing to signs of consolidation across Europe’s airline industry. He suggested that financially weaker carriers could reduce capacity or leave the market altogether during the winter season, creating a more balanced supply of seats.
He also said the proposed sale of British budget airline easyJet could trigger further consolidation across the sector, reducing competition in some markets and improving pricing conditions in the future.
Although Ryanair continues to fill 94% of available seats, the airline said the outlook for the remainder of the financial year remains closely tied to developments in fuel markets, global conflicts and consumer confidence.
