Holidaymakers are set to face increased air fares next summer as demand continues growing while airlines remain short of capacity, according to Ryanair chief executive Michael O’Leary.
Ryanair Holdings predicted on Monday that it could earn between €1 billion and €1.2 billion profit in its current financial year, which ends on March 31st 2023, if Covid or geopolitics cause no further shocks.
The Irish airline giant reported a record €1.37 billion profit for the six months to September 30th as soaring passenger numbers drove recovery from pandemic disruption.
Speaking to analysts after the company published its results, Mr O’Leary said Ryanair believed air fares would increase next summer.
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“European short-haul will still be short of capacity but there will be stronger demand,” he predicted.
Mr O’Leary said that Asian traffic should return, while the stronger dollar would lure more transatlantic passengers to Europe.
Ryanair expects its fares to increase by “mid to high single digits” next year on the back of these trends, which Mr O’Leary said would help it cover higher fuel costs.
The Irish airline reported on Monday that revenue hit €6.62 billion in the six-month period – the first half of its financial year – from €2.15 billion over the same time in 2021.
Ryanair offered 15 per cent more seats this summer than before Covid-19, the only European airline that did not return this year with less capacity than before the pandemic.
High demand drove fares in the peak months of July, August and September up by 14 per cent, compensating for a slight fall in the first quarter and boosting profits to record levels.
“But we still expect to lose somewhere between €100 million and €200 million this winter,” Mr O’Leary cautioned.
He added that if there were no repeats of last year’s omicron variant lockdowns and no further geopolitical shocks or impact from Ukraine war, then second-half losses should be at the lower end of that range.
Ryanair expects to fly 168 million passengers through the financial year up from its previous prediction of 166.5 million.
The airline reported that a record 95.1 million people travelled with it in the first half, as holidaymakers returned to flying following two years of restrictions.
It aims to carry 185 million passengers in its next financial year, depending on deliveries of new Boeing 737 Max-10 aircraft.
The US manufacturer was due to send Ryanair 51 of these by April, but Mr O’Leary said that this would more likely be 40 to 45 by the end of June, which he calculated would “just about” get the airline to its target.
Ryanair is bringing forward full pre-Covid pay restoration to December this year from April 2023 on the back of the strong performance.
The airline will write to unions including the Irish Airline Pilots’ Association, that have yet to agree pay-restoration deals asking them to restart talks.
Earlier this year, Ryanair agreed with most of its unions to restore full pay in April 2023, two years ahead of originally scheduled, subject to how well the business performed.
Chief financial officer Neil Sorahan noted that bookings were slightly closer in than normal at this time of year.
He noted that the airline had enjoyed a strong October and that bookings were holding up into Christmas.
Ryanair has hedged half its next financial year fuel needs at $93 a barrel. Mr Sorahan explained that the airline believed there was as much risk of the price falling as increasing, so was happy with that position.
Mr O’Leary told analysts that increased capacity and cost advantages over rivals would enable Ryanair to continue growing and taking a larger share of European air travel markets.
However, he stressed that risks remained. “This recovery is strong but it’s still fragile and it could fall over,” he said.
