Ryanair dividends unlikely before next year

Ryanair shareholders will have to wait until at least next year before the airline restarts returning cash to them. Chief executive Michael O’Leary told analysts that the Irish group would use its resources to pay off debt – it has €1.6 billion in bonds falling due in March and August respectively – and to cover €2.5 billion in spending, mostly on new aircraft due from Boeing.

Once it hits its target of cutting its €960 million net debt to zero by April next year then O’Leary says it will look to restoring payments to shareholders. But investors are also likely to see a different approach to rewarding them, particularly over the longer term. Previously the airline has made returns to investors through special dividends and share buy-backs. O’Leary said on Monday that he does not “see us doing large share buy-backs in the future”. Instead the airline seems set to favour modest, steady dividend payments.

This reflects its chief executive’s view of the company’s likely growth. He believes that the 10 per cent-plus rates of expansion that it now enjoys will slow to around 6 or 7 per cent annually by around 2026/27.

Meanwhile, Ryanair expects to fly 185 million passengers in its next financial year, which begins in April, from 168 million in the 12 months to the end of March, an increase of slightly more than 10 per cent. Its low costs, around €30 per passenger, excluding fuel, should mean it will have the cash to pay for its new aircraft and repay two bonds, for €850 million and €750 million.

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O’Leary is adamant that the group will not refinance this debt as that could cost 4 to 5 per cent. Avoiding this step will allow it to maintain an existing cost advantage over rivals that have seen their expenses increase since pandemic restrictions ended while the Irish carrier has kept its own outgoings close to their pre-Covid levels.