Key Highlights
- First-quarter net profit plunged 34% to €538m, falling 7% short of analyst expectations
- Average ticket prices declined 6% compared to the prior year as Middle East tensions impacted demand
- Costs for unhedged fuel surged more than 100% following US-Israel military actions against Iran
- Second-quarter fare guidance revised to “modestly lower” versus previous flat expectations
- Morgan Stanley maintains “overweight” stance with €27.60 target price
Shares of Ryanair plummeted over 5% during Monday trading sessions after the European discount carrier unveiled a significant decline in quarterly earnings and lowered its revenue projections for the peak summer travel period.
The Irish airline posted net profit of €538 million during its fiscal first quarter spanning April through June, representing a 34% contraction from the €820 million recorded in the corresponding period last year. The figure underperformed analyst expectations of €579 million and fell substantially below Morgan Stanley’s projection of €639 million.
Top-line revenue increased a modest 1.1% year-over-year to €4.43 billion, marginally trailing consensus estimates of €4.48 billion.
The primary headwind came from pricing pressure. Average ticket prices retreated 6% during the three-month period—a sharper decline than the carrier had previously anticipated—as passengers delayed bookings amid escalating geopolitical uncertainty in the Middle East region.
Chief Executive Michael O’Leary identified two primary factors during the company’s earnings conference call: “The principal cause of this was 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.”
Soaring Energy Expenses
Following military strikes conducted by the United States and Israel targeting Iranian facilities in February, jet fuel prices experienced a sharp upward spike. While Ryanair had secured hedging contracts for the majority of its fuel requirements, the unprotected portion—approximately 20% of total needs—saw costs more than double throughout the quarter.
Crude oil briefly touched $90 per barrel following an intense weekend of US-Iran military exchanges before moderating slightly. Maritime traffic through the Strait of Hormuz, a critical chokepoint for global petroleum supplies, has essentially ground to a halt.
A temporary peace agreement reached last month provided short-lived respite to energy markets, but those improvements evaporated as diplomatic efforts collapsed and hostilities resumed.
Excluding fuel, per-passenger costs actually registered 1.5% below analyst projections, while the carrier maintained a robust 94% load factor, indicating aircraft continued operating at near-full capacity.
Forward Guidance and Boeing Developments
Ryanair has revised its second-quarter fare expectations, now anticipating “modestly lower” pricing compared to the year-ago period, retreating from earlier projections of stable fares. O’Leary characterized the expected decline as falling within “something low to mid single digits.”
The carrier maintained its full-year passenger traffic projection unchanged, forecasting a 4% increase to 216 million travelers.
Regarding cost structure, Ryanair withdrew its previous guidance calling for mid-single-digit unit cost inflation. Management now indicates outcomes will hinge on unhedged fuel price fluctuations, which analysts had been modeling at 1%-2% growth.
Chief Financial Officer Neil Sorahan emphasized Ryanair’s expanding competitive cost advantage. He noted the unit cost differential versus Wizz Air has ballooned from 26% pre-pandemic to exceeding 81% currently, while the gap compared to easyJet has widened from approximately 70% to roughly 150%.
Addressing Boeing deliveries, O’Leary indicated MAX-10 certification is anticipated “sometime in September or October,” with initial deliveries of 15 aircraft scheduled for spring 2027. The airline has hedged 60% of its 150-aircraft MAX-10 order against euro-dollar exchange rate volatility at a rate just above 1.23.
Morgan Stanley projects full-year consensus net profit estimates will decline from approximately €2.1 billion to around €1.9 billion following these results, though the firm maintained its “overweight” recommendation and €27.60 price objective.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
