Ryanair has reported a first quarter profit of €170 million in the three months to end June 2022, reversing its prior Q1 loss of €273 million, however the result is still below the €243 million profit reported for Q1 FY20 in the pre-Covid period. Revenue rose to €2.6bn – a considerable improvement over the €370 million reported in Q1 2021.
During the quarter, Ryanair’s traffic recovered strongly to 45.5m from 8.1m (+9% ahead of pre-Covid), even though the airline noted that Easter bookings and fares were “badly damaged by the Russian invasion of Ukraine in Feb”. Ryanair’s load factor improved to 92% from 73% a year earlier.
Ryanair reports that even though sectors increased by almost 330% and traffic rose 460%, its operating costs rose just 250% to €2.38bn (incl. a significant 560% increase in fuel to €1bn), driven by lower variable costs such as airport and handling, ownership and maintenance and improved fuel burn due to the introduction of more 737-8200s. Lower costs, coupled with higher load factors, saw (ex-fuel) unit cost per passenger drop to €30.
Ryanair’s FY23 fuel requirements are 80% hedged (65% jet swaps at $63bbl and 15% caps at $78bbl) and FY24 hedging has increased to 30% at approx. $92bbl. Carbon credits are over 90% hedged for FY23 at €55 (well below the current spot price of c.€90). The airline states that its hedge position helps insulate it against the spiralling cost of fuel, and provides a significant competitive advantage, particularly into winter 22.
Ryanair has also disclosed that following a review of its operating leases and because the airline had failed to agree “competitive pricing on a new aircraft order” with Boeing, the group opted to extended its Lauda A320 leases by up to 4 years (until 2028), which it says will lock in “material rent savings, enhance operational efficiency and facilitate growth opportunities over the coming years”. Ryanair says that this process is close to completion.
Ryanair has also highlighted its success in ramping up operations as demand returns. Ryanair's Michael O'Leary, said: “Our decision to work with our unions and agree pay cuts to minimise job losses (and keep crews current) throughout the two years of Covid was vindicated in recent months, as many European airlines, airports, and handling companies struggled to restore jobs that were cut during the pandemic. Ryanair seems unusual among the major EU airlines in Summer 22, insofar as we are fully crewed, despite operating at 115% of our pre-Covid capacity. Our business, our schedules and our customers are being disrupted by unprecedented ATC and airport handling delays, but we remain confident that we can operate almost 100% of our scheduled flights, while minimising delays and disruptions for our guests and their families.”
O’Leary also noted the demise of many competing carriers in Europe that had opened up opportunities for the low-fare airline. “These structural capacity reductions have created enormous growth opportunities for Ryanair to deploy our new, fuel efficient, B737 Gamechangers and our market share has increased significantly across major markets in Europe,” he said.
Ryanair's net debt at 30 June fell to €0.4bn (€1.45bn at 31 Mar.), and over 90% of the Group's fleet of B737s are unencumbered. Despite peak capex this year and next, Ryanair states that it still expect to improve the balance sheet to a “broadly zero net debt position over the next 2 years. The strength of our balance sheet ensures that the Group is well positioned to exploit the many growth opportunities that exist in a post-Covid Europe.”
Despite the positive results, Ryanair remains cautious on its outlook for the remainder of its fiscal year 2023. “While there are clear signs of pent-up demand, bookings remain closer-in than was the norm (pre-Covid) at this time of year,” said O’Leary. “We have limited visibility into the second half of Q2 and almost zero visibility into H2, when we are typically loss making.”
As a result, the airline has not provided guidance yet but states that it hopes to be in a better position following its half-year results in November.