Release Date: July 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ryanair Holdings PLC (RYAAY, Financial) reported a 10% increase in traffic to 55.5 million passengers in Q1.
- The company has extended its fuel hedges, saving over $450 million in the current year.
- Ryanair Holdings PLC (RYAAY) is 75% hedged for FY25 at just under $80 per barrel, providing significant cost savings.
- The company has a rock-solid balance sheet with a B+++ rating and strong liquidity of EUR4.5 billion in gross cash.
- Ryanair Holdings PLC (RYAAY) continues to lead in ESG ratings, being the number-one-rated airline by Sustainalytics.
Negative Points
- Q1 profit fell by 46% to EUR360 million due to lower airfares and increased operating costs.
- Revenue per passenger decreased by 10%, and average fares were down 15% in Q1.
- The company faced significant delays in Boeing aircraft deliveries, being 20 aircraft short for the summer schedule.
- European ATC capacity issues caused multiple flight delays and cancellations, impacting operations.
- Pricing remains softer than expected, with Q2 fares projected to be materially lower than last summer.
Q & A Highlights
Q: Michael, before we get into the numbers, in your PR, you're calling for urgent ATC reform. Why?
A: Well, ATC, in the last 10 days of June, delayed 1 in 3 Ryanair flight departures, as it did for many other airlines across Europe. ATC fees across Europe have risen by 15% over the last three years, and yet they are meaningfully understaffed. We're suffering repeated equipment failures, and they're failing to deliver the service we're paying such record prices for. It's unacceptable. Last year, French had 57 days of ATC strikes. This year, so far, we've had three days of French ATC strikes, but actually the ATC performance and ATC delays are up because of this short staffing. We're now calling on EU Commission President Ursula von der Leyen and the Parliament to stop long fingering ATC reform and deliver two key reforms: you must compel ATC to fully staff for the summer schedule; and two, you must protect overflights during national ATC strikes.
Q: Moving to the fleet, what's the latest update on Gamechanger deliveries?
A: We had 156 of the Gamechangers in the fleet at the end of June, which is 10 ahead of where we were at year end. Given how July deliveries are going at the moment, we'd expect to be over 160 by the end of July. So 160 of those available for the peak summer period. But we had plans to have an additional 20 ahead of that when we were setting our stall out for the current financial year. We continue to work very closely. As Michael already said, with Boeing weekly calls taking place to make sure that we get the aircraft on time. And in fairness, we've noticed that the quality and the frequency of deliveries has improved. There's always the risk of Boeing -- further Boeing delivery delays. But at this point in time, our focus has now changed very much towards getting in the additional 50 aircraft that are left in the order book this summer of next year, 2025.
Q: And will you receive compensation for those delivery delays?
A: We get very modest compensation, mostly in the form of maintenance and other credits. Our focus however has been getting the deliveries in here before we get to the end of July, so at least we have the maximum number of aircraft available for August. But the compensation we receive will not reflect the significant loss we're suffering as a result of being 20 aircraft short, which means this year we've reduced our full year traffic guidance back from 205 million down to 200 million.
Q: Looking ahead, when do you expect the MAX 10 to be certified?
A: There's a couple of steps in this. We have to see the MAX 7 certified first. Based on what we're hearing and our expectations, we think that will likely get certified at some stage in the first half of 2025. That would then put the MAX 10 in a good position to be certified in the second half of 2025. And we're still very much planning on the base of having our first MAX 10 in H1 2027.
Q: Back to your summer 24 schedule, what are the call-outs?
A: Well, volumes are strong and we expect volumes to remain strong over the rest of the summer. I think you can see from our June numbers that we carried record traffic over 19 million passengers for the first time. Pricing, however, remains soft and we would expect it to be weaker throughout the summer than in the same period last year. This summer, however, we're operating a record schedule. We've got 200 new destinations, five new bases including for example in Morocco, Tangier, which ties in very nicely with the domestic route operation that we have down there this summer as well. We're committed to delivering as much low fare travel as we can this summer. And I believe indeed over the rest of the year to our customers and our airport partners. And to that end, not only will we continue to take delivery of aircraft through July and August where we won't necessarily be able, and September, where we won't be able to put them into the peak summer schedule but we've also now extended three of the Lauda A320 leases out to 2028, again to facilitate as much growth as we can.
Q: And what's your view on intra-European capacity over the next few years?
A: We're going to remain significantly constrained for the next number of years. We can see even this year, if you look at the Eurocontrol numbers, we're running at about 95% of pre-COVID capacity on average daily flights. Now, some of that may close in a little bit into the peak summer. But the Pratt & Whitney GTF engine issue for A320 operators is not going away. It's going to take a couple of years to sort that out. OEMs, Boeing and Airbus way behind on the deliveries. We're not going to see that backlog getting closed anytime soon. And then on the back of all of the capacity that come out during COVID, we're seeing the M&A story play out in Europe. We already saw the ITA-Lufthansa deal get the green light in recent weeks. I think the Air Europa-IAG deal will also get a positive decision from the European Commission soon. And then TAP is going to go to market if not this year, most likely into next year. And at the same time, with capacity hugely constrained, we're taking another 50 Gamechangers before the summer of next year and with 300 MAX10s, which are going to underpin a decade of growth for Ryanair to 300 million passengers.
Q: Michael, moving to your results. Ryanair reported a Q1 pat of EUR360 million, down 46%. What were the key drivers?
A: Well, Q1, we've seen strong traffic growth up 10% to EUR55.5 million, despite 20 Boeing aircraft delivery delays. Q1 average fares were down 15%. Some of that was the move of the first half of Easter into Q4. But also, underlying pricing has been softer than we thought it would be this summer after two years of 20%-plus fare increases. As a result, Q1 schedule revenues were down 6%; ancillary revenues up 10% to EUR1.3 billion; and operating costs were up 11%, reflecting traffic growth of 10% as our fuel hedge savings offset higher staff costs, ATC handling costs, and also the impact of the Boeing delivery delays.
Q: And that's Q1. What about Q2? How are bookings and fares tracking?
A: Well, as I said, you know, previously, the Q2 was going well and we had very strong traffic numbers in June, where
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
