Ryanair Shares Fall After First-Quarter Profit Miss
Ryanair shares dropped more than 7% on Monday after the airline reported weaker-than-expected first-quarter earnings.
Europe’s largest budget carrier posted net income of €538 million. That represented a 34.4% decline from €820 million in the same period last year.
The result also missed the analyst consensus forecast of €579 million by 7.1%. It came in 15.8% below Morgan Stanley’s estimate of €639 million.
Revenue Weakness Drives the Earnings Miss
Morgan Stanley said the earnings disappointment was mainly caused by weaker revenue rather than higher operating costs.
Non-fuel costs per passenger were 1.5% better than market expectations and matched the broker’s forecast.
Fuel costs were in line with the consensus estimate. However, they were 6% higher than Morgan Stanley had predicted.
Quarterly revenue increased by 1.1% year-on-year to €4.43 billion. This figure was 1.1% below the market forecast of €4.48 billion but around 1% above Morgan Stanley’s estimate of €4.38 billion.
Ryanair Fares Fall More Than Expected
Scheduled revenue per passenger came in 3% below consensus expectations.
Average fares fell by 6% compared with the previous year. This decline was worse than Ryanair’s earlier guidance for a mid-single-digit drop.
It was also weaker than Bank of America’s pre-results estimate of approximately 4%.
Ryanair Chief Executive Michael O’Leary said the Middle East conflict had made some customers more hesitant to book. As a result, more passengers delayed reservations until closer to their travel dates.
The timing of Easter also affected the annual comparison because part of the holiday period fell within the previous financial year’s fourth quarter.
Higher Fuel Costs Pressure Ryanair’s Profit
O’Leary said the cost of Ryanair’s 20% unhedged fuel exposure doubled during the quarter.
The combination of higher fuel prices and weaker fares placed significant pressure on the airline’s profitability.
Despite these challenges, Ryanair’s passenger load factor remained stable at 94%.
Passenger Traffic Expected to Reach 216 Million
Ryanair expects passenger traffic to rise by 4% during the full financial year.
The airline forecasts that it will carry approximately 216 million passengers. This outlook is in line with estimates from Morgan Stanley and the wider analyst consensus.
However, Ryanair changed its guidance on unit cost inflation. The company said the outlook would now depend heavily on unhedged fuel prices.
Previously, management had forecast mid-single-digit percentage growth in unit costs. Morgan Stanley and consensus estimates had pointed to increases of 2% and 1%, respectively.
Boeing MAX-10 Deliveries Remain on Schedule
O’Leary said Boeing expects the MAX-10 aircraft to receive certification in September or October.
The manufacturer has also confirmed that the first 15 deliveries remain on track for spring 2027.
Ryanair has placed firm orders for 150 MAX-10 aircraft. Around 60% of these orders are hedged against euro-dollar exchange-rate movements at slightly above $1.23 per euro.
Ryanair Maintains a Cost Advantage Over Rivals
Chief Financial Officer Neil Sorahan said Ryanair’s cost advantage over competing airlines continues to increase.
Before the COVID-19 pandemic, Wizz Air’s costs were around 26% higher than Ryanair’s. That gap has now widened to more than 81%.
Sorahan said the cost difference could continue expanding over the coming quarters and years.
The gap with easyJet has also increased. According to Ryanair, the unit cost difference has risen from approximately 70% before the pandemic to around 150%.
Airline Expands Fuel and Currency Hedging
Ryanair has hedged 15% of its fuel requirements for the 2028 financial year at approximately $85 per barrel.
The airline has also hedged 90% of its operating expenses for the 2027 financial year at an exchange rate of $1.15 per euro.
For the first half of the 2028 financial year, around 30% of operating expenses are hedged at $1.20 per euro.
These measures are intended to reduce Ryanair’s exposure to fuel-price volatility and currency movements.
Ryanair Withholds Full-Year Profit Guidance
Ryanair did not provide full-year net income guidance.
The airline also declined to repeat its previous unit cost inflation forecast because of limited visibility during the second half of the financial year.
Management highlighted several uncertainties, including volatile jet fuel prices, rising maintenance expenses and higher employee pay.
Ryanair also expects to face approximately €300 million in additional European Union environmental taxes.
Second-Quarter Fares Expected to Decline
Ryanair now expects second-quarter fares to be modestly lower than a year earlier.
The airline had previously forecast broadly unchanged fares.
O’Leary said the decline could be in the low-to-mid single-digit percentage range.
The first-half result will depend heavily on last-minute bookings during the remainder of August and September. This is despite strong passenger volumes during the summer 2026 travel season.
Morgan Stanley Cuts Its Profit Expectations
Morgan Stanley expects analysts to reduce their full-year net income forecasts following the weaker first-quarter results.
The broker believes the consensus estimate could fall from €2.1 billion to approximately €1.9 billion.
However, Morgan Stanley maintained its “overweight” rating on Ryanair and kept its €27.60 price target.
The broker noted that summer passenger demand has improved, reducing the need for aggressive fare discounts. Nevertheless, second-quarter pricing continues to trend modestly lower.
