Ryanair is preparing to slash prices to lure customers back on to its planes before the spring, as it warned of a “hugely uncertain” financial outlook.
The Irish-listed carrier said “media hysteria” over the Omicron variant had worsened its losses in the last quarter of 2021 and shareholders could expect further disruption from Covid, although it was gearing up to run more flights overall this summer than before the coronavirus pandemic struck.
Ryanair made a loss of €96m (£80m) in the last three months of last year – despite revenues four times higher than the autumn of 2020, when stricter international travel restrictions were still in place.
Its chief executive, Michael O’Leary, said the first three months of 2022 would require “significant price stimulation at lower prices” to attract customers. The airline cut its capacity for January by a third after December passenger numbers dropped 1.5 million below forecast after Omicron hit travel.
O’Leary said recent bookings had improved after the easing of travel restrictions but passengers were still booking later and nearer departure. The airline did not change its forecast for a full-year loss to March of €250m-€450m – a wider than usual range.
O’Leary added: “This outturn is hugely sensitive to any further positive or negative Covid news flow and so we would caution all shareholders to expect further Covid disruptions before we here in Europe and the rest of the world can finally declare that the Covid crisis is behind us.”
The chief financial officer said the legacy of the pandemic could mean a long-term change to airline practices, including wearing masks on board.
Neil Sorahan told the Telegraph: “Masks will be something that will be with us for a while longer to come. It’s a bit like after 9/11, we ended up with our toiletries in plastic bags, maybe we’ll have to live with masks for a while longer.”
The current high price of fuel was not a concern, Sorahan said: “We’re the best-hedged airline in Europe at the moment – fuel trading over $91 a barrel this morning we’ve locked in our fuel requirements at $60 a barrel so we’re in very good position on that over the next 15 months.”
Ryanair meanwhile retained ambitions to open bases in Ukraine, should tensions with its neighbour recede, O’Leary said: “If it is not invaded by Russia, it is a country where we would expect to open a couple of bases … Some time in the next two or three years subject to agreements on costs.”
Route planners had visited Ukraine again this month but the authorities were not in a position to discuss Ryanair’s expansion plans, O’Leary said, “as they were somewhat otherwise distracted”.
The airline is targeting growth to 225 million passengers a year by 2026, and has taken delivery of 41 Boeing 737 Max aircraft, after years of delays after design flaws caused two fatal crashes.
O’Leary has repeatedly described the Boeing 737 Max as a “game-changer” for the airline, offering lower costs and lower carbon emissions per flight.
However, its overall footprint will grow: the planned 50% growth over the next five years would be accompanied by only a 16% reduction in fuel use per new plane. It hopes to cut fuel use per passenger by another 10% over the next decade by using synthetic fuels, which are not currently available at scale.
Gerald Khoo, an analyst at Liberum, a stockbroker, said Ryanair was positioned for a strong recovery, adding: “There is growing industry optimism that summer 2022 could represent a near-normal trading period, with strong pent-up demand exceeding restrained industry capacity, so long as international travel restrictions continue to ease.”
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Ryanair prepares price cuts as it warns of ‘hugely uncertain’ financial outlook