Ryanair Holdings plc (NASDAQ:RYAAY)'s fiscal first-quarter profit fell 34% to €538 million from €820 million a year earlier. Revenue rose about 1% to €4.38 billion, short of the €4.48 billion ***** ysts expected. Passenger traffic climbed 6% to 61.3 million. Shares fell as much as 7% on the day (July 20). Rival carriers Wizz Air, Lufthansa, IAG, and Air France-KLM all dropped too.
Two things drove the miss. Firstly, fares fell 6% as the Iran war made travelers nervous and pushed bookings closer to departure. Secondly, operating costs rose 11% because the 20% of Ryanair Holdings plc (NASDAQ:RYAAY)'s jet fuel that isn't hedged more than doubled in price, hitting $150 a barrel during the quarter. CEO Michael O'Leary said the conflict, EU jet-fuel supply concerns, and general economic uncertainty forced the airline to cut fares to fill seats. He gave no full-year profit guidance, calling second-quarter pricing "trending modestly down" YoY and noting zero visibility into the second half of the year.
That raises a real question. Is this just a short-term problem for Europe's strongest budget airline, or is it the beginning of a long period of low ticket prices that will last even after the war ends?
BULL CASE
Ryanair Holdings plc (NASDAQ:RYAAY)'s own earnings call is the strongest source for the bull case. CFO Neil Sorahan told CNBC the Middle East conflict will cause a capacity shakeout among weaker European airlines this winter, since carriers without Ryanair's cost base or balance sheet may fail or get absorbed. He confirmed Ryanair paid off its final €1.2 billion bond in May. The corporation is now debt-free and owns its roughly 620 aircraft outright, with about €2.8 billion in cash on hand. Sorahan pushed back on demand fears directly, telling CNBC, "No shortage of bookings. No shortage of people traveling, just travelers booking closer to departure.
#billion #fell
Two things drove the miss. Firstly, fares fell 6% as the Iran war made travelers nervous and pushed bookings closer to departure. Secondly, operating costs rose 11% because the 20% of Ryanair Holdings plc (NASDAQ:RYAAY)'s jet fuel that isn't hedged more than doubled in price, hitting $150 a barrel during the quarter. CEO Michael O'Leary said the conflict, EU jet-fuel supply concerns, and general economic uncertainty forced the airline to cut fares to fill seats. He gave no full-year profit guidance, calling second-quarter pricing "trending modestly down" YoY and noting zero visibility into the second half of the year.
That raises a real question. Is this just a short-term problem for Europe's strongest budget airline, or is it the beginning of a long period of low ticket prices that will last even after the war ends?
BULL CASE
Ryanair Holdings plc (NASDAQ:RYAAY)'s own earnings call is the strongest source for the bull case. CFO Neil Sorahan told CNBC the Middle East conflict will cause a capacity shakeout among weaker European airlines this winter, since carriers without Ryanair's cost base or balance sheet may fail or get absorbed. He confirmed Ryanair paid off its final €1.2 billion bond in May. The corporation is now debt-free and owns its roughly 620 aircraft outright, with about €2.8 billion in cash on hand. Sorahan pushed back on demand fears directly, telling CNBC, "No shortage of bookings. No shortage of people traveling, just travelers booking closer to departure.
#billion #fell
2 months ago
