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Ryanair's H1 Profit Slump: Weaker Fares, Moderating Price Weakness

AInvestMonday, Nov 4, 2024 1:12 am ET
1min read
Ryanair, Europe's leading low-cost airline, reported an 18% fall in H1 profit, primarily driven by a 15% drop in average fares. However, the airline's CEO, Michael O'Leary, recently stated that price weakness is moderating, raising hopes for a recovery in the airline's financial performance.

The decline in sterling since the UK's Brexit vote has significantly impacted Ryanair's H1 profits. An 18% reduction in sterling's value has reduced average fares by 13% to 15% in the second half of the airline's financial year. This currency-related headwind, coupled with increased price stimulation, has led to a 46% drop in profits.

Despite the challenging environment, Ryanair's cost-cutting strategies and operational efficiency have helped mitigate the impact of weaker fares. The airline's unit costs are around half those of its closest competitor, easyJet, and significantly lower than other rivals. This cost advantage enables Ryanair to maintain profitability even with lower fares.


As price weakness moderates, Ryanair's full-year financial performance is expected to improve. The airline has adjusted its full-year guidance to a 7% rise over FY 2016. This positive outlook can be attributed to several factors, including Ryanair's relentless cost-cutting strategies, inspired by Southwest Airlines, and its status as the lower-cost provider in Europe.


Ryanair's moderation in fare weakness has positively impacted its market share and passenger numbers. As of Q3 2024, Ryanair's market share in Europe has increased by 2% year-over-year, with a 15% rise in passenger numbers compared to the same period in 2023. This growth is a testament to Ryanair's low-cost strategy, which enables it to offer competitive fares even amidst moderating price weakness.

In conclusion, Ryanair's H1 profit fall, driven by weaker fares, is a short-term challenge that the airline is well-positioned to overcome. With a moderation in price weakness, Ryanair's cost-cutting measures, and ancillary revenue streams, the airline is poised to maintain its low-cost advantage and continue its growth trajectory. As the airline's financial performance improves, investors can expect a strong recovery in Ryanair's stock price.
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