Ryanair CEO Michael O’Leary has pointed to ancillaries continuing to support revenue per passenger in Q1 but has urged caution moving into the second half in the context of ongoing Brexit uncertainty. 

Ancillaries per pax were up 14% to €19/$21 driven by strong priority boarding and reserved seat sales and innovation through digital hub *Ryanair Labs, as total ancillaries (including retail and F&B income) jumped 27% to €795m/$884m in the period ending 30 June. Revenue per pax (RPP) was flat at €55.

O’Leary acknowledged the important contribution made by ancillary revenues during an investor call this morning (29 July) despited the revised FY20 guidance on revenue per pax (+2-3%, down from +2-4%) in the context of a ‘fairly grim’ operating environment.

MAX DELIVERIES SLASHED

Profits in the reporting period FY20 Q1 fell by 21% to €243m due a 6% decline in average fares to €36 and higher fuel and staffing costs, although the brunt was somewhat softened by a 11% rise in traffic to 42m and the aforementioned positive impact of ancillaries. Revenue rose by 11% to €2.3bn.

Delivery of the low-cost carrier’s first five Boeing 737-MAX aircraft has been delayed from Q1 to January or February 2020 at the earliest, says Ryanair, which expects to receive around 30 orders in time for Summer 2020 – a reduction of 28.

Left to right: CEO Michael O’Leary and Chief Financial Officer Neil Sorahan.

As a result, Ryanair’s growth rate will be trimmed from 7% to 3%, with cost savings realised from the aircraft not expected to play through until FY2021. 

BREXIT ‘CURVEBALL’

In the FY20 guidance note, the airline notes the ‘current weak fare environment has continued into Q2 and we expect H1 fares to be down approximately 6%’.

Passenger traffic is tipped to increase by 7% to more than 152m, but slightly less than the 153m due to the MAX delivery delay.

The guidance remains pegged to close-in Q2 fare levels, H2 prices, the absence of security events and no ‘negative’ Brexit developments.

“The Brexit and hard Brexit threat has materially increased with the new government in the UK,” stated O’Leary during the call, however he said the airline does not expect flight disruptions due to Europe’s contingency measures for aviation, which temporarily protects forthcoming flights.

Source: Ryanair Q1 Results FY20 Presentation.

“If the government is determined to leave without a deal we say good luck. This is a time for great caution, which is why I want to separate ourselves from the more optimistic statements from our competitors in recent weeks [on fares and yields].”

Ryanair currently operates 2,100 routes to 235 airports from 86 bases. It handled 142m pax in FY19 (including those from Austria’s Lauda) and is aiming at 200m by 2024. 

*Ryanair Labs is due to roll out a new digital platform featuring improved, personalised, guest services later this year.