As Ryanair shareholders are well aware, the interests of consumers and investors don’t always align. The airline’s stock plunged by 17 per cent in the wake of announcing a 46 per cent drop in profits and impending lower fares during the summer. While customers continue to utilise the airline – Ryanair predicts a transport of 200 million passengers this year, marking an 8 per cent increase, the caveat is that this is “at a cost,” as stated by CEO Michael O’Leary.
O’Leary has revealed to stakeholders that albeit the attempt to discontinue some of the budget-friendly seats during the past four weekends in the hope of luring more passengers to pay extra, unfortunately these attempts haven’t been successful resulting in a shortfall of 50,000-100,000 reservations every weekend.
The dwindling stock price gives Ryanair an appearance of affordability, as per Bank of America, which values the airline at just nine times its projected earnings for 2025. However, investors might find themselves questioning the credibility of current consensus estimates.
CEO O’Leary openly acknowledged the volatility and uncertainty of the situation. At present, only 34 per cent of the seats for September have been sold, and less than 20 per cent for October. Therefore, with consumers holding their ground, a “above 5 per cent” fall in second-quarter fare prices is predicted, along with a potential “double-digit decline in pricing.”
O’Leary warned that if a steep drop in price is essential, then the entire third and fourth-quarter pricing strategy could be jeopardised. Ryanair had previously reaped the benefits from soaring fare prices in the summers of 2022 and 2023. However, now it appears that the power has shifted to the consumers.