Ryanair expects to emerge as Europe's only major low-cost carrier

Michael O'Leary said concerns about the impact of recession and rising consumer price inflation on Ryanair’s business model have been greatly exaggerated.

Ryanair predicted it would eventually become Europe's only major low-cost carrier, with Chief Executive Michael O'Leary claiming a widening gap on costs would make rivals easyJet and Wizz takeover targets.

"Europe is inexorably moving towards a similar out-turn as North America where you will have three very large, somewhat higher cost, high-fare connecting carriers, and one very large low-cost carrier" in Ryanair, O'Leary said.

Wizz chief executive Jozsef Varadi, who has always maintained his cost base is comparable to Ryanair's, last week said he did not see his airline as a takeover target.

EasyJet, a hybrid player focused on undercutting legacy airlines at established airports which does not see itself as a direct competitor to Ryanair, did not immediately respond to a request for comment.

O'Leary said both of the rival airlines "would be candidates for M&A over the next couple of years because ... they are stuck in a space where they are mid-airfare, mid-cost and they are not able to compete with us on cost or pricing."

Ryanair posted its largest-ever profit for its key summer season and said it expected very strong passenger and fare growth for years to come as customers switch from higher-cost rivals.

But it also warned Europe's recovery remained susceptible to shocks from Covid-19 and Russia's invasion of Ukraine and said aircraft delivery delays from Boeing could hit its capacity next summer.

Ryanair shares were up by more than 5% in trading today.

The Irish airline, Europe's largest by passenger numbers, earned €1.371bn in the six months to the end of September, the first half of its financial year.

While that was just short of a forecast of €1.385bn in a company poll of analysts, it was well ahead of its previous first-half record of €1.29bn in 2017.

"Concerns about the impact of recession and rising consumer price inflation on Ryanair’s business model have been greatly exaggerated," Chief Executive Michael O'Leary said.

"We expect these strong fundamentals will continue to underpin robust traffic and average fare growth for the next 18 months at least," he said, pointing to a possible influx of US and Asian passengers to Europe next summer.

Profit and traffic are poised for "very strong growth" until 2025 assuming oil prices remain relatively stable, O'Leary added in a video presentation.

A loss-making winter, during which Ryanair hopes to boost traffic 10% above pre-Covid levels, is likely to leave the airline with an after-tax profit of between €1bn and €1.2bn for the year to March 31, he said.

O'Leary said the July-September quarter had delivered growth on a scale he had never seen, with 15% traffic growth combined with a fare rise of 14% thanks to the combination of pent-up demand and the post-Covid retrenchment of rivals.

Reuters