Ryanair is planning to enter a period of slower profitable growth by 2027, when its Boeing 737-10s start arriving, although the Irish LCC’s passenger numbers are set to double by 2034.
“The growth will slow down,” Ryanair Group CEO Michael O’Leary said, speaking on a May 22 earnings call. “As we get to 2027, with the MAX 10 orders, we don’t expect to be growing at 10% a year when we’re at 225 million passengers, but we do expect to be growing at mid- to single-digits, around 5-6% per year.”
O’Leary’s plans for a decade of careful, slower, profitable growth fits with a recent outlook prediction by Bernstein analyst Alex Irving, who said: “In our view, this is the turning point for the company as it slows growth from the high single-digit rates seen over the last cycle, and into a more mature phase focused on cash returns.”
Ryanair carried 168.6 million passengers during its fiscal 2022-2023, which ended March 31. This metric is expected to increase by over 10% to 185 million in 2023-2024, growing to 225 million in 2026 and hitting 300 million by 2034, representing around 30% of the European market.
“To put that in context, that [300 million] is 100% growth over our pre-COVID figure of 149 million passengers,” O’Leary said. “It is astonishing the demand that is out there across Europe. We have more growth opportunities than we can handle, not just the next 12 months, but certainly for the next five or six years.”
In the short- to mid-term, this growth will be supported by the arrival of 50 Boeing 737-8s each summer, in 2023, 2024 and 2025. Then, there will be a two-year gap before Ryanair’s 150 firm-ordered 737-10s begin to arrive in early 2027. Roughly half of this order will be used to replace older 737 NGs, while the remainder will be used for growth.
As of March 31, the Irish LCC had a fleet of 537 737s, including 98 737-8s. Like many airlines, Ryanair has been affected by aircraft delivery delays. “There is little prospect, because of challenges in the supply chain, that there will be a dramatic increase in [Airbus and Boeing] monthly production for the next two or three years,” O’Leary said. “It will creep upwards, probably in ones and twos, not 10s and 15s.”
O’Leary is “reasonably confident” that all 51 737-8s deliveries that were planned for summer 2023 will be in place by late July. These aircraft were originally meant to arrive by April 2023.
O’Leary previously said no routes would be canceled because of the summer 2023 aircraft delivery delays, and that they would not have any material effect on Ryanair’s schedules, customers or results. During the May 22 update, O’Leary specified that Ryanair will be up to 10 737-8s short in June and early July, affecting 600,000-800,000 passengers, although he described this as “largely immaterial” in a year when Ryanair is planning to carry 185 million passengers.
However, there was a cautionary note in Ryanair’s full-year results, saying that the 737-8 delivery delays might push some of the 2023 passenger growth into the lower-yielding H2, potentially reducing its full-year passenger target. Ryanair is also anticipating a “modest increase” in ex-fuel unit costs, partly driven by higher air crew pay, but summer demand is robust and peak fares are trending ahead of last year.
“We are cautiously optimistic that [fiscal 2023-2024] revenue will grow sufficiently to cover our €1 billion [$1.1 billion] higher fuel bill and still deliver a modest year-on-year profit increase,” Ryanair said.
O’Leary said Ryanair’s fiscal first quarter is going to be “very strong,” with significantly higher fares, because the comparable prior-year traffic and fares were “entirely distorted” by Russia’s invasion of Ukraine in 2022. There is also very little visibility on the second half of 2023-2024, with only 5% of seats currently sold for the December to March quarter.
“We see no reason why demand won’t continue to be strong, but we think we’re right to be cautious,” O’Leary said. “We’ve seen too much irrational exuberance from our competitors, but there’s no doubt that there is a strong recovery underway.”
Turning to Ryanair’s recent commitment for up to 300 MAX 10s, which is set for shareholder approval on Sept. 14, O’Leary said he is paying a “slightly higher price” than Ryanair’s previous order, but he believes new aircraft availability will be “very scarce” in the mid-2030s. “If you factor in the [737-8] delivery delay compensations, the price per seat comes out a little bit less than our last order in 2014.”
He believes this positions Ryanair to take advantage of market opportunities, such as slots at Barcelona and Madrid which might be freed up by International Airlines Group’s (IAG) acquisition of Air Europa. Ryanair has also been growing its market share significantly in Ireland (49% to 58%), Italy (from 27% to 40%) and Poland (26% to 36%).
