Ryanair CEO Michael O’Leary has said that a “recessionary feel around Europe” could be a factor in slower-than-expected growth in airfares as the low-cost carrier posted record annual profits slightly ahead of expectations.
O’Leary warned two weeks ago that summer fares would likely be lower than the 5% to 10% rise it expected as recently as late April. The airline said its fresh forecast of flat to modest year-on-year peak summer price growth was “heavily dependent” on last-minute summer bookings. With less than 50% of bookings made for July to September, the quarter the airline makes most of its profit, O’Leary said summer pricing could still “go either way”.
Rival EasyJet was also more cautious with its outlook last week. “It is a bit surprising that pricing hasn’t been stronger and we’re not quite sure whether that’s just consumer sentiment or recessionary feel around Europe but we still see peak travel demand certainly through July and August being strong,” O’Leary said in an investor presentation. O’Leary’s surprise stems from the fact that delays in new aircraft deliveries and issues with engine parts has constrained capacity in Europe, something airline executives expected to lead to further fare increases during another busy northern hemisphere summer.
Chief Financial Officer Neil Sorahan said that the airline had to reduce fares in particular for mid-week flights in April and May to boost demand and while the trend may continue into June, it should then improve.
