The airline sector is notoriously volatile, and Ryanair’s recent results reflect this reality. The company reported an 18% decrease in post-tax profits for the half-year, totaling €1.79 billion, and revised its passenger forecasts downward for the upcoming financial year.
However, this perceived downturn might be misleading. Recent challenges have primarily stemmed from three key issues: delays in Boeing aircraft deliveries, ongoing conflicts with online travel agents like Booking.com and Kayak, and a decrease in fare prices. Encouragingly, improvements are anticipated in all these areas, potentially enabling Ryanair’s CEO, Michael O’Leary, to secure a long-awaited €100 million bonus.
While the lack of new planes from Boeing seems to pose a challenge, Ryanair’s situation is more complex. O’Leary had anticipated that additional Boeing 737 Max aircraft would bolster operations this summer; instead, he found Ryanair facing excessive scheduling, staffing, and operational costs with only 170 of the planned aircraft in service, about 20 fewer than projected.
This elevated cost structure coincided with a shift in consumer behavior, as travelers grew less willing to pay the inflated fares they accepted during the previous two summers, where demand surged post-COVID.
Average ticket prices, including additional fees, dropped by 10% to €52 in the last half-year, exacerbated by certain online travel agencies halting the sale of Ryanair flights. Consequently, even with a 9% increase in passenger numbers to 115 million, revenue saw only a minor rise of 1% to €8.69 billion—falling short of the 8% surge in operating expenses, which climbed to €6.68 billion. This posed a significant challenge for profitability.
Part of this decline can be attributed to what O’Leary describes as a “load active/yield passive” pricing approach: lowering ticket prices to boost demand and maintain a high occupancy rate of 95% on flights. As the strongest capitalized airline in Europe, with a net cash position of €600 million and a fully-owned fleet of 580 Boeing 737s, O’Leary is confident in Ryanair’s ability to outlast competitors in a price war.
Looking ahead, O’Leary suggests that fare reductions will not persist indefinitely, forecasting a potential increase of 5 to 10% next year due to limitations on airline capacity and elevated consumer spending spurred by interest rate cuts. He has also successfully negotiated agreements with 90% of online agents. On the aircraft delivery front, Ryanair’s finance chief, Neil Sorahan, expressed optimism, stating, “I’m hopeful we may be over the worst.”
In a strategic move, Boeing has appointed a new leader, Kelly Ortberg, and announced a $19 billion refuelling initiative. However, Ryanair is taking a more cautious stance regarding aircraft deliveries, projecting around 200 million passengers for the fiscal year ending in March, while lowering the target for the following year by 5 million to 210 million.
This combination of factors indicates a more promising outlook for next summer. There remains a risk of further complications from Boeing, and O’Leary has expressed frustration over Rachel Reeves’s latest adjustments to air passenger duty, although he may be overstating the impact of a £2 increase. Nevertheless, barring any geopolitical disturbances, Ryanair’s shares, which have slightly decreased to €18, appear undervalued—trading at less than 11 times projected earnings as forecasted by Peel Hunt for March 2026. The airline has returned nearly €9 billion to investors since 2008.
To realize his €100 million in options, O’Leary has until 2028 to boost net profits to €2.2 billion or to elevate share prices to €21 and maintain that level for 28 consecutive days. He remarks, “I’d be disappointed if the share price doesn’t get above €25 by then.” Despite the recent profit dip, one might wager on Ryanair achieving new heights.
Thames Water Faces Financial Disputes
In potentially transformative events, Thames Water is currently embroiled in a financial dispute between its A-class and B-class creditors, primarily concerning up to £3 billion of expensive bridge financing supplied by the A-class. This A-class, holding £12 billion in debt valued around 80p on the pound, aims to support Thames until a comprehensive recapitalization can occur after the regulatory agreement with Ofwat, while also avoiding immediate threats of special administration.
However, this proposal would worsen the position of the B-class creditors, who possess £1 billion of loans trading at about 15p on the pound. Consequently, the B-class has raised objections to this financing offer, which includes a 9.75% coupon and additional fees they estimate will approximately double the cost.
The B-class has its own financing proposal, reportedly at 8% with reduced fees, which Thames, burdened with £15.2 billion in net debt, would be prudent to consider. Yet, concerns linger regarding the financial backing of the B-class proponents, predominantly hedge funds and distressed debt investors.
The A-class, a diverse coalition comprising entities like Abrdn, BlackRock, Apollo, and Elliott, retains the power to block the B-class’s plan. While both proposals require 75% approval from both creditor classes, A-class creditors could utilize UK insolvency law to enforce their preferred proposal due to their superior financial standing, an option unavailable to the B-class, despite attempts to elevate their ranking through interim debt offerings.
If the B-class can devise a solid and financially feasible alternative, it is imperative they present it without delay; absent that, their objections lack substantial credence.
Meta’s AI Plans Complicated by Environmental Concerns
In an unexpected twist, Meta CEO Mark Zuckerberg’s ambitions to establish an AI data center in the U.S., powered by nuclear energy, have been disrupted by the presence of a rare bee colony, according to reports from the Financial Times. This situation may lead to a surge in local apiarists near Sizewell C.