Michael O’Leary told investors on the earnings call after the release of H1 results that strong traffic growth of 9pc reached €115m despite being impacted by Boeing delivery delays. Average fares fell by 10pc, but the trend is improving as the company moves into Q3.
Ryanair has 170 Boeing 737 Max in its fleet, which increased to 172 by the end of October, and the company has opened five new bases and 200 new routes over the summer. The balance sheet remained strong, with over €3.3bn in gross cash and reduced costs, although operating costs rose by 8pc.
O’Leary outlined that Ryanair expects to reach 300m passengers by 2035 if the MAX 10 gets certified, but growth will be slower in FY ’25 and FY ’26, with an adjusted passenger target of 200m for FY ’25 and about 210m for FY ’26 due to delays in aircraft deliveries.
Addressing future challenges, O’Leary noted the difficulties posed by ATC issues, increased taxes in England and France, and geopolitical tensions, which could affect pricing and guidance for FY ’25. Thus far, bookings for Q3 are strong, indicating a stable outlook despite uncertainties related to Q4 bookings due to last year’s successful Easter period not being repeated this year.
Operator: Good morning, and welcome to the Ryanair H1 Results Call. My name is Adam, and I’ll be your operator for today. [Operator Instructions]. I will now hand over to Ryanair Group CEO, Michael O’Leary, to begin. Please go ahead.
Michael O’Leary: Okay. Good morning, ladies and gentlemen. Welcome to the Ryanair H1 Results Conference Call. We’re joined by all the members of the team from different parts of the globe. I’m going to run through quick highlights. As Neil Sorahan, our Group CFO, will give you a comment on the financial highlights, and then we will maximize the time for Q&A.
You’ll see this morning that we reported H1 after-tax profits of €1.8bn, 18pc lower than the prior year H1 profit of €2.18bn. Highlights at the half-year include strong traffic growth of 9pc, reaching a record of €115m. It would have been higher but for the repeated Boeing delays. The key theme is that average fares fell in the half-year by 10pc, but the trend is improving. We were down 15pc in Q1 and down 7pc in Q2.
We’ll turn to Q3 when we look at forward guidance. We have 170 Boeing 737 Gamechangers in a fleet of 608 aircraft at the end of the half, and that had risen to 172 by the end of October. We have five new bases and 200 new routes opened this summer. The approved OTA partnerships now cover over 90pc of all OTAs, protecting consumers from being overcharged. We provide OTAs with direct feed into the ryanair.com website, but in return, they guarantee that the customer will get only our prices. We also receive accurate email costs and customer credit card information, establishing a direct relationship with every cost in our bookings through approved OTAs.
I think again, our strong balance sheet has enabled us to take a very strong fuel hedge position. We’re 85pc hedged for the second half of FY ’25 at $79 a barrel. We’ve taken advantage of recent points of weakness to increase our FY ’26 cover to 75pc at $77 per barrel. We completed the $700m share buyback in August. As of today, we’ve completed just over 30pc of the €800m follow-on share buyback. We expect that pace to continue, likely running until about April or May of 2025. The Board confirmed on Friday that an interim dividend of €0.223 per share has been declared and will be paid in February 2022.
Looking back at the half-year, revenues were resilient, rising 10pc to €2.74bn, rightly ahead of our 9pc traffic growth. I think the key metric is that operating costs performed well.
They rose 8pc, lagging behind the 9pc traffic growth as the fuel savings offset higher staffing costs due to our two-part Boeing delivery delays. We found ourselves gearing up for Boeing deliveries last summer but being over-crewed and over-staffed, ultimately finishing about 5m passengers short of where we were originally going to be. Yet, if you take the half-year into account, operating costs rose slightly less than traffic. The balance sheet remained strong, with gross cash at the end of the half-year being over €3.3bn. Net cash was just €600m as of September 30th, despite paying out €900m in CapEx, €900m in share buybacks, and a €200m final dividend in H1.
We own our entire Boeing 737 fleet, which totals 580 aircraft. It’s fully unencumbered, which I believe materially widens Ryanair’s cost advantage over our competitors in Europe, almost all of whom now work with expensive finance leases, incurring high financing and leasing costs. As I mentioned, we expect to complete the €800m follow-on buyback program sometime in May 2025. By then, Ryanair will have returned almost €9bn, including dividends, to shareholders since 2008, and we will have bought back approximately 36pc of our originally issued share capital.
In terms of fleet and growth, at the end of October, we had 172 Gamechangers in our fleet. We now expect the remaining 9 Q3 deliveries, which were due in September, October, November, and December, to be delayed into Q4. We are hopeful we will receive those in January, February, and March if the Boeing strike settles reasonably quickly. However, there is no doubt that we are now going to miss some deliveries. When we take those nine aircraft in Q4, that leaves us with 29 more aircraft to acquire for summer 2025. We had initially planned to receive those this winter, but we now think it is reasonable to delay about half of those aircraft. Therefore, we expect to receive about 15 of the 29 aircraft before the end of June, in time for summer 2025, while half of them will be delayed into the winter of 2025-2026.
Accordingly, I believe it is sensible for us to begin to adjust our original scheduled traffic. Originally, for FY ’25, we had expected to carry 205m passengers; however, due to the Boeing 737 deliveries, we have had to scale that back to 200m. In fact, I think we will come in just under 200m for the full year. The original target for FY ’26 was 215m passengers, but we will now have to revise that down to about 210m, with the possibility that it may need to be reduced further, potentially to 208m, entirely dependent on how quickly Boeing resolves the strike and provides us with accurate updates on aircraft deliveries.
We are working closely with Boeing. I speak to Stephanie Pope on a weekly basis, and I spoke to her again on Friday. There is voting on the new labour deal today, and I hope to have the results tonight. I must say, I am impressed by the work that has been done on the ground in Seattle. You can lift the phone and talk to someone, which is a change from day one under the previous management. They are working hard to get deliveries; in fact, even during the strike, management was brought in, and we had two aircraft ready for delivery when the strike started.
They brought in extra management to deliver those two aircraft to us during October, so they’re doing everything they can, and they have our full support. I think, though this is generally positive for the industry, we are going to be short aircraft ourselves for FY ’25 and will be more reliant on deliveries in FY ’26. Looking forward, given our experience this year, we were surprised by the price softness. We’ve come off two years of price increases in summer ’23 and summer ’24 of 20pc due to post-COVID recovery. This year, we were a little bit surprised by the price softness, which we believe is due to spending tightness in Europe, certainly the impact of OTAs, and the fact that we’re 5m passengers short of our original target growth.
We are constrained in our delivery next year, and we know that the rest of the European industry is heavily constrained due to Pratt & Whitney repairs. The OEMs are still going to increase production. I would be, medium-term, very optimistic about where pricing is going to go because of these capacity constraints. I saw some of the coverage today in Ireland and England suggesting Ryanair would be scaling back its growth ambitions. However, we will still reach our target of 300m passengers by 2035 if Boeing gets the MAX 10 certified, though we’re going to have to grow a little bit slower in FY ’25 and FY ’26. Once we get the balance of the 29 outstanding aircraft, which might extend into summer 2026, we will be back up to our target of 225m to 230m passengers.
I believe these constraints should be positive for pricing into summer ’25 and summer ’26. As you’re aware, the Board is reviewing the area of control. We confirmed that over 49pc of Ryanair’s issued share capital is held by EU nationals as of September. It is appropriate to review the potential variation of either the ownership restrictions, which prohibit non-EU nationals from acquiring our ordinary shares, or the voting restrictions, which dictate how control is exercised. That process continues. We’ve consulted thus far with about 60pc of our shareholders, and we think it will take another 3 to 4 months. The Board hopes to make a decision on whether it is sensible to vary the ownership or control sometime in the first half or middle of 2025.
Moving to the key element, which is the outlook. At this point in time, I say this: we have about 70pc of the bookings in the system for Q3, but only about 11pc of the bookings for Q4. So, we have very little visibility. However, we’re pretty sure we’re going to finish somewhere between 198m to 200m passengers, with the midpoint just over 199m, which would be up about 8pc on the year, subject to no worsening of the current Boeing delivery rate. Unit costs are performing well, and we now expect full-year unit costs to be broadly flat. Our fuel hedge savings, strong interest income, and some modest aircraft delay compensation will largely offset ex-fuel cost inflation, most notably crew pay and productivity increases, higher handling and ATC costs, and the inefficiency costs we suffered this year due to repeated Boeing 737 delays. Forward bookings into Q3 are strong, and declining pricing appears to be moderating. Again, what does that mean? If I go back, Q1 pricing was down 15pc, and Q2 pricing was down 7pc. Huge prices will be down by less than that, but it will be slightly down. So, I think it’s more of a single-digit decline. The trend, I think, is favorable. But then we get into Q4, and in Q4, we will have a very challenging prior-year comparison because half of Easter was in Q4 last year. None of Easter is in this year’s Q4. But at this point in time, for Q3, the bookings are strong, pricing declines are moderating, but we still have 30pc of Q3 bookings to take, and those will be the key close-in Christmas and New Year bookings, with zero Q4 visibility, and the quarter won’t benefit from last year’s early Easter. That means the prior-year Q4 comparisons will be down. Therefore, I think it’s too early this morning to provide any meaningful FY ’25 PAT guidance. The final outcome will certainly depend on avoiding adverse developments during the remaining five months of the year, especially with the risk of outbreaks of conflict in Ukraine and the Middle East, repeated ATC short staffing and capacity restrictions, and further Boeing delivery delays.
And Neil, can I hand over to you for any comments you’d like to highlight regarding the balance sheet and the P&L?
Neil Sorahan: Okay. Thanks, Michael. You covered it fairly well, but I’ll reiterate. I’m pleased with how costs went in the first half of the year. The hedging that we locked in for the year is delivering good savings, but we’re focusing across all of the other lines as well. This has enabled us to improve the guidance on the full-year unit cost to be broadly flat. Our balance sheet is rock solid with a BBB+ investment grade rating and over 580 aircraft on order, which gives us a massive advantage over everybody else. This is another reason why the cost advantage and the cost gap between us and everyone else is widening because we’re financing ourselves through cash while everyone else is out there raising expensive leases and debt.
Distribution is going well. We’re about one-third of the way through the €800m buyback, as Michael said. That will hopefully get us through the summer of next year. We have now locked in some modest savings on fuel hedging into next year, which is very important in the current volatile oil market we are in. In terms of CapEx, while we’re still guiding €2.3bn for this year, having spent about €1bn in the first half of the year, the reality is that some of that is now likely to slip into next year. Once we have greater visibility on where and when the aircraft are coming in from Boeing, we will revisit that. But it’s more of a timing issue than anything else. I don’t think I really have much more to add, Mike.
Michael O’Leary: Okay. Let’s all go to Q&A, please, and spread some of the questions around to the wider management team here.
Operator: [Operator Instructions]. And our first question comes from James Hollins from BNP Paribas (OTC:BNPQY). James, your line is open. Please go ahead.
James Hollins: Just one for me, actually. So, feel free to spend twice as long as you would have on this. I think the ATC situation, I mean, has clearly been discussed at length by my investors. Maybe any chance you could quantify what the ATC situation was? Not just in Q1; I mean, it seems to me, from your comments, that you very much saw that it lasted into the summer. So, we start to think about, I guess, fiscal ’26 and the not-easy comps. But just as much detail as you can on — and I think you did note it was probably a bigger impact than you had thought. So, I’d love to hear your thoughts on this, maybe as well.
Michael O’Leary: I’ll give you an intro, and Eddie will talk, or maybe Jason McGinnis as well. I just missed the OTA — the impact of the OTA, online travel agency dispute lasted — it started last November. Now it’s undoubtedly taken 2 or 3 — 2 points off our load factors in the third and fourth quarters last year. But it did hit us this summer by more delay than I had allowed for. I mean, the one reason I was a bit specific is I didn’t see any of these bookings going to our competitors. I mean there was no notable bump in load factors or yields of either easyJet (LON:EZJ) or Wizz or the others. But I think we’ve seen a strong bump in both bookings and load for some of the tour offers this year to easyJet, Wizz, et cetera. So, I think some of that traffic did migrate away from the OTAs and Ryanair onto the kind of tour operator sites.
I would, by the way, however — was it the right thing to do? Absolutely, we would fight with the OTAs again tomorrow morning and with anybody who tried to interpose themselves between us and our customers, particularly when they — by imposing themselves, they are overcharging our customers and giving us fake emails and fake payment details. Now I’m pleased to say the relationship with over 90 of the OTAs is now excellent. We’ve only two standouts who have not yet stepped to the approved OTA deals. In other words, two OTAs who are still overcharging our customers, and that’s booking.com, although they are small in volume terms in Europe, and e-Dreams in Spain. Other than that, everybody else has signed up. So, I think if I — and I’m guessing here, if we’re looking at how much of our decline in pricing; if you take our pricing in Q1 and Q2, we’re down 10pc. I think it’s reasonable for now to believe that maybe up to half of it is attributed to the OTAs and
half of it is pressure on consumer spending. I don’t think you can get away from the pressure on consumer spending issue. We went from two years with pricing going up 30pc, 20pc. We did expect to moderate this year. I thought we’d be up between 5pc and 10pc, and we were down 10pc. Sometimes it happens. There’s nothing wrong with the model. I would always sacrifice short-term fares for market share growth, and we have taken enormous quantities of market share from competitors across most of the major European markets this year. Maybe because they will constrain repairs with the engines or have been, in the case of easyJet, they still haven’t recovered their pre-COVID traffic volume, while we are operating at 40pc more than our pre-COVID traffic.
So, I would always sacrifice short-term pricing and short-term profitability for long-term growth and longer-term gains. But I think the OTA impact was more damaging than I had first allowed for. The good news going forward is that forward bookings into next summer with the OTAs are already very strong. Their pricing is well above our average pricing, but we would expect that because they’re taking bookings for summer holidays next year, whereas we’re taking bookings into the winter period. We expect a much easier prior-year comparison next year. When we get to Q1 of next year, we will both have — these two would be in Q1. We should have a strong flow of forward bookings coming from the OTAs, ensuring that all of those customers who are looking through those OTAs are now getting real Ryanair prices. The OTA is free to levy a separate fee, and that’s fine. But we are getting the customer’s email and the customer’s credit card details, so we can interact with each customer as well.
So, I think that has been a very successful outcome for us; however, there’s no doubt we’ve taken short-term pain this year. Looking forward, as of today, we are about 2pc stronger booked into summer 2025 than we were this time last year. Now it’s on a pretty tiny sliver of bookings, but to be 2 percentage points further ahead on a very small number is quite strong into next year. We will likely have a weaker prior-year comparison by the time we get to summer 2025 as well. Eddie, and maybe Jason, if you just want to add something to that?
Eddie Wilson: Yes. It’s Eddie. I mean, the difficulty, James, sometimes is that when you’re looking at comparisons, and when you look in prior years with OTAs, it was impossible to know who was doing what coming through the pipes because they were using other intermediaries to scrape. But what we tend to see now, as Mike has pointed out regarding summer bookings, is that OTAs are not a homogeneous set; they operate in different ways. However, we can definitely see that the holiday ones, which package holidays, book further ahead and at higher fares. If you look at that compared to last year, if we weren’t getting those bookings, we were obviously chasing those to achieve a load factor.
The good thing, as well, is that with the OTAs, it’s not just about switching on the pipe here either, because some are better than others at maximizing what’s coming through. The more tech-focused ones have managed to get up to speed much more quickly, while others haven’t. There is no doubt that we can see the forward booking input for the summer. These are bookings that we didn’t get in January, particularly last year. When this broadly happened in late November last year, you were pretty much sold out into December. So, it was really those summer bookings we were missing in January, along with the effects of other macro factors like interest rates and consumer sentiment.
But I echo what Michael said: the hard decision was the right thing to do. We can see that reflected in customer issues; some of the most challenging customer issues we faced occurred when we had the volumes we do now. People were showing up and being charged check-in fees because the OTAs had just sold this and couldn’t care less at that stage about the problems it was causing consumers at airports. So, broadly, I echo that it was absolutely the right thing to do, although some OTAs are better than others. We still have a little bit to go with some of the OTAs in terms of getting them back to where they believe they were comparable with last year. Jason?
James Hollins: If I take Q1 to Q2 — in Q1, fares are down 15pc. Now, I think as much as one-third of that was probably the first half of Easter moving into prior year Q4. So, if you step back from Easter, I’m doing back-of-the-envelope calculations here; I think Q1 like-for-like is down somewhere between 7pc and 10pc. Q2 is down 7pc. Q3 is down by a figure between 0pc and 5pc. How much of that do you think is attributable to OTAs, and how much is just consumer spending under pressure?
Eddie Wilson: Yes, for me. Yes, I don’t disagree. I think it’s about half and half regarding the interest rate inflation environment. I think last Christmas into January, the consumer was certainly weaker. I could see it in the volumes, particularly, as we said previously, across leisure and the Canaries. However, lots of the markets continued to book very well; Central and Eastern Europe was strong throughout the whole period, and load factors through to summer were very strong. I’m very happy to have the summer finishing out, particularly with a very strong October midterm. Hopefully, that continues into December, but it’s a little bit too early to tell in terms of Christmas. I agree that for summer ’25, it’s very early days so far, but I’m very happy with how it’s selling. All the markets are selling well, and I think that is an indication in terms of the capacity environment as well. I think we are booking earlier this year than they have been for leisure and the Canaries.
Michael O’Leary: Thanks, Jason. Thanks, James. Next question, please.
Operator: The next question comes from Harry Gowers from JPMorgan. Harry, please go ahead. Your line is open.
Harry Gowers: I’ve got two questions, if I can, probably both for Neil. Just on the ex-fuel costs, I think we should start to annualize some of the pay increases put through at the back end of last year. So, maybe a little bit more color on what you’re seeing for ex-fuel cost per passenger, specifically over winter or on a full-year basis. And then related to the first one, on the delay compensation received in the first half, maybe you’re able to quantify the total, and will that continue to be a bit of a tailwind for ex-fuel costs in the next 12 months or so?
Neil Sorahan: Okay. Harry, I’ll start with the second one first. We’re not going to quantify the delayed compensation. It’s modest, as we call out in the press release. In the first half of the year, it came between ourselves and Boeing and falls well short of putting us back in the money for the 5m-plus passengers that we’ve lost. Will there be more in H2? The likelihood is yes. It will depend very much on how many aircraft we get and when we get them. But again, it will be relatively modest in the overall scale of things. On unit costs themselves, total costs have done a very good job. Absent the Boeing compensation, we’ve seen some improvements on other ex-fuel cost lines in the second quarter of the year. We hope that will continue into the third and fourth, which is why we’re guiding total unit costs to be broadly flat rather than marginally down, which we had previously anticipated. We would hope that. next year. With the slower growth, we won’t be over-crewed, as was the case this year. We have enough crews for about 20 more aircraft, and that’s hopefully the case going into next year. As you rightly said, as we move into the first calendar quarter of next year, we’ll start to annualize some of that productivity pay that had come through. However, it’s too early to put numbers on where our unit costs are going to be next year, as we haven’t done the budgets yet. But I think we’ve performed well this year and am pleased that we’re guiding for broadly flat costs while locking in a 75pc fuel hedging that provides modest year-on-year fuel savings.
Michael O’Leary: Thanks, Neil. Thanks, Harry.
Operator: The next question is from Stephen Furlong at Davy. Stephen, your line is open.
Stephen Furlong: Michael, I have two questions. Just where you — looking at the allocation of growth, Michael, I think you called out some scrapping of aviation in Sweden, Hungary, and various regional airports. Could you talk about that and where you see that going? And yes, well, maybe I’ll start with that and then come back for another.
Michael O’Leary: Okay. And again, I’ll ask Eddie to join in. Look, we are too light on aircraft, so we’re doing a lot more churn. We’re taking aircraft away from airports in countries that are using taxes. The two big calls, I’d say, would be the French budget. Now we’re small in France, even though we’re the number three airline, but we’re taking capacity away from France. We’re also reducing capacity in Germany, where the government hasn’t got a clue. They’re not only raising aviation tax but also ATC fees and security charges. Even the Lufthansa Group is now significantly reducing flights, including about 1,000 Eurowing flights in Hamburg.
I’m medium-term optimistic on Germany. I think they will eventually realize that either this government hasn’t got a clue, or this government is going to change its policy and start lowering air travel costs in Germany. Then we had England budget last week, where they increased APD. A new Labour government committed to growth got elected on a solid mix of strike growth, and the first thing they do is increase taxes on air travel on and off and the periphery of Europe. So, we again — and I think this plays into the capacity constraint story for us next year, while we’re looking to deliver between 205m and 210m passengers and more churn. I think you’ll see us moving some capacity out of Germany, France, and England next year. We’re not able to grow in Dublin because of the traffic cap, and we will be redeploying that airport capacity into cutting or scrapping taxes in Hungary and Sweden, which have eliminated their aviation tax entirely. This is, I think, a sign of what’s to come. The home of flight gaming is now stopping aviation tax; they’ve figured out that it’s not the way to grow their economy. In Italy, we’re having significant success at a number of major airports including in Italy, Portugal, and Venice. We hope to see changes at Prescare Airport, where they’ve scrapped the €650 municipal tax. We think there’s a reasonable prospect that more Italian regions will eliminate this tax along with the Italian finance pension tax.
While we are redeploying aircraft, we will probably see about 20 to 25 aircraft growth for next year. However, our growth from 200m to 210m passengers will slow down to about 5pc. So, there will be more churn. A lot of this is due to interesting discussions with some of our airports. We’re stating, “Look, you’re at the bottom of our list; either you’re one of our higher-cost airports or…” Airports are becoming very aware that there are aircraft and capacity constraints and this realization is making them more aggressive. With nobody else in town and no other competition coming over the hill due to capacity constraints in Europe, they are realizing they need to incentivize growth.
I think you will see us reallocate a significant proportion of our aircraft capacity next year to those states and airports that are lowering taxes and fees. This traffic cap in Dublin is particularly damaging. We’ve just opened a second runway, which increases Dublin’s capacity to 60m passengers. However, we have a potentially problematic transport minister, a green transport minister who thankfully is not running for election because he probably wouldn’t get re-elected anyway. We hope that the election will be called next week and that the new government will quickly scrap the tax. We had a very productive hearing in the High Court on Friday; the court is expected to give a ruling today at 2:00 PM, and we are pretty confident that it will rule to stay the IAA’s ability to limit slots next year during the pending appeal to the EU.
All our arguments are pretty clear-cut. The Dublin airport traffic cap is contrary to EU law, and I believe it will be overturned by the EU courts. I don’t know if you want to add anything to that, Eddie, and maybe Juliusz can come in on the Dublin cap.
Eddie Wilson: Yes, Michael, I think you covered most of the geography there, except that I would say that post-COVID, we would have probably expected airport traffic recoveries have moved earlier. But now that it has started in places like Italy, where you have taxes being removed. Or you look at just one example of Sweden, whereby SAS is much smaller than it was pre-COVID. Norwegian is largely back in Norway—what does Sweden do for traffic? They figure it out; they remove the taxes, and we put in 30pc more based aircraft. I think that’s really going to start to play out across Europe where these airports now realize there’s nobody else coming. So, I think the cracks are beginning to show. We see one other area where we have put in a lot of capacity as well, like Morocco, where we’ve got 14 or 15 based aircraft, close to 10m passengers. So, I think there’s a lot more to come, but I think you’ve covered all the geographies there, Mike.
Michael O’Leary: I think one of the points I’d make is that we’re looking at England market next year, and we expect to take our traffic down from about 55m to about 50m passengers. We’re not going to close routes. What we’re going to do is we have enormous capacity in England, but we’re going to trim out frequency. I think you’re going to see us across many of our bigger markets trim frequency next year, switching that capacity to those countries that are scrapping aviation taxes or lowering access costs, and to airports that are incentivizing growth.
Again, I will be optimistic about pricing next year, aside from the fact that we will have a pretty weak prior-year comparison. We will be constraining frequencies—we will not be closing routes. We will not create vacuums; I don’t think we have any competitors in Europe anyway, but we’re certainly not going to invite anybody else into markets where we are currently operating. Trimming capacity in a lot of markets out of Ireland because of the traffic situation in England due to the insane rise in APTs, I think will be very good for our pricing next year. And again, if you come back to Neil Sorahan’s point, if you look at the cost discipline in this business, the cost discipline is unmatched by any other European airline. If we get any bump in pricing next year, you’re going to see a lot of that flow straight to the bottom line. Juliusz, do you want to give us anything on the Dublin cap?
Juliusz Komorek: Thanks, Michael. Maybe just to say that it is accepted by all parties that there is a serious question of EU law to be answered in relation to the cap. This is reflected by the fact that the court case on Friday was argued not only by Ryanair but also by Aer Lingus and, importantly, an association of American airlines who are concerned about the risk of losing some of their slots in Dublin. So, it’s hard to be definitive and hard to predict the outcome of the court process, but we are fairly optimistic that the court will see sense in our arguments and grant the stay that we requested, which would allow for growth to be possible in Dublin next summer.
Michael O’Leary: Stephen, what’s your second?
Stephen Furlong: No, I’ll leave it at that, yes.
Operator: Next question comes from Jaime Rowbotham from Deutsche Bank. Your line is open. Please go ahead, Jaime.
Michael O’Leary: Jamie, go ahead. Okay, let’s move on. We’ll come back to…
Operator: Next question comes from Muneeba Kayani from Bank of America. Muneeba, your line is open. Please go ahead.
Muneeba Kayani: Good morning. It’s Muneeba from Bank of America. I just wanted to follow up on the earlier question about OTAs. You said that over 90pc have been converted. What exactly does that mean? Are they all kind of fully integrated at this point? And then, secondly, where are discussions with the two remaining ones? Do you think you would be able to get them on board as well?
And then a question for Neil around cash return and buybacks. In the video, you mentioned that there could be more. How have you thought about the amount for share buybacks, the €700m and the €800m that you’ve announced this year? And do you have any framework for thinking about the amount into next year? Thank you.
Michael O’Leary: Thanks, Muneeba. Maybe I’ll take the first part, and Neil will give you the second. So, on the OTAs, if you take the range of OTAs making bookings on our system prior to last November, we’ve now signed up over 90pc of them. There are essentially only two remaining OTAs who have not signed up to our deals and are still overcharging or inflating our airfares and overcharging consumers. Those are Booking.com, but they’re very small by volume in Europe, and the other name is bigger by volume in Europe, particularly in Spain. We have multiple court cases ongoing with both. We’ve won in— we’re booking in the States in Delaware. We’ve won numerous cases against e-Dreams in Europe outside of Spain. We have lost a couple of defamation actions in Spain, although generally, those have been ex parte defamation actions where we weren’t able to make our case, and we would be appealing those measures. I expect— I think it’s inevitable that both Booking and eDreams will eventually sign up to our approved OTA agreements, because I think it’s been very difficult, using the transparency of the web, to be able to overcharge your customers while your competitor OTAs are selling them directly Ryanair’s low fares with no hidden charges or inflation. The critical thing is that, so far, we have protected over 90pc of OTA customers, and we expect that figure will rise towards 100pc. Over what period of time? I don’t really know. What else? I think it’s more fair on the OTAs. Unless Jason or Eddie, you want to comment on it? And then Neil can answer the second question.
Eddie Wilson: Yes. Sorry, Michael, it’s Edward. What you have is that, without naming the specific ones, those that are more tech-focused companies are much better at maximising the APIs that we’ve put into them already because they’ve got the tech resources on the other side, while some haven’t. They’re still coming up to speed, particularly because, as part of the OTA agreement, they can’t put on extra charges for things like ancillaries. So, they’ve got to be doubly sure that they are reflecting transparency in pricing. There’s some way to go on some of them where they maximize it. However, those that are selling summer holidays for next year in terms of packages—where it’s a little bit more complex on their side, as they have to include hotels and all that—are generally getting back up to where they would have been. They’re progressing at different paces. But I’m not going to give you details on how many or which ones are behind the curve; it just depends on their tech resources on the other side.
Michael O’Leary: Okay. And just before I hand over the share buyback point, Muneeba, I would draw your attention to two things. One, the Boeing delivery delays this year meant we had less CapEx and more spare cash. Our first instinct was to return that additional cash to shareholders. However, I would highlight, as we’ve done in the results, that we have two large bond repayments coming up in September ’25, €850m, and May ’26, €1.2bn. We are determined to pay down that debt, and that will be the Board’s first priority while maintaining our dividend policy going forward. Neil, on share buyback?
Neil Sorahan: The quantum this year was driven by the lower CapEx, but also, we didn’t have any big bond repayments. We’ve got an opportunity, just given where the share price went in the July and August period, to lean into the €700m buyback. We finished that earlier than anticipated, and €800m, with the slowing CapEx and the delays in Boeing, seems about the right number. That gets us to the next number, but we’re very focused on the €850m bond in September ’25, and there’s a €1.2bn bond beyond that. We’ll continue to pay back 25pc of prior year PAT, and you’re seeing that. We’ve already announced about a €240m dividend in February. There will be another €240m or thereabouts in September of next year. Ultimately, the profitability in the business, the CapEx opportunities, and the debt repayments will dictate how much spare cash is available for the Board to return. But I think we’ll finish the €800m buyback first and then look at what comes after that, Muneeba.
Michael O’Leary: Thanks, Neil.
Operator: The next question comes from Dudley Shanley from Goodbody. Dudley, your line is open. Please go ahead.
Dudley Shanley: Two questions, if I may. First of all, can you just update us on the latest you’ve heard regarding the certification of the MAX 7 and then the follow-on certification of the MAX 10? And then the second question is one of your favorite topics, Michael, which is ATC disruption, especially during the summer for the first wave. Can anything be done about this, and can it be done without route charges going up over time? Thank you.
Michael O’Leary: Great. Okay. I just spoke in court on Friday afternoon. They remain confident that they’re still working away on the certification. They still expect certification of the MAX 7 in the first half of FY ’25, and then the MAX 10 certification will follow reasonably quickly thereafter, sometime in the mid-second half of 2025. I think we can take them at their word. We’ve had some reasonably positive feedback with EASA, who have said that they are reasonably impressed by the MAX 10 and don’t see any reason why that certification won’t take place. It’s a good aircraft, but it’s driven by getting the MAX 7 certified first. What’s important, though, is that work continues even while the strike is ongoing. The ATC disruptions have been in shambles this year. I think what’s really depressing about ATC is that so much of this is fixable. EUROCONTROL figures showed that flights in Europe this summer were at 98pc of their pre-COVID volumes. So, it’s not that the skies are overcrowded or that they’re dealing with huge growth; they’re actually dealing with fewer flights than they had in 2019. But they’re short-staffed. In many cases, they’re short-staffed because people simply won’t come to work on Saturdays and Sundays. Or, as in the case of the French, they’ve negotiated a deal with the French unions where they can report to work three hours late. Now, if you’re unaccounted for or reporting to work three hours late, it doesn’t make much difference. But if you’re a pilot or an air traffic controller and you’re scheduled to be on duty at 4:00 a.m. but report at 7:00 a.m. because you can, then the whole first wave gets delayed.
So, there are two things that can be done, and we’re pushing hard with the EU Commission. One, protect overflights during national ATC strikes. The Spanish, the Italians, and the Greeks already do this; they use minimum service to protect 100pc of overflights. But France uses minimum service legislation to protect about 80pc of their domestic flights and only 20pc of overflights. So, because of the geographical position of France, everybody else gets screwed.
Two simple things: one, protect overflights during national ATC strikes; and two, we require a commitment that each of the ANSPs, particularly the French, the Germans, and, to a lesser extent, the Spanish, will be fully staffed for the first wave of flights every morning. There is no point in having a labour deal that allows some air traffic controllers— and we’re talking one or two air traffic controllers—so that the first wave of flights in France could lose about 20pc of its capacity. We’re talking tiny numbers of people here, who are being grossly mismanaged. I think if the new EU commission is optimistic, it has put competitiveness at the center of the new five-year mandate for the EU Commission. If you really want to do something about competitiveness, start by fixing Europe’s chronic ATC services. Those two simple measures would eliminate about 90pc of ATC delays. Next question, please.
Operator: The next question comes from Alex Irving from Bernstein. Alex, your line is open. Please go ahead.
Alex Irving: A couple for me, please. First of all, regarding the MAX 10, what can you say about the certification? What are you accruing for? Is there a risk of unit staff cost inflation if this gets pushed out? Second, regarding ancillary sales, the passenger muted growth has bee pretty low in this quarter and the last quarter. What’s driving this? And what initiatives are you currently working on to get these back to growth, please?
Michael O’Leary: Sorry, Alex, could you just repeat the second half? You broke up there; the tax something in the second quarter?
Alex Irving: Ancillary sales per passenger in low growth. What are we working on to get back to growth?
Michael O’Leary: Okay. I’ll give that second question to Neil. Regarding the MAX 10, look, we’re very optimistic about the MAX 10. That’s why I wouldn’t change one decimal point of our growth trajectory to reach 300m by the mid-2030s. The big issue for us is that we’ll do our first 17 deliveries of the MAX 10 in the first half of 2027. So, we have to be there for summer ’27. As long as the MAX 10 is certified in the second half of 2025 and Boeing can increase their monthly production in line with their projections, then there should be no delays to those deliveries.
We see that those aircraft will bring us, compared to the original 737 NGs, 20pc more seats while burning 20pc less fuel. I mean, their transformation of our operating costs is significant. We don’t foresee any significant staff impact. It will make our—if you go back to Slide 3 or Slide 4 of our presentation on the unit cost line—it will meaningfully widen our staff cost leadership, airport and handling cost leadership, everything, except for expected route charges, since the aircraft are heavier.
We will not, obviously, recruit additional pilots if there is some additional delay to those deliveries in the first half of 2027. But I think you’ve seen us— which did happen to us in the summer of 2024. So, I don’t see any significant bump in staff costs arising from it. We will have a fifth cabin crew on board, but all our trade deals at the moment with pilots and cabin crew are done. They’ve factored in all variants of the 737s. We will only be taking 17 aircraft in. So, if there was—if someone was silly enough to say, well, we won’t fly the MAX 10 unless we get XYZ, we’d say fine. We typically move it to a different geography where we have no difficulty getting our crew into the MAX 10.
So, I think there’s nothing but upside for us in the MAX 10. The productivity of the aircraft is extraordinary. The productivity, by the way, of even the end of the Gamechangers has been extraordinary. We are getting 4pc more seats, and they burn 16pc less fuel. These are transformational for our business. We own the aircraft, and I look across at some of our competitors who are frankly doing sale and leasebacks desperately or cooking the books, trying to take certain profit from sale leasebacks through the P&L. We have none of that, and we have no long-term debt or leasing costs on our balance sheet.
So, I can’t wait for the MAX 10s; I think they are going to be transformational for our cost and for our profitability from the summer of 2027 onwards. And I’d just say I’m not quite sure about the ancillary sales; ancillary sales per passenger were up 10pc.
Traffic is up 9pc. So, we are getting, as we said, ancillaries continuing to bump a little bit ahead of traffic growth. But then Neil, and maybe I don’t know whether Eddie wants to add something on ancillaries there.
Neil Sorahan: Yes, I’m happy to do that, Michael. As you said, it was a pretty good performance in the first half of the year with a 10pc increase in revenue. There are probably three big areas, Alex, as you’re well aware, where we make a lot of the money: reserved seating. That’s going well; it’s up year-on-year. We hope to optimize that and the pricing around it. Onboard sales have improved year-on-year, and our new order-to-seat initiative, which we were trialing in early summer and have now rolled out across the network, is going very, very well, with people eager to get their order in early on board. So, I’d be hopeful there’s more to come from that.
The one area that probably disappointed me a little bit this year was priority boarding. I think some of that might have been due to the fact that we’ve been under pressure from air traffic control this year to try and avoid taking slots. Our priority is to close the door, get the Airbus on the aircraft, and fly. So, there’s maybe been a little bit of gaming from some customers regarding not taking bags on board. But we’re addressing that, and we’re working through some upside there. I feel there’s more to go on the priority.
We’ve been quite clear there aren’t going to be any major new initiatives coming, but there’s a lot to be done with the products that we have—just enhancing them. I’m pleased with what’s happening on board. Having underperformed over the past couple of years, onboard sales have turned a corner this year, and I think we’ll see plenty more growth on that front. And then, working with labs, we’ll continue to try and improve seating and collabourate with my colleagues in operations and at the airports to enhance priority boarding.
Michael O’Leary: Eddie, anything to add on ancillaries?
Eddie Wilson: No. I mean just — it’s really — sorry, it’s Eddie here. It really just stands in the interplay or whatever between those core products in terms of optimizing revenue between the trade-offs regarding behaviors on bags and priority boarding and bundles and issues like that. And it’s just — we’ll never get to the end of this, Alex, as the lab team works on the models, which will become even more sophisticated over time.
Michael O’Leary: I would just add one thought there. In a past year where the average fare was down 10pc per passenger, a lot of that is due to consumer spending being under pressure. I think it’s very impressive that ancillary revenues were up 10pc on a 9pc traffic growth. We are still able to mine the ancillary revenue line and to encourage or convert customers to the convenience of priority boarding, reserve seating, etc., even during a time when consumer spending is under pressure.
Operator: The next question comes from Jarrod Castle from UBS. Jarrod, your line is open. Please go ahead.
Jarrod Castle: Good morning, everyone. You’ve hedged 75pc of your fuel for 2026, and if I look back a year ago, you had only hedged 53pc at that stage for March ’25. So why do you, I guess, increase the hedging? Is this suggesting anything in terms of the direction you see oil going in the next year? Additionally, you’ve highlighted a lot about ownership, those control rules, and your engagement with stakeholders. I’m not asking where these heads, but can you provide a bit of color regarding potential outcomes that you’d like to achieve?
Michael O’Leary: Okay. I’ll ask Juliusz to address the ownership and control aspect related to hedging, Jarrod. Look, we’re always waiting to pounce when we see weakness in oil prices below our current year, where we can lock in cost savings. I think we’re always keen to do so. We’re undoubtedly in a period where the world is more volatile. Fuel prices a week ago were under $70 a barrel; today, they’ve opened up over $75 a barrel. So, what we’re trying to do is to have some cost certainty going forward. We’re hedged this year at $79 a barrel and are now 75pc hedged at $77 a barrel. I don’t think we would go over the medium term higher than that. I think there’s a real risk that—and some market analysts are beginning to talk now of maybe $60 a barrel—we could find ourselves a bit exposed compared to our own hedged competitors. Oil prices could go lower, but then we’ll pick that up with our 20pc to 25pc unhedged fuel. But I like the feel of where we are at the moment. Given the situation in the Middle East and in Ukraine as we move into the winter, there is always a risk oil prices will go higher, to $75 or $80 a barrel. We’re not trying to beat the market; we know nothing more than anybody else does about oil prices. But we have a balance sheet that allows us to hedge out to the way forward jet into plain jet, and we are always—if you go back to the years, we were hedged at $89 a barrel. This year, it’s $79 a barrel. Next year, we’re at $77 a barrel. If I saw an opportunity, say oil prices fell below $60 a barrel and we could meaningfully go in and hedge another 10pc, 15pc, and bring it down towards the low 70s per barrel, we might move. But I think it’s unlikely. We’re still burned or scared by the memory of COVID, where we did, during COVID, have a rolling 90pc hedge policy. I don’t know if we will ever get hedged up to 90pc on this. It’s just some ridiculous opportunity there. But I like the fact that we have very stable unit costs. We’re taking more Gamechangers, which gives us an operating cost efficiency. We’ve hedged 75pc of our fuel this year at $1 a share less than the current year. So, I like what we’re able to do to secure our kind of stable cost next year. Given weak prior year comparisons, there’s a reasonable risk to the upside in terms of pricing, particularly with our own capacity constraints next year. Juliusz, maybe you could give people a quick briefing on the ONC consultations and where we think it might go.
Juliusz Komorek: Yes. Thanks, Michael. So, over the last few weeks, we spoke to shareholders who represent approximately 60pc of the issued share capital. Those shareholders currently hold both through the ordinaries and through the ADRs. We received a lot of interest and feedback and generally found this exercise very useful. We still have quite a few meetings in the diary for the coming weeks. At the same time, we are in discussions with our regulators, including the national regulators in Ireland, Poland, and Malta, as well as the European Commission. I wouldn’t want to talk more about potential outcomes, and I don’t think it would be appropriate to provide more detail given that we haven’t yet spoken to everyone. We have an open invitation out on our website for shareholders to express their views, and we have received interesting feedback through that channel as well. Therefore, I don’t think it would be appropriate to provide more detail regarding those we haven’t spoken to yet. But it has been useful, and we will give an update as soon as we can.
Michael O’Leary: And I think that’s an important point to be made here, Jarrod. There were some concerns at the start of this, particularly with the ADR holders, as the ordinaries were trading at a discount of 29pc compared to the ADRs when we started this consultation on the 11th of September. Over the past 6 to 8 weeks, that ordinary discount has narrowed; as of last Friday, it was at 18pc, the discount on the ordinaries compared to the ADR. That narrowing has been entirely due to the prices of the ordinaries rising by 11pc over that 7-week period. In fact, the price of the ADR has increased by only 1pc. So, I think there was a fear among ADR holders that if we move here, this would—what they see as a premium on the ADRs, and what we interpret as an unfair discount on the ordinaries—would be arbitraged away by the ADR price falling. In fact, as borne out over the last 6 or 7 weeks, we think what will happen is that the discounts on the ordinaries will arbitrage away as the ordinaries rise up to where the ADRs are. I think that’s a key point. But yes, as Juliusz has said, we have an open mind on this. The Board will consider it. The alternatives are we could remove the ownership and control restrictions, we could remove just the ownership restrictions but keep the voting control restrictions, or we could keep the ownership restrictions and remove the voting restrictions. So, the Board will take into account the views and inputs of shareholders. However, we also have to liaise with our regulators, both the European and national regulators of the five airlines that we operate. We think that process will likely take until about mid-next year before we come to some kind of conclusion. I think that is a reasonable time frame.
Juliusz Komorek: That’s the best estimate at the moment, but no fixed time frame.
Operator: The next question comes from Sathish Sivakumar from Citi. Sathish, your line is open. Please go ahead.
Sathish Sivakumar: I have two questions here. First on the ancillaries. In the video, it was mentioned that about 35pc of the passengers are ordering directly via the app. In terms of spending, how does this compare to consumers or customers ordering via the app? Do they tend to spend more compared to traditional onboard spending? Any comparison on that, like what does the spend per passenger look like? The second question is around fuel costs. As we go into next year when the SAF Ryanair kicks in, can you provide any visibility around how much of the SAF procurement is done and at what price? This would again give us good visibility in terms of fuel costs over the next few years.
Michael O’Leary: On the orders, what we’re seeing is a greater propensity. It’s reasonably recent, but there’s an increased propensity of people making orders and decisions while waiting for the aircraft to board. I think this will boost the spend per passenger on in-flight sales, but in-flight sales are a pretty small part of our total ancillary volumes. As Eddie has said, the large moving items are priority boarding and reserved seating. From where we are, we think—and it’s certainly borne out in the first couple of weeks of flights—there is a notable double-digit increase in the percentage of people who will shop on board when they can do so using—doing it in advance using the order seat functionality, and we think that will continue. I’m here with Thomas Fowler, our Director of Fuel and Sustainability. Tom, do you want to take the second part? Then I might double back and ask Eddie or Neil to comment further on the orders.
Thomas Fowler: Yes. So, Sathish, just on the SAF side, we’re currently negotiating prices with our fuel suppliers ahead of the mandate next year. So, it’s very early to give an exact number on it. But we have some contracts rolling off with suppliers in January that we’re negotiating at the moment. We’re looking at SAF premiums of between 2 times and 4 times depending on the region, but we’re nowhere near finalizing it for the year.
Michael O’Leary: Thanks, Thomas. Eddie, Neil, do you want to add on the order-through-seat ancillary spend?
Eddie Wilson: I mean, as you say, just two points I’d make. One is from a lab perspective. There’s a low-cost solution done by Bluetooth that has changed behaviors on board and just shows me the innovation that we’re getting from the lab side. Without any servers on the back of the airplane or any certification or anything like that, it’s a pretty slick solution. The second thing I’d say, and I’m here with Sinead, is that people are more inclined to buy more when they’re ordering on the app rather than asking directly. Sometimes people don’t ask for, like, three packs of four cans of Heineken (AS:HEIN), which puts them at a bit of a difficulty when they’re doing it through the app. So, it’s a behavioral change. It looks like people actually—we’ll need more data on it—but it seems that they actually buy more per passenger.
Neil Sorahan: Yes, I’d agree with Eddie there. I think one of the other benefits of that is that people who may have traditionally waited for the second service or third service are now willing to put in that random order between services, and you get the incremental sales that you wouldn’t have had before—and stuff like that is performing well also
Michael O’Leary: Yes. I’ll give you an anecdote. When I came back with a kid from Rome for the school midterm last week, my wife now has me ordering the stuff there. They are paranoid that we won’t have a panini or ham or cheese or something on board. So, we now order through the app. The only downside is I was sitting in row four, and people around me said they were right down with my stuff first. So, they said, “You get special service here on the in-flight.” I said, “No, no, you should order through the app.” I think it will significantly boost the conversion of people on board, but it won’t be dramatic. Its impact on our overall ancillary revenues won’t be dramatic because in-flight sales are a reasonably small percentage of that.
Operator: The next question comes from Savanthi Syth from Raymond James. Savanthi, please go ahead. Your line is open.
Savanthi Syth: Good morning. Just two quick questions. If you look at the next 12 to 18 months, given your slower growth plan, are there any major cost items that you think, based on current trends, will see greater pressure? Or maybe because of some of the items that you’re working on, will see less pressure than you’re seeing today? And then just on the second question, could you talk about the steps that you need to take to migrate the last 25pc of our customers to the app? Are there any related cost savings that you’re expecting?
Michael O’Leary: Okay. Eddie, you do the second half; I’ll do the first half. For the next 12 to 18 months on cost items, I think the two that we would focus on at the moment are the propensity of governments, like the French and English, to look for increased taxes on air travel. I think we’ve seen very significant successes in getting the Irish, the Hungarians, the Swedes, and the Italian regions to roll back taxes. But there’s no doubt in my mind that England and France are going in the opposite direction. I would worry about route charges, although I think we have some reasonably simple solutions here on route charges, such as protecting overflights and ensuring they are operational first thing in the morning. However, I think governments will use this as a way to drive up ASPs and increase route fees or ATC fees above inflation.
Other than that, we think airports and handling labour, aircraft ownership, and our financing income line will continue to be strong. But I think I draw no further comfort from our cost performance in the first half of this year or over the full part of this year. No other airline in Europe is managing to keep costs flat this year unless they are manipulating the P&L by recognizing a loss of sale and leaseback profits. I think the real upside for us in the next 12 months to 18 months with our capacity constrained and revenue or frequency reductions in a lot of the bigger markets, I think there’s real potential for upside on pricing and payers. We hope we’re beginning to see that as we move into Q3, where there’s no doubt in my mind that we have strong bookings and that price declines are moderating. A lot depends on what happens in summer 2025, but I would be reasonably optimistic that—against prior year weak comparables—we’ll see fares up in summer 2025. Eddie, do you want to talk about how we could migrate the other 25pc of customers to the app?
Eddie Wilson: Yes. I mean, the real benefit here—and we’ve seen this flowing through from the app and the data travel app—is that we’re actually able to communicate what gates you’re going to, any delays that might be coming, and we’re just able to manage that much more effectively. The next phase of this will allow you to manage operational problems more easily on the day. For example, if you are engaging an aircraft from an 8200 to an 800 with a different seat configuration, you’ll be able to do that virtually in real-time without people having to discuss which seats they’re in. All these things will drive operational efficiency and 25-minute turnarounds.
There’s also the ability, when you’ve got everybody on this app, to work around those old legacy systems at airports, which have been in place for a long time. You’ll be able to manage queues at virtual boarding areas, etc. Anything that speeds up getting people on aircraft will help, especially as larger-gauge aircraft come online. We’ve got to be thinking about that as well. Ultimately, yes, it saves paper, but there will also be a cost benefit for us in getting around legacy systems, resulting in a much better experience. This will be in place for next summer, and you will just need a smartphone to do that. About 70pc of people have smartphones. We’ve seen this work before with online check-in, where people don’t have to go to a check-in desk. It’s another change, but I think people see the benefit of it.
Michael O’Leary: I mean, I feel very optimistic. I think we—no, we can’t guarantee that we’ll eliminate 100pc of fees like boarding card reissuance fees and airport check-in fees. But really, if. we have everybody on the app, and we’re sending you messages; it should really collapse those fees, which are a source of irritation to a small number of passengers. Increasingly, the vast majority of our passengers who arrive at airports without having checked in are customers of OTAs who weren’t passed on the reminder emails and text messages, which went to some fake mobile phone number. If we have 100pc of people on the app, they will be receiving the reminders. I believe that everyone will then be able to check in on their phone the day before they travel, and we should really be able to eliminate 100pc of those fees.
Now, there will always be some who ignore the messages, think it’s spam, and won’t check in. If they still arrive at the airport and haven’t checked in, they will incur a fee. However, we think we should be able to collapse that to almost zero if we have everybody on the app. There will be a real boost in our interaction with customers, but also in eliminating some of those annoying fees for customers, some of which they only incur because the OTAs didn’t pass on reminder emails or text messages.
Operator: Your next question comes from Duane Pfennigwerth from Evercore ISI. Duane, your line is open. Please go ahead.
Duane Pfennigwerth: Just on overstaffing, have you paused pilot hiring? Maybe you could put it into context regarding the number of pilots you plan to hire in the next year versus what you’ve done in the last couple of years? The point of the question is: do you have an estimate for the size of the cost headwind from overstaffing, which should presumably work itself out over the next year or two?
Michael O’Leary: I think so. I mean, I wouldn’t want to put a particular number on it, Duane. But we had geared up; we were crewed for the number of pilots we had trained and recruited in the first two calendar quarters. We had hired more than 20 more pilots and cabin crew for 20 more aircraft than we were actually operating through the summer of 2025.
Now, we could have made a decision right there to return them or get rid of them, but we won’t. We did think natural attrition would take them out. The problem is we have very little attrition of pilots and cabin crew; we’re at an all-time record low turnover of both. So, we did carry the thing this summer. I think it minimized some of the compensation costs because we did have more standby crew utilized by cabin members. But we wouldn’t want to repeat that. That’s why we’re telegraphing now to the market early that we’re taking down the growth for next year. We’re saying today, 210m. If Boeing comes back with adverse news between now and Christmas once the strike is over—I mean, safety focus is committed to me. She’ll come back to me once they are out of the strike and people are back to work; they’ll give me a definitive delivery on our nine Q4 delayed deliveries. Then, how many of the 29 aircraft will go to get ahead of—when I say summer ’25, I mean taking aircraft up to the end of June. I’m not counting any in July and August. This year, we were trying to take deliveries in July and August. We had crews ready to go, and we had them on sale, which forced us to change the schedule. It’s very disruptive and costly.
Because of the lack of attrition at the moment, we have stepped down or canceled a lot of pilot recruitment and training. Our pilot recruitment and cabin crew recruitment and training in both the calendar fourth quarter and the first quarter of next year have been significantly reduced. We are doing some modest pilot recruitment, but it’s very limited; almost all of that will be absorbed by our cadet programs, recruiting our cadets and promoting them through to first officers.
There are very few leaving at the moment. There’s not a lot of other 737 jobs across Europe, and there’s very little demand in the Middle East for 737 pilots. Our turnover and attrition of pilots is at an all-time low, which is good. I believe people are generally happy with where they are; they’re getting the benefit of significant pay increases and productivity pay increases over the last two years. People seem to be generally satisfied with their life, and nobody is leaving. The same situation exists for cabin crew, but again, because the recruitment and training of cabin crew is a much shorter cycle, we have canceled a lot of recruitment and training programs that we had planned in Q4 and Q1 of next year.
We will do some cabin crew recruitment and training in the first half of next year. We’re probably only running at about 30pc or 40pc of what we would have normally done in previous years when the demand was higher. However, I think we had a meaningful cost penalty this year. If you look at the full year, we expect staff costs to rise as traffic goes up about 9pc. Staff costs will rise between the high teens. Some of that—I can’t point out specifically what that is—because we were over-crewed through the summer with those pilots and cabin crew for the 20 aircraft we didn’t receive. So, we’re down 5m passengers; we’ve lost that 5m passengers and the ancillary revenues from those passengers, but we carried the crews through the summer at the same time.
And Neil, do you want to add anything on that?
Neil Sorahan: No, I think you’ve covered it very well. The 20 aircraft worth of over-crewing was the key lag for us this year, and hopefully, we can manage that down a bit into next year. If we’re growing with fewer aircraft in the fleet, we will accrue appropriately.
Operator: The next question comes from Ruby Colony from RBC.
Unidentified Analyst: Good morning. Firstly, on Slide 17 of your presentation, you’ve now got 10pc passenger growth in full-year ’27 on 1pc fleet growth. How should we think about that? Secondly, I was wondering if in Q3 your book-to-date pricing was much different from your fare expectations, given the slightly weird prior year comparison you have from OTA moving Ryanair flights from their websites last November?
Michael O’Leary: Thanks, I mean, I can’t remember off the top of my head what’s on Slide 17. What number of traffic—what number has been for FY ’27 there? If you’re looking at it, going on only…
Neil Sorahan: It’s 230 in there, which is a point in time; it may or may not be that number, depending on the number of aircraft we get.
Michael O’Leary: I think that’s reasonable. We would expect for FY ’27, a lot of this now would be dependent on getting it. If Boeing delivers all of the 20, I mean, assurances were made to people on Friday. While they missed some of the deliveries for summer 2025, we will have all of the remaining Gamechangers—210 Gamechangers—in the system by summer ’26. I think it would be reasonable that we would get close to 230m. We are determined to continue to hit those traffic numbers, but they’re dependent on Boeing delivery delays.
So, if you take our FY ’25, originally we were projecting 200m; I think we’d be at about 199m and change. FY ’26 originally targeted 215m, and we would step that back now towards about 210m. But I see no reason why we wouldn’t then be able to get that back up towards 230m for FY ’27. Now, maybe it might be 225m, 227m, or 228m, but as soon as we get those aircraft, we can deploy them profitably. I think that’s reasonable.
We will then have a year or two—I’m not sure about FY ’28 or FY ’29—because we will, at that point in time, be facing redelivering some of the Lauda A320s, and we are heavily dependent on Boeing not having any delivery delays on the MAX 10s. Regarding Q3 and the OTAs, look, it’s hard to separate it. All we can give you is what we have at the moment: the forward bookings into Q3 are strong. We released the October traffic stats this morning—94pc load factor, traffic up 7pc. And that was even with the Boeing delivery delays. It’s hard to say how much of that is due to the OTAs coming back online. Eddie has made the point that while we have approved and delayed deals in place with over 90pc of the OTAs, some of them have not yet got the pipes or the API fully functional because their IT departments are slower than some of the bigger ones who are better at IT. So, I think there’s more to come from the OTA in Q3 and Q4. What we can tell you at this point is that traffic growth is strong. We would still expect, in Q3, that the scheduled traffic in Q3 will be up about 7pc to 8pc, in line with the October number. The price decline is certainly moderating. I go back again: it was minus 15pc in Q1; some of that was due to Easter moving into Q4. In Q2, it was minus 7pc. I think a midpoint between zero and minus 5 in Q3 would be a reasonable back-of-the-envelope calculation. It’s not a forecast, so please don’t quote it back to me as some bloody forecast, but it is moderating. It’s just hard to know how much Easter will affect Q4. But while we have a tough prior-year comparison in Q4, we will have a bumper Q1 because we’ll have all of Easter in next year’s Q1, whereas we don’t have Easter in this year’s Q1.
Operator: The next question comes from Andrew Lobbenberg from Barclays. Andrew, your line is open. Please go ahead.
Andrew Lobbenberg: Your cabin capacity to England is down by 10pc. What are you going to do with those slots? And then a second question back to the OTA. So, you mentioned that 90pc of the OTAs have signed up. But eDreams is quite large, I think. Would it be fair to say that it represented more than 10pc of your passengers last year? So, actually, you’re missing a bit more than the 10pc you suggested. What is the pathway forward for you to reconcile with eDreams?
Michael O’Leary: Okay. Thanks, Andrew. A lot of the— as I said, we try to make the point that a lot of the airports in England If we cut about 5m passengers out of England next year, it will be done on frequency. We won’t move the aircraft; we won’t vacate overnight aircraft. Most of our Enlgish airports are not slot restricted, but we certainly wouldn’t reduce overnight aircraft at the big airports, Manchester, Bristol. I’m trying to think, Eddie, off the top of my head, are there any others that are slot controlled? I don’t think so—Edinburgh, Glasgow, and over to that. But we will take a lot of the capacity we operate with those airports on aircraft that are based elsewhere in Ireland or in Europe, flying in and out of those airports. We will divert some of those frequencies away from England to lower-cost destinations like Italy, regional Italy, Sweden, and Central Eastern Europe, where we’re seeing increasing incentives. So, we don’t think and we wouldn’t compromise slots for any of the couple of English airports for slots for us are an issue. On the OTA, eDreams is one of the bigger ones, but it’s nowhere near 10pc of passengers. None of the OTAs on their own have a significant impact on our volumes. They’re all reasonably modest on a stand-alone basis. If you look at the eDreams business model, however, almost—well, I find 100pc of what they claim to be in profitability is coming from this eDreams Prime subscription, where they promise you a discount on 100pc of flights. Yet, on every flight we’ve trialed, they’re overcharging customers. We think it’s inevitable that eDreams will ultimately have to sign up because they’re going to lose market share to competitors like Loft Holidays and the other OTAs who will simply take that business. The other OTAs can now offer low Ryanair fares at Ryanair’s prices, whereas eDreams is still trying to run a business where they’re inflating Ryanair fares and the cost of Ryanair ancillary services. Given the transparency of the web, it’s inevitable that they will have to sign up eventually.
We are indifferent as to whether they do or don’t. But at the moment, we’re off sale with eDreams, and that suits us fine. We don’t want to be on sale with anybody who is inflating our airfares or overcharging our customers. It’s a matter for eDreams; we frankly couldn’t care less. It’s not going to make any difference to us going forward. But we are absolutely determined to ensure that nobody gets between us and our customers, and by working with approved OTAs, we ensure that those OTAs are offering their customers real Ryanair fares while providing us with genuine customer emails and real customer payment details. Does anyone want to add anything on the eDreams OTA side? Feel free. No? Okay.
Operator: The next question is from Gerald Khoo from Panmure Liberum.
Gerald Khoo: One if I can. Firstly, on the tax rate, which seemed a bit high at 14pc in Q2, obviously above the standard rate. I was just wondering what would be a sensible assumption for the full year? Secondly, on your revised aircraft delivery schedule, could you clarify what you’ve actually assumed in terms of the timing of the resolution of the strike at Boeing, please?
Michael O’Leary: Okay. Maybe Neil or perhaps Tracey McCann might handle the tax question, please, and then I’ll take the Boeing delivery schedule.
Neil Sorahan: Yes, I’m happy to jump in there on the tax, Gerald. As you’re probably aware, we make most of our profit in the first half of the year and in jurisdictions where tax rates are slightly higher, whereas we tend to make less money in the second half of the year. So you’ll see the tax rate be around 10pc to 11pc for the full year due to losses in some of the markets in H2.
Michael O’Leary: Thanks, Neil. On the aircraft delivery schedule, we’ve provided an updated aircraft delivery schedule to give you a sense of where we think we are in terms of the additional growing delivery delays and why that’s causing us to step back our traffic forecast for FY ’25, and also for FY ’26. We’ve made no assumptions on the settlement of the strike. The reason—there’s a ballot today on the 38pc pay increase. We have no idea whether it will be settled or not. Boeing themselves think it’s about 50-50. I suspect the labour may well turn it down if they offer 8pc. My view is these guys will hold out for 40pc, but what do I know? All we’re saying is that this is what our current forecast will be for FY ’26.
To reach 210m passengers, we need to get the nine delayed Q4 aircraft in by the end of April or May, and if we get those in the first quarter, the critical issue will be how many of the 29 additional aircraft we can get by the end of June. We’re not going to schedule any aircraft deliveries in July or August, but whatever we get by the end of June is crucial. At this point, I think 15 is a reasonable assumption. However, that is heavily qualified by what Boeing decides—and again, I spoke to Stephanie Pope on Friday. They will update their delivery schedules with us once the strike is finished. They think it will take about four weeks to get back into full production after the strike. We hope to try to get it resolved this week, in which case they would be back up to full production before Thanksgiving or after Thanksgiving, but before Christmas.
However, there is a real risk that we will receive less than those 15 aircraft by the end of June. If it’s 10 or if it’s 5, I don’t know what that impact will be. We will have to move some of our traffic growth out of FY ’26 and into FY ’27. I would caution again that the more we have to delay our growth, the better the outcome will likely be for pricing in summer 2025 and FY ’26, given the weak prior year comparison in FY ’25. Personally, I would like to take as many aircraft as we can get, but as a shareholder, I think the more the aircraft are delayed, the better it will be for our profitability in FY ’26.
Operator: Our last question comes from Conor Dwyer from Morgan Stanley. Conor, your line is open. Please go ahead
Conor Dwyer: Good morning. First question is just on the buyback. You talked about the slowdown being influenced by the payback of bonds next year and lower CapEx this year accelerating it. I’m wondering if there’s any influence from the fact that you’re also expecting potential rule changes on the ownership? And if it basically would make more sense to hold back some of the cash to do more of the buyback on the ordinary shares. My second question is regarding the prerecorded call. Neil, you spoke about a willingness to explore other financing options if they become more attractive than cash. Just wondering if that’s only to change the capital structure, or if you might also consider extra leasing to bump up the growth of the overall business over the next few years?
Michael O’Leary: Okay. Thanks. I’ll take the first question again and get Neil to take the second. On the buybacks, I don’t think the review of ownership would make any difference. The buybacks are not driven by the pricing of the discount on the ordinaries or the ADRs. I mean, the current buyback is skewed 70-30 towards the ADRs anyway. But I think it’s instructive that since we began this consultation process with the shareholders, the discount on the ordinaries has eroded from 29pc to 18pc. Almost all of that has come as a result of the pricing on the ordinaries rising, even at a time when we are buying more ADRs than ordinaries. So, I don’t think it will make any significant difference.
If the Board wishes to change either the ownership or the control rules in conjunction with our regulators, we will still be facing the material challenge of maintaining very strong cash generation as long as we continue with current profitability for the next two to three years while we have a gap or a falloff in CapEx. What drives our share buybacks is surplus internally generated free cash flow. We have no other uses for that cash. Therefore, as with dividends this year, we completed a €700m share buyback.
Now, I think there was no doubt that the decline in the share price as a result of the disappointing guidance on pricing and fares this summer certainly incentivized the Board to move quickly and to accelerate the share buyback, but it was driven by having surplus cash. I think the surplus cash will be a little tighter for the next year or two, given the two big bond repayments, but there should still be room for share buybacks over those two years. Then we’ll be back into significant CapEx as the MAX 10 deliveries start to roll out in the first half of 2027. So, I don’t think the bond and our Board’s willingness to look at buybacks will be affected by the consultation process on ownership and control. It will be driven solely by our ability to continue to generate really strong free cash flow and deploy that free cash flow in terms of shareholder returns. I look around me at our competitors, all of whom have massive net debt positions, and yet we’ve returned €9bn to shareholders over the last 15 years. I think there’s every indication, through a combination of dividends and share buybacks, that we’ll be able to continue that market-leading performance for the next a couple of years. Neil, I forgot the second half; it has something to do with the prerecord on…
Neil Sorahan: The financing options available to us. Conor, we’ve always been opportunistic in what we do. The reality is that in relation to leasing, we’ve got a higher investment grade rating than any of the lessors out there, so we can raise money cheaper than the lessors. However, they would have to have a compelling reason for us to consider that financing. I can’t see how capacity constraints in the coming years will reduce what are now sky-high leasing rates, which thankfully we’re not paying, but our competitors are. If the bond market, for example, were to become cheaper than financing ourselves out of cash to refinance bonds and so forth, we might look at it. Potentially, in a few years’ time, when we’re trying to take some of the residual risk from the NGs off the balance sheet, we might look at lessors. But I think if the pricing remains where it’s at, that wouldn’t be my first, second, or third port of call when it comes to looking at alternatives to our current cash.
Michael O’Leary: And again, I think you’re looking forward to next year; nothing fills me with more optimism than the aircraft lessors making record profits on lease extensions and new aircraft leases to our competitor airlines. They’re driving up the cost of operations for our competitors across Europe at a time when we’re buying new aircraft and utilizing our balance sheet, and those aircraft are carrying 4pc more passengers, with 16pc more efficiency. When we get to the MAX 10, it will provide 20pc more capacity while consuming 20pc less fuel. So, I’m very optimistic going forward that the unit cost gap between us and our competitors will continue to widen. Our competition in Europe is going to be under significant pressure. If you look at Lufthansa’s results last week and Air France this week, they’re all talking about EBIT because there aren’t any earnings there. These companies in a constrained capacity market are going to drive up airfares for the next couple of years, which will give us a lot of headroom to see modest growth in airfares, much of which will flow through to Ryanair’s bottom line.
Any other questions, or is that the end of it? No? Okay.
Operator: That concludes the Q&A session. I’ll hand back to you.
Michael O’Leary: Thank you very much, everybody. I think we’ve run 1.5 hours on questions and Q&A. We have an extensive roadshow in place. I, along with a number of the team, am over here in the U.S., while Neil is in England heading for the U.S. Eddie and other team members will be covering investor meetings in Ireland, England, and Europe. If anybody wants to meet with us, please contact Davy’s Goodbody, we’d be very happy to have a meeting with any investors.
May I conclude by saying, look, I think we’ve had a challenging summer on pricing. We were surprised by the downturn in pricing after two years of very strong pricing. The real message to take away from this call, though, is that if you look at the unit cost performance, it is absolutely on track. We are doing a stellar job at containing costs. We’ve been surprised by the weakness in pricing this year. However, it’s reasonable to expect that pricing will move modestly upwards next summer in a heavily constrained marketplace, as long as there are no geopolitical events that disrupt air travel.
I would think the Ryanair balance sheet, concerning Ryanair’s P&L, is poised to benefit from any improvement in pricing or alternate pricing next year, particularly as we move into FY ’26 with a very weak prior-year comparison. With that, thank you very much. I look forward to seeing you all at some stage over the next week. Neil and Tracey—or Neil and Jason—are going to the Baird Industrial Conference in Chicago next week as well. So, if we don’t get to see you this week and anyone wants to meet with Neil or Jason, they’ll be in Chicago next week. Thanks, everybody. Hope to see you soon. Thanks. Bye.
Operator: This concludes today’s call. Thank you very much for your attendance. You may now disconnect your lines.
