Fresh 737 Max delays hurt Ryanair’s passenger growth target
Ryanair today warned Boeing 737 Max delivery delays will hurt growth plans as it swung back into profit in its third quarter.
Ryanair was expecting its first delivery of the airplane to arrive in spring 2019. But it admitted that will now not happen until September or October 2020.
The fresh Boeing 737 Max delivery delays will mean it will not meet its 200m passengers per year target until as late as 2026, two years later than planned.
That will also prevent Ryanair from achieving cost savings associated with the new aircraft until late 2021.
737 Max deliveries ‘repeatedly delayed’
“Delivery of the group’s first Boeing 737 Max-200 aircraft has been repeatedly delayed from Q2 2019,” Ryanair said.
“It is now likely that our first Max aircraft will not deliver until Sept. or Oct. 2020. The requirement for Max simulator training will also slow down the delivery of backlogged aircraft and new deliveries.”
The planes were grounded worldwide after two fatal crashes in which 346 people died.
Ryanair has reportedly ordered 135 737 Max planes, and could buy another 75. But Boeing, which swung to a huge loss last week, still has no return date for the model.
The budget airline had to reschedule summer 2020 due to delays to deliveries of 737 Max models. At the time it expected 58 such deliveries but warned only 30 would arrive in time. That number is now zero.
Ryanair posts strong Christmas trading
Nevertheless, Ryanair swung back into profit for the three months to the end of December thanks to strong Christmas bookings.
Profit after tax hit €88m (£74.1m) for the quarter. That compares to the same period the previous year, when Ryanair fell to a €66m loss
The budget airline welcomed almost 36m passengers across the period, six per cent higher than in 2018. And it also posted a 13 per cent climb in revenue per guest.
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That comprised nine per cent higher air fares but also a 21 per cent jump in passenger spending. That comprised travellers paying for priority boarding and to choose their seats.
However, Ryanair’s fuel bill climbed 14 per cent to €700m due to higher prices and higher traffic. The Boeing 737 Max crisis contributed to higher costs too. Ryanair was forced to shell out on maintenance of older planes that are now staying in the fleet for longer.
The airline’s share price climbed 4.3 per cent to 15.5p on the positive set of numbers.
Richard Flood, investment manager at Brewin Dolphin, said: “This is a strong set of results in a seasonally weak part of the year for Ryanair. The reduction in seat capacity across the sector as a result of the failure of a number of airlines should enable Ryanair to maintain strong pricing into the key summer months.
But he warned: “The European airline industry faces a large challenge should the coronavirus spread to Europe, and Ryanair would not be immune to such a development.”
Ask Traders senior analyst Nigel Frith said the profit took pressure off Ryanair over the coronavirus and 737 Max delays.
Whilst investors are focusing on the positives today, delays to Boeing 737 Max deliveries will not only delay Ryanair’s target of reaching 200m passengers by two years to 2026, but also prevent it from achieving cost savings associated with the new aircraft until 2021.
Ryanair’s full year outlook
Ryanair raised financial year 2020 profit after tax guidance to between €0.95bn to €1.05bn in January.
Ryanair now expects full year passenger traffic to grow eight per cent to 154m travellers. Revenue per passenger is set to rise between three and four per cent.
But the airline’s fuel bill will rise €440m. That left Ryanair predicting it will land “close to the mid-point” of its guidance.
“This guidance is heavily dependent on close-in Q4 fares and the absence of any security events,” the company said.
Broker Liberum hailed Ryanair’s Christmas numbers as it stuck to a buy rating on the airline’s stock.
“The performance was even stronger than we had forecast,” it said in a note.
On the unchanged full year outlook, it said: “Although this implies a bigger fourth quarter loss year on year, which seems potentially pessimistic.”