Ryanair pays out on soaring flights

Ryanair’s profits reached a record high in the spring and summer due to a combination of soaring fares, and additional charges.

Dublin-based airline, Ryanair, has begun paying dividends in anticipation of the possibility of Europe’s largest airline reporting a full-year profit more than a quarter above previous records. The company also expects to grow for a decade.

Ryanair reported a profit after tax of €2,18 billion for the six-month period ending September, 59% higher than the summer bumper of 2022.

This was fueled by increased fares, add-on fees for luggage, assigned seating and priority boarding. Ryanair passengers on average paid €81 for each flight, which is a third higher than what they paid before the pandemic.

It is expected that the airline will lose money in the first quarter of 2024 – traditionally the slowest period of trading – but, with an early Easter, it anticipates profits of between €1.85 and €2.05 for the full year ending March. This would be a 35 percent increase over its previous record, €1.45 billion for 2017-2018.

The airline expects to fly 183.5 million passengers in 2019, which would mean it will achieve its long-term goal of earning €10 per passenger per flight, for the first time.

Ryanair is now confident enough to declare its first dividends since its 39-year existence, despite the fact that it has spent €1.6 billion to buy new Boeing 737 Max planes and paid off €1 billion in debt.

 O’Leary’s payment is not a flight of fancy

It plans to pay out €400 million in interim and final dividends this year, of which about €16 million will go to. The airline plans to distribute €400 million this year in interim and final payouts, including €16 million to Michael O’Leary (62), its chief executive.

Ryanair, whose initial dividend yielded a little over 2 percent, has pledged to distribute 25 per cent in the following financial years. This should bring the annual dividend up to €750 million, if it meets its 10-year target of 300 millions passengers per year and €3 billion of annual profits.

Neil Sorahan (52), Ryanair’s Finance Director, described the decision to pay regular ordinary dividends as “a statement of intent and a mark of maturity for our business”. He said that it was a bit earlier than most shareholders had expected.

Ryanair’s base fares, before adding on fees, rose by 24 percent over the summer. The carrier is expecting average fares to rise by 15 percent in the current quarter, thanks to a good half-term holiday booking and a strong performance during the summer.

Sorahan acknowledged that “massive increases” were only a one-time price increase.

The price of Ryanair shares has doubled since the pandemic’s lows. Yesterday, they closed at €15.95, up 76 cents or 5 percent.

Michael O’Leary, Ryanair’s chief executive for 30 years, has said that the lowest cost is always best.

If you can increase your fares, and then charge outrageous fees for extras like baggage in the hold and boarding early, you’ll win twice.

Ryanair claims to be the cheapest airline. It is still cheap, but not as much as before. The airline has boosted fares year on year by 25 percent.

In the quarter from July to September, Ryanair’s average fare plus any add-on fees per passenger per flight totalled £77. easyJet topped £105 in the same period. Ryanair estimates that its cost per passenger is between 50% and 75% lower than easyJet’s. This includes staffing costs (with the same crew working more often), aircraft ownership (Ryanair aims to buy all of its jets whereas easyJet leases many back), and airport costs.

If you remove the operating costs per passenger and per flight — around £51 for Ryanair and £93 for easyJet — the profit of Ryanair over the summer is about £26, while easyJet only made £12 per passenger. Ryanair transported twice as many passengers as easyJet in the third quarter.

EasyJet is talking about double its annual profit in the next few year to £1 billion. Ryanair claims it will make €2 billion in profits this year.