Monday 16 September 2019

Slowing seat growth 'may not deliver fare boost' for Ryanair

Shares in Ryanair rose as much as 1.6pc yesterday. Stock Image
Shares in Ryanair rose as much as 1.6pc yesterday. Stock Image
John Mulligan

John Mulligan

RYANAIR'S lower capacity growth over the next year because of delayed Max deliveries might not have one side-effect that could have helped the carrier - higher ticket prices.

The airline - Europe's biggest low-cost operator - confirmed yesterday that it will slow its capacity growth for the coming winter and next summer due to delivery delays for Boeing's beleaguered 737 Max jet. The Max has been grounded all over the world since the spring after two deadly crashes revealed problems with its anti-stall system.

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Ryanair has ordered a Max variant - the Max 200 - which will probably take an extra couple of months to be certified after the Max itself. That leaves Ryanair eyeing a December start to deliveries.

"Since Ryanair can only take delivery of between six and eight new aircraft each month, we are now planning our summer 2020 schedules based on taking up to 30 B737 Max aircraft deliveries up to the end of May 2020," said chief executive Michael O'Leary.

He said that Ryanair's summer 2020 growth rate will now be more than halved, from 7pc to 3pc. That is expected to see the airline carry about 157 million passengers in the financial year to the end of March 2021, compared to a previous estimate of about 162 million.

"This shortfall in aircraft deliveries will necessitate some base cuts and closures for summer 2020, but also for the winter 2019 schedule," said Mr O'Leary. "We are starting a series of discussions with our airports to determine which of Ryanair's underperforming or loss-making bases should suffer these short-term cuts and/or closures from November 2019," he added.

Shares in Ryanair rose as much as 1.6pc yesterday, and those of other carriers also got a boost, as investors bet that moderated capacity growth in the European market will help to lift yields, or the average ticket price that passengers pay.

But Goodbody Stockbrokers warned that such optimism might be misplaced.

"While the market may see this as a positive for yields next year, we think it is too early to make such a call as slowing capacity into this year failed to bolster pricing, as market demand was hit by the deteriorating macro environment," said analyst Mark Simpson.

Trade union Fórsa said Ryanair's announcement was "of concern". It represents Ryanair pilots and cabin crew here.

"At this point, we have no specific information about any routes or bases that might be affected. Fórsa will be watching the situation closely, and will expect the airline's management to consult with the union in advance of deciding or announcing any measures that could impact on the jobs, incomes or working conditions of union members," said a spokesman.

Ryanair has 135 firm orders placed for Boeing Max jets, and an option on 75 more.

The core Ryanair fleet consists of about 455 Boeing 737 aircraft.

Irish Independent

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