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26 May 2023
Don''t believe the hype?
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Don''t believe the hype?
Just how good will the summer be?
Ryanair is playing its usual coy game on summer pricing, and tempering enthusiasm around an exceptional peak period. This is despite industry capacity being indicated by the company down 5-10% against 2019 levels, average fares tracking 20% above pre-Covid in the last published quarter, and unit ancillaries reported 10% ahead. We acknowledge that the group is only 40% sold for the summer, but we have increased our expectations on fiscal Q224 pricing to +7% y/y (vs +1%), implying fares around 20% ahead of 2019.
Boeing delays do not appear overly acute, and long-term sorted
The company appears confident that any Boeing delivery delays will be minor this year, and it is on track to achieve 185m targeted passengers in FY24 (BNPPe 185.2m). More importantly to the long-term story, we now have clarification on its delivery schedule out to FY34, rising to a fleet of 800 aircraft (+45% vs current c.550) and total annual passengers of 300m.
Best in class performance to prevail
Ryanair is clearly pivoting away from any pretence of driving supernormal growth, and is intending to grow profitably and sustainably, supporting retained high levels of net cash (already at net cash for FY23) and the resumption of dividends in FY25 (as we now explicitly forecast). The MAX10 order and prevailing passenger numbers imply a fleet and passenger CAGR for FY26-34 of just 2.8% and 3.7% respectively, a level at which we expect normalised annual earnings to be deliverable at around the targeted EUR10-11 per passenger.
FY24 earnings and TP raised by 6%, retain Outperform
We have increased our FY24 earnings by 6% and, despite broader cost inflationary headwinds, we continue to forecast net profit in FY25 at EUR10/pax, driving net profit of EUR2.2bn. Based on unchanged CY23 target multiples, we raise our TP by 6% to EUR19 and retain our Outperform.