Ryanair Demand Still Strong Despite Headwinds

The notorious European budget airline will publish its annual earnings report on Monday. Analysts believe the company will continue benefitting from improved summer travel demand this year.

Low-Cost Travel Remains Popular

European low-cost airlines have started the year strongly, with Ryanair specifically reporting an 8% increase in traffic for April compared to the same month in 2023. High inflation affecting the UK, Eurozone, and Nordic countries appears not to have diminished the appetite for travel. Still, consumers seek more affordable ways to reach preferred holiday destinations. Despite reduced demand for trips to Israel during winter due to conflicts in Gaza, overall revenue was maintained as passengers shifted to other popular locations, such as Spain.

While the airline industry faced a few bumps, Ryanair remains especially vulnerable. Higher fuel costs from escalating energy prices early in the year could impact the bottom line, as the Irish discount carrier has 65% of fuel hedged until next year. With a high volume of flights crossing France, the 67 days of air traffic controller (ATC) strikes also pose a potential hurdle for the airline this year. However, investors may discount that in hopes of improved labor conditions in the coming year and next.

Ryanair's Model, Investors' Focus

RyanAir's previously strong strategy of using a single aircraft type to reduce maintenance costs recently became more vulnerable. The airline only operates Boeing 737 aircraft, which have faced defects issues that have attracted media attention. Boeing has also been slow in delivering new planes, hampering Ryanair's capacity to expand before the busy summer.

Looking ahead, the focus might be on RyanAir's growth targets for the coming year. The airline has benefited from the post-pandemic travel rebound, allowing profits to increase about 20% year-on-year (YOY). However, growth may moderate going forward as performance will be compared to normalised travel levels. At this stage, typical booking statistics for the full year are not available, but RyanAir can provide revenue guidance and may discuss fuel cost impacts on profits.

Ryanair to Neckline?

Ryanair hit a record high of $151 in April but has since declined by about 16% to $120. It appears the share price may be forming a head and shoulders (H&S) pattern, where a decline to $120 would complete the neckline. If confirmed, it would suggest a move to the right shoulder at around $136, where it could rise back to new records after surpassing $142. However, if the neckline support gives in to potential pressure, prices could fall to $112, likely changing the overall trend.

Source: SpreadEx / Ryanair

Key Takeaways

Ryanair will publish its annual earnings report on Monday. Analysts expect the company to continue benefitting from improved summer travel demand this year despite ongoing fuel costs and strike challenges. While the airline industry faced a few bumps, Ryanair remains vulnerable to higher energy prices, having hedged 65% of fuel until next year, and potential disruption from air traffic controller strikes in France. Investors will focus on Ryanair's growth targets for the coming year as performance is compared to more normalised travel levels.