Ryanair Holdings Share Price Decline

Shares of Ryanair Holdings (IR:RYA) (NASDAQ:RYAAY) traded lower on Monday following the airline’s latest earnings report, which signaled moderate expectations for fare and passenger growth despite in-line results for H1 FY 2024/25.

At 3:16 AM (0816 GMT), Ryanair was trading 2.5% lower at €17.565.

Analysts at RBC Capital Markets noted that Ryanair posted a half-year profit of €1.79 billion, closely aligned with consensus estimates of €1.8 billion. However, investors were concerned about signals of slower future growth due to delivery delays and softer fare expectations for Q3.

The low-cost airline’s earnings exhibited a mixed picture with a decrease in average fares—down 10% for H1, including a 15% drop in Q1 and a 7% drop in Q2.

Ryanair has warned that Q3 fares are likely to continue softening, subject to close-in bookings as the quarter progresses.

RBC analysts stated that while cost control remains crucial, with unit costs expected to stay flat, any positive sentiment was muted by tempered expectations for fare growth and traffic projections.

Revenue for Q2 came in at €5.07 billion, a modest 3% increase, bolstered by a 9% rise in ancillary revenues and steady fuel costs.

Despite this, overall operational expenses rose by 6%, narrowing Ryanair's profit margins. The airline’s EBIT for the quarter dipped slightly, falling 3% year-over-year to €1.65 billion, though this was marginally above market consensus. Net income dropped 6% from the previous year to €1.43 billion.

In its outlook, Ryanair has downgraded its FY26 traffic target to 210 million passengers, down from a previous forecast of 215 million, citing ongoing aircraft delivery delays. Although passenger numbers for FY25 are still anticipated to grow by around 8%, reaching up to 200 million, this revision has tempered broader growth expectations for the upcoming years.

The airline declared a €0.223 interim dividend, set for February 2025, and reported a significant reduction in net cash reserves, now standing at €0.59 billion, down from €1.74 billion at the end of the previous quarter. This decrease follows capital expenditures and shareholder returns, including a completed €700 million buyback in August, with additional buyback efforts underway.

Analysts at RBC Capital Markets stated, "We see longer-term attractions to Ryanair's low-cost and relatively high-margin business model. We expect FCF yields to exceed 10% by FY26E as capex decreases, leaving scope for further shareholder returns."