Ryanair pledges €700m share buyback as higher prices boost revenue

Proactive Investors – Full-year results from Ryanair (LON:0RYA) were in line with previous guidance but with the airline surprised investors and analysts with its share buyback and dividend.

A €700 million share buyback is set to begin later this week and the introduction of a dividend, n int. div. €0.175 paid in Feb. Final div. of €0.178

Revenue for the year to end-March was up 25% to €10.78 billion as traffic grew 9% to 183.7 million, despite delays in Boeing (NYSE:BA) aeroplane deliveries.

Revenue per passenger was up 15%, including a 21% increase in fares and a 3% rise in ancillary revenue.

Total ancillary sales increased 12% to €4.30 billion, as spending on priority boarding, reserved seating and inflight sales increased to around €23.40 per passenger.

On the outlook, CEO Michael O’Leary said he expects traffic to grow 8% in the new financial year to 198-200 million passengers, “subject to Boeing deliveries returning to contracted levels before year-end”.

He said Ryanair’s cost advantage over competitors “continues to widen”, even though he expects unit costs to “rise modestly” as non-fuel costs are offset by fuel hedge savings and rising interest income.

“Recent pricing is softer than we expected, with Q1 requiring more price stimulation than last year (particularly as half of Easter moved into March and out of April).

With EU short-haul capacity constrained and summer 2024 demand positive, the company projects summer 2024 fares to be flat to modestly ahead of summer 2023.

Broker Peel Hunt (LON:PEEL) says new forward guidance for 2025 results is “slightly below our estimate” due to delays in Boeing aircraft deliveries.

Olly Anibaba, analyst at Third Bridge, says Ryanair slightly underperformed its 92-93% load factor target for the winter and said industry experts “believe airlines are consciously not prioritising load factor to keep fares slightly higher”.

“The Boeing delivery delays will be a huge problem for Ryanair,” he adds, with Ryanair expected to receive only half of what was promised, potentially reducing passenger volumes by 5-10 million.

“Ryanair can offset some of the impact on profits by removing the worst-performing routes from their network.”