Ryanair sees slower-than-expected growth in airfares over summer
John Strickland, independent aviation business strategist talked to CGTN Europe on Ryanair results and the reasons behind the cheaper-than-expected summer fares.
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00:00 Well, John Strickland is an independent aviation business strategist and he joins us now to
00:05 tell us a bit more about all of this. Welcome back to the programme, John. So what's going
00:09 on here? This is good news, perhaps, for consumers and holidaymakers getting maybe cheaper tickets
00:13 than they were expecting this summer.
00:15 Well, this is a line that Michael O'Leary has been communicating today, but it is a
00:19 benefit for consumers. The fares are going to be a little bit softer than expected. But
00:23 what we should do is put it in context. Of course, coming out of Covid, as airlines began
00:28 to fly summer 21, summer 22, we talked about pent-up demand. People were flying almost
00:34 at any price. Capacity was quite limited. And fare levels were going up to levels not
00:39 seen previously. I think it was probably quite ambitious to expect fares would go up substantially
00:44 again a third year in a row. So what we've heard from Ryanair today is the current quarter
00:50 running through till the end of June is relatively soft. We also need to remember Easter fell
00:58 in this quarter last year. This time around, it doesn't. But the real peak period, July,
01:02 August, September, when schools are on holiday, is looking stronger. Orbit, as we've just
01:07 been saying, fare levels not quite as high as expected. But it's still pretty positive
01:12 from an airline point of view. We've seen similar commentary from EasyJet. Demand looking
01:17 strong, but people are not really prepared to pay that much more.
01:21 So where do you see demand going? And have we really seen the end of the so-called staycation,
01:27 which of course we saw just after Covid, people having their holidays domestically. Are people
01:32 really now much more keen to get overseas and spend their summer holidays in the sun?
01:36 Well, people are still traveling strongly. Ryanair has seen volume growth. Ryanair is
01:41 adding aircraft to its fleet, as is EasyJet. Of course, the backdrop for the industry is
01:46 a shortage of capacity. Ryanair will be about 20 aircraft or so light at work, expected
01:53 to be, so it can't resource maybe as much demand as it would wish to. That's similarly
01:58 the case with Wizz Air, who we're reporting on Thursday. They in particular have a larger
02:03 problem about a quarter of their fleet, or close to a quarter of their fleet, is currently
02:07 grounded. They fly Airbus aircraft powered by Pratt & Whitney engines, which are having
02:12 to go extensive maintenance repairs due to underperformance of a particular type of engine.
02:19 So demand is pushing up against the buffers with airlines like those two, and indeed other
02:25 carriers in the market. But there are always unknown factors. We've had a pretty wet spring,
02:30 certainly in northern Europe, and that's pushed people to fly more. We've got perhaps the
02:34 wild card even of the Olympics in the summer this year, which some people may decide to
02:39 stay at home there. And also factoring into consumer consideration is not just the price
02:43 of tickets, but of course everything about a holiday. We've seen increases in restaurant
02:48 costs, increases in hotel prices, not to mention the cost of living generally. So while people
02:53 may not be travelling less, they are very much more focused on how much they can afford
02:58 to spend on those much sought holidays.
03:00 And let's talk a little bit more about those aircraft capacity issues. How big a problem
03:05 is Boeing's delay in aircraft deliveries for the broader European airline industry? And
03:10 do carriers simply not have enough planes? And is there any sign of that improving soon?
03:14 Well, it's a significant problem. Actually, Ryanair is the one who is hit most because
03:19 they have an all-Boeing fleet. They've got over 550 aircraft in their fleet. They were
03:25 expecting to take delivery of around about 40, 50 or so additional Boeing 737 MAXs this
03:33 summer. As I mentioned, there will be about 20 light of that figure. They're going to
03:37 have to take some later in the summer than they expected, which is not really terribly
03:41 valuable because the peak is past Ryanair, but it's a big full advantage on that capacity.
03:47 Other airlines around Europe are less impacted. Not so many have large fleets of Boeing aircraft
03:52 as far as short flights are concerned. But then the Airbus problem is much more prevalent.
03:57 Whistair, as I mentioned, with a fleet of about 160, 170 aircraft currently has a quarter
04:03 of them grounded. Other airlines, for example, Vueling in the IAG group, Lufthansa is another
04:10 one that have aircraft powered by these permanent engines. So those aircraft are not available.
04:16 The manufacturers talked about downtime per aircraft in a region of 350 days. So that's
04:21 the best part of the year to get those engines fixed on those aircraft. And Airbus already
04:26 did have delivery delay challenges anyway alongside Boeing. So that keeps capacity pretty
04:32 tight and it doesn't look like a problem that's going to go away quickly. So it's going to
04:35 continue to vex airlines, not just in the months ahead, but probably running into next
04:40 year as well.
04:41 OK, John, we always appreciate your insights. Thank you very much indeed. John Strickland.