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When Ryanair decides to go to war with an enemy, it is used to getting its way. But the European low-cost airline’s long battle with online travel agents (or “pirates,” as CEO Michael O’Leary liked to call them) has left it with some unexpected wounds. Unfortunately for competitors, Ryanair’s injuries are unlikely to limit her for long.
Ryanair shares have lagged several of its rivals so far this year, losing around 6 per cent against an (albeit unremarkable) gain of 3.5 per cent for easyJet, for example.
O’Leary shook the market in July, when it warned that Ryanair’s summer airfares would be “materially lower” than the previous year because consumer spending had deteriorated. This triggered fears of a hard landing of the post-pandemic “revenge travel” boom. Investors were then left scratching their heads when easyJet and others failed to echo the pessimism.
On Mondays, Ryanair confirmed what some analysts had suspected for some time: that its war with online travel agencies (OTAs) was at least partly to blame for the 10 percent year-on-year drop in average fares in the first half of the year. up to 52 euros. . This contributed to an 18 percent drop in first-half net income to €1.79 billion.
OTA (think sites like Booking.com, Expedia, and Kayak) suddenly stopped sell Ryanair flights by the end of 2023. Ryanair was relatively optimistic at the time, believing that customers would simply book directly through its website. But OTA’s customer base was more loyal than expected. Ryanair was forced to cut prices to fill planes.
The airline has other difficulties: it has revised downwards its expectations for the number of passengers it expects to carry in its next full financial year to 210 minutes from 215 minutesdue to delivery delays at Boeing.
Still, Ryanair will not be affected for long. First, it has established “approved partnerships” with most OTAs. These resolve many of the sources of contention between the two parties, such as providing customer details to Ryanair. Crucially, they allow your flights to be re-listed.
Rivals are also facing delivery delays. Unlike others, Ryanair is not affected by Pratt & Whitney engine problems with its existing aircraft. Industry-wide capacity constraints should help support airfares in the coming years as Ryanair gets costs under control.
Considering that Ryanair’s average after-tax profit per passenger before the pandemic was around 11 euros, net income forecasts for 2026 seem too conservative, considers Bernstein analyst Alex Irving. Current Visible Alpha estimates suggest a profit per passenger of just 9 euros. With the travel agency wars largely behind us, that leaves Ryanair plenty of room to take off.