Investing.com — Shares in fell over 7% on Monday, after Europe’s largest budget airline reported first-quarter net income of €538 million, down 34.4% from €820 million a year earlier and below analyst estimates.
Net income missed a consensus estimate of €579 million by 7.1% and Morgan Stanley’s own estimate of €639 million by 15.8%.
Morgan Stanley said the miss was driven by revenue, as non-fuel costs per passenger came in 1.5% better than consensus and in line with the broker’s forecast, while fuel costs were in line with consensus but 6% above Morgan Stanley’s estimate.
Revenue for the quarter rose 1.1% year on year to €4.43 billion, missing the consensus estimate of €4.48 billion by 1.1% but exceeding Morgan Stanley’s estimate of €4.38 billion by around 1%.
Morgan Stanley said the consensus miss was driven by scheduled revenue per passenger, which came in 3% below consensus, as fares fell 6% year-on-year, steeper than the mid-single-digit decline the company had guided.
For the full year, Ryanair guided traffic to grow 4% to 216 million passengers, in line with Morgan Stanley and consensus estimates. Unit cost inflation guidance will now depend on unhedged fuel prices, changed from a previous guide of mid-single-digit percentage growth, compared with Morgan Stanley and consensus estimates of 2% and 1% respectively.
“Principal cause of this was the price of our 20% unhedged fuel doubled in the quarter and fares fell 6%, primarily, we think, due to the impact of the Middle East conflict and the first part of Easter falling into our prior year Q4,” group chief executive Michael O’Leary said on the earnings call.
Average fares declined 6%, worse than Ryanair’s prior guidance of a mid-single-digit fall and beyond BofA’s pre-results estimate of approximately 4%, as the Middle East conflict drove consumer hesitancy and pushed bookings closer to travel dates.
Load factor held steady at 94%. O’Leary said Boeing expects MAX-10 certification “sometime in September or October of this year,” adding that the planemaker has confirmed the first 15 deliveries remain on track for spring 2027.
Group chief financial officer Neil Sorahan said the cost gap between Ryanair and rivals continues to widen, “If we look at our two nearest competitors, before COVID, Wizz were 26% behind Ryanair. Now that’s over 81%, we would expect that to continue to grow over the next number of quarters and years.”
He made similar remarks about easyJet, where the unit cost gap has widened from 70% to 150%. On hedging, O’Leary disclosed that FY2028 fuel is now 15% hedged at $85 a barrel, with operating expenses 90% hedged at $1.15 to the euro for FY2027, and first-half FY2028 30% hedged at $1.20 to the euro.
The airline also said 60% of its 150 firm MAX-10 aircraft orders are hedged against at just over 1.23.
Ryanair did not provide full-year net income guidance and also declined to reaffirm its prior unit cost inflation outlook, citing limited visibility into the second half, jet fuel price volatility, €300 million of additional European Union environmental taxes, rising maintenance costs and pay increases.
Ryanair said second-quarter fares are now expected to be modestly lower year on year, compared with its previous guidance for flat pricing. O’Leary characterised the decline as “something low to mid single digits” and said the first-half outcome would depend heavily on the strength of close-in bookings through the remainder of August and September, despite strong summer 2026 volumes.
Morgan Stanley said it expects consensus full-year net income estimates, previously €2.1 billion, to be reduced to €1.9 billion following the first-quarter results.
The broker maintained an “overweight” rating on Ryanair with a price target of €27.60, saying second-quarter fares were trending modestly lower despite a pick-up in summer 2026 volumes and less need for price stimulation.