Ryanair's disclosure that passenger numbers jumped 10% in September, even amid flight cancellations, underlines the extent to which the budget carrier is still growing despite the pilot-rostering challenges that have clipped its planned expansion.
The airline has today detailed passengers numbers that, on an earned-seat basis, were up 10% at 11.8 million in September – a month which includes more than 2,000 flight cancellations. While below the 12% rise recorded for the rolling year to date – and only incorporating two weeks of cancellations – this still illustrates a strong growth rate.
Ryanair had initially hoped to confine flight cancellations to six weeks in September and October after the scale of an over-allocation of pilot leave became clear. But the airline subsequently opted to ground 25 aircraft over five months during the winter and will operate 10 aircraft fewer than planned next summer, in a bid to draw a line under the pilot-rostering issue once and for all. The carrier will suspend 34 routes between November and March 2018.
The impact will be a slowing in its capacity growth over the winter months, from 9% to 4%, and the airline now expects to carry two million fewer passengers in flying 129 million over the year ending 31 March 2018 – and four million fewer in flying 138 million the following year.
But that still represents not only the highest figure of passengers carried by a European airline, but also strong growth for the year overall. Ryanair remains in the rapid expansion mode it has been in since ending its fleet-growth hiatus with a major follow-on Boeing 737-800 order in 2013.
FlightGlobal schedules data shows that as of 28 September, Ryanair was set to lift capacity around 11% in terms of flights over the five months from November to March compared with the same five-month period in 2016-17. That includes a little over 27,000 additional flights. Ryanair says it is cancelling around 18,000 flights, meaning it will still operate around 9,000 more flights this winter than in the same period last year.
That would still involve the carrier growing faster, in absolute terms, than most in Europe. And even after the cuts, it will still by a distance operate more flights than any other European carrier this winter.
Details of the routes impacted show that much of the Irish carrier's UK domestic network will be suspended over the winter season as part of efforts to tackle its pilot-rostering issues.
The airline, which only resumed UK domestic operations three years ago, will suspend its London Stansted routes from Edinburgh and Glasgow, as well as its Belfast link to London Gatwick. That leaves flights from Derry to Liverpool and Glasgow as Ryanair's only UK domestic routes over the winter period.
The UK is one of the most impacted countries in terms of its representation among the 34 routes Ryanair is suspending between November and March. Eleven routes covering six UK airports are on the list.
But the biggest country casualty among routes being suspended is Italy. Fourteen services, including seven from Trapani, are being put on hold during the winter.
Greece, Poland and Germany are also among the most impacted countries, while the Bulgarian capital Sofia, German city Hamburg and Thessaloniki in Greece each have five services being suspended.
PROFIT FORECAST UNCHANGED
Ryanair put the cost of the initial cancellations at up to €25 million – a combination of the lost profitability and the passenger compensation.
It also put the cost of flight vouchers for all impacted passengers, subsequently announced as part of its later round of flight cancellations, at no more than €25 million.
It also expects slightly lower yields over the next two months as it undertakes various seat sales. But Ryanair has not changed it full-year guidance of a net profit of €1.4-1.45 billion.
Likewise, it adds: "Over the next two years as Ryanair hires more pilots and raises pilot pay, costs will rise slightly but we don't believe this will impact profitability."
Until recently, the carrier had a practice of voluntarily grounding some aircraft over the winter rather than operating them on routes that were loss-making during those months. New airport deals and a greater emphasis on routes with a business appeal to mitigate seasonality have altered that picture. But cancelling routes during the lower-yielding winter months limits the lost revenue. The extra notice also means cancellations are not eligible for EU passenger compensation.
While Ryanair's profit expectations are undented, this should be set in the context of relatively strong European carrier financial performance. Ryanair left its outlook unchanged despite a strong first quarter, but several European carriers – admittedly, most operating to a calendar year and thus at the halfway stage of their financial years – lifted their profit outlooks, including Austrian Airlines, Finnair, Icelandair, Lufthansa and SAS.
A profit within Ryanair's guidance would still mark an improvement on the €1.32 billion net profit it recorded for the year ended March 2017. That was the third-highest profit, net, among European airline groups for the last financial year.
There has been impact on the carrier's share price. This has fallen from a year-high of just over €19 in the middle of September to its current price hovering below the €17 level. That, though, is in the context of continued strong growth over most of the year. The share price has been climbing from €12 a year ago.
Ryanair chief Michael O'Leary has also spoken of reputational damage for the carrier. After the biggest publicity hit since Ryanair's adoption of its more customer-friendly "Always getting better" campaign, O'Leary responded in direct but contrite fashion. "This is a mess of our own making," he said following the first round of cancellations. "I apologise sincerely to all our customers for any worry or concern this has caused them."
The flight cancellations also represent the first big setback for Ryanair's overhauled management team. The carrier appears to have identified a need for a tighter grip on operations: its chief people officer Eddie Wilson has taken over the pilot recruitment and rostering function, and the airline has abandoned any interest in bidding for Alitalia, in order to "eliminate all management distractions".
An earlier version misidentified Ryanair's chief people officer
Source: Cirium Dashboard