Ryanair (NR, BBB+/BBB+) 1Q25 (3m to June) Results

Its read-through to peers that is of interest given Ryanair low beta (has committed to be debt free by '26 and runs a net cash position). The theme of falling yields that started with Delta in the US looks to be getting worse as we roll-through earnings;

• Lufthansa (12th July): "in particular, a market-related decline in yields in all traffic regions – especially in Asia – had a negative impact."
• Finnair (19th July); "the yield environment is softening from the very high levels of 2023. Having said this, we are still facing an elevated level, if we take a bit longer historical period into consideration."
• Ryanair (22nd July); "while Q2 demand is strong, pricing remains softer than we expected, and we now expect Q2 fares to be materially lower than last summer"

Ryanair also faced operating costs that were up +11% - we didn't see that in Finnair (-0.6%) and Lufty said unit costs were similar to previous year. Co did say some of it was on Boeing delays and it's kept FY guidance for costs ex. fuel still at a only "modest increase".

We have flagged IG network carriers alongside Air-France in HY screening tight many times - perhaps caused by investors (over)extrapolating the recent run of rating upgrades and spread rally (former has largely come to an end). Air-France earnings come on Thursday, we said some downside was priced on Friday and more being added this morning; new 29s +12/-0.5pts. EasyJet 28/31s +6-8bps are also coming out from tight levels.

Equities being impacted; Ryanair -14%, easyJet -8%, IAG- 4%, Finnair -3.5% and Lufthansa -1.2%

1Q Results:

• Customers up +10% to 55.5m over the qtr while load factor down -1ppt to 94% was in-line with expectations. Big blow again was in yields with rev/passenger -10% driven by the average fare falling -15% to €41.9 (c€47.2).
• It left group revenue down -1% at €3.6b (c€3.9b). Fall in fares was not matched in costs; operating up +11% to €3.26b and concerningly not driven by fuel (hedges generated savings) but by higher staff and other costs. It left PAT at €366m (c€542m); a near halving (-49%) from last yr and margin contracting from it's impressive 19% to 10%. Reminder Ryanair is the sector leader in margins.
• On Fuel it is 75% hedged for 12m to March '25 (at <$80bbl) and 43% hedged in 12-months following (at <$79bbl). * Cashflow from operating actives was €1.1b down from last year's €1.25 but still firmer than operating performance fall given lower capex and more favourable WC (even on yoy basis).
• On equity pay-outs it says 50% of €700m buyback programme completed - which Included €250 this qtr. It's dividend policy is 25% of prior-year's PAT - i.e. €480m in FY25. * No issues on BS; €4.5b cash on hand and net of debt leaves it with a €1.74b cash (up from €1.4b last qtr).
• Reminder O'Leary in FY24 results committed to paydown the only two outstanding lines (25/26s) while financing aircraft capex from "internal resources". Target was to be "debt free 2026". No mention/update of those plans in today's release.
• Outlook is for FY25 traffic growth of +8% (unch), unit costs ex. fuel to rise moderately (unch). Revision down is in Q2 pricing which is softer than expected leading to guidance for fares to be "materially lower than last summer" from previous "flat to modestly up". It's waiting for 1H (4th Nov) to issue FY profit guidance.