Ryanair chief executive Michael O’Leary has said there are “no signs” of the economic slowdown hitting airlines after the low-cost airline racked up record bookings at the start of the year.
Passengers were also paying up for higher fares as demand from consumers withstands slowing economic growth and a squeeze in the cost of living in the UK and across Europe.
“All the indicators are very strong,” O’Leary told the Financial Times on Tuesday. “There is a lot of spending going on out there. Hotels are full, restaurants are full,” he said.
Ryanair reported 4.95mn bookings last week, the most in the airline’s more than 30-year history. “There is an outside prospect this week we might do 5mn for the first time,” he said.
No major airline has reported a significant slowdown in demand for flying despite the grim economic backdrop, a resilience that O’Leary put down to pent up demand for travel following pandemic border restrictions, high savings and still low levels of unemployment.
Avolon, the world’s second-largest jet leasing company, this week predicted that global air traffic would recover to pre-pandemic levels by the middle of this year, propelled by the reopening of China’s borders.
Ryanair is already back above its 2019 flying schedules, but O’Leary warned the recovery was still vulnerable to a sudden collapse in demand, potentially because of an escalation of the war between Russia and Ukraine, or a new flare-up in the Covid-19 pandemic.
“There is undoubtedly strength in bookings and pricing at the moment. And if that continues through into Easter and the peak summer travel without any black swan event, then I think we could see all the airlines do very well in Europe this year,” O’Leary said.
Ryanair expects to carry a record 168mn passengers in the 12 months to the end of March, up from 149mn in its busiest year before the coronavirus crisis.
Earlier this month the airline upgraded its earnings forecasts to profit after tax of between €1.33bn and €1.423bn, up from a previous guide range of between €1bn and €1.2bn.
O’Leary cautioned that profitability could be squeezed over the next 12 months as the airline would be more exposed to the volatile price of oil when some of its fuel hedges expire in April.
But he said that for now passengers appeared willing to soak up much of these price rises through higher air fares.
“We are looking at fares rising at high single digits for the second year running [ . . .] I don’t think I have seen two years of rises like that,” he said.
“We are waiting to see what could go wrong, because everything is steaming ahead,” O’Leary said.
Airline shares have had a strong start to the year amid signs of resilient bookings, but the major European players including easyJet and British Airways owner IAG are still trading at a discount to their levels before the pandemic.
Ryanair shares were on Tuesday trading at €14.70, their highest since May but below the €18 level of early 2020.
“I think there is still a lot of [investor] scepticism about oil prices, Covid and Ukraine [ . . .] nobody is out there [ . . .] saying ‘I know, let’s invest in the airline industry into the post-Covid recovery’. It will take a while and we have to deliver,” O’Leary said.