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Despite reporting its best-ever annual profit, low-cost carrier Ryanair is facing challenges in the current quarter. The Dublin-based firm saw a 34% increase in profit after tax to 1.92 billion euros and a 25% rise in revenue to 13.44 billion euros in the full year to March 2024. However, operating costs were up significantly, with a 24% increase year on year and a 32% spike in the airline’s jet fuel bill.

Ryanair has also flagged a weaker pricing environment in the current quarter. Analysts at Deutsche Bank have noted that recent pricing has been softer than expected. This may be due to a “recessionary feel” in Europe or weaker consumer sentiment, according to Ryanair CEO Michael O’Leary. The airline may have to resort to discounting or cutting fares to maintain a load factor of 94% in the coming months.

Despite the challenges, Ryanair announced a 700-million-euro share buyback program, reflecting a “very strong” balance sheet, according to Chief Financial Officer Neil Sorahan. The airline has been focused on restoring pay for its employees after the Covid pandemic, bringing in pay increases, and paying down debt. With 1.4 billion euros in gross cash at the end of the last year, the board is confident in returning funds to shareholders.

Challenges Ahead

In addition to the weaker pricing environment, Ryanair is facing other challenges, including delays in the delivery of new Boeing aircraft and the grounding of numerous Airbus planes due to engine issues. These factors are expected to constrain capacity for the airline in the near future.

While Ryanair has achieved record profits and continues to grow its passenger numbers, the airline is not without its challenges. Operating costs, a weaker pricing environment, and other unexpected issues pose risks to its future performance. The airline will need to navigate these challenges carefully to maintain its position as a leading low-cost carrier in the industry.

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