Is there more to Ryanair Holdings PLC (LSE:RYA)'s disappointing first quarter and weaker-than-expected outlook than fee pressure?
The Budget Irish airline's average fares dropped 15% to €41.93 in the quarter, contrasting sharply with the expected 2% decline.
Total revenue came in at €3.6 billion, falling €350 million short of Peel Hunt's forecasts, while operating expenses were €15 million higher, mainly due to increased fuel costs.
All in all, Ryanair dropped “weak results and (a) weaker outlook”, stated Peel Hunt, with second-quarter fares projected to be materially lower than last year.
This is a stark contrast to the previous guidance of flat to modestly higher fares.
Yet, as analysts at Peel Hunt today pointed out, competitors easyJet and British Airways owner IAG have managed to update their guidance without making any changes.
Meanwhile, holiday bookings, particularly in the UK, remain robust “with high prices and limited availability”, noted Peel Hunt.
“We therefore speculate that Ryanair’s yield shortfall may be attributed to the loss of key OTA (online travel agency) sales until May,” said the bank’s analysts.
Ryanair vs. the pirates
Ryanair’s chief executive Michael O’Leary is an outspoken critic of OTAs such as eDreams and Mytrip.
O’Leary has accused these online price aggregators of overcharging customers and even inventing fees out of thin air.
In May, Ryanair awarded eDreams the dubious honour of ‘No.1 OTA Pirate’ for allegedly overcharging as much as 116%.
The airline recently hailed a victory in the US courts over a counterclaim from Booking.com alleging defamation and unfair competition in Ryanair’s campaign against what it calls “deceptive practices of OTA Pirates”.
Ryanair has put in place agreements with several OTAs, including loveholidays, Kiwi, TUI, On the Beach, eSky, and El Corte Inglés, in order to prevent nefarious OTAs from screenscraping the Ryanair website and potentially overcharging consumers with hidden fees.
But Peel Hunt speculates that the delay in setting up these agreements was partially to blame for the disappointing quarter. Not solely of course- a fair chunk of Easter sales fell outside of the first-quarter, while weakness in the German and Eastern European markets was also cited as a headwind.
A Ryanair spokesperson told Proactive that this reasoning was "not correct", reiterating the "materially lower" pricing projections outlined in the first-quarter trading update.
Peel Hunt has nonetheless maintained a buy rating on Ryanair stock with a €23.8 price target against a €13.56 publication price.