As 2024 comes to a close, the outlook for Europe’s three biggest low-cost carriers is varied. Clear differences are apparent in the financial performance and the broader issues affecting Ryanair, easyJet, and Wizz Air.
Let’s begin with a closer look at Ryanair. While summer profits were healthy at €1.52 billion ($1.58bn) they were down by 6% year on year.
The airline highlighted pricing weakness and saw fares fall 7% in the second quarter. While unwelcome, this was a lower rate of decline than Q1’s 15%. What’s interesting is this depth of price falls has not been experienced to the same extent by the other two low-cost airlines – more on them shortly.
Ryanair’s Fare Strategy
Price matters to all budget carriers, but especially Ryanair. The Irish firm has long used price to stimulate demand. It uses a “load factor active, revenue passive” approach to ensure full aircraft. These drive higher ancillary sales, which now account for around a third of company revenues.
Ryanair has never been shy about putting pressure on its competitors. It’s therefore conceivable that some of the price weakness may have been self-induced. The carrier also battled with several online travel agents in late 2023 and into 2024. These are mostly now overcome with new commercial agreements, but this cost some sales, particularly later booking and higher fare traffic.
Putting pricing to one side, the biggest challenge Ryanair currently faces is delivery delays to its outstanding order of Boeing 737 Max 8 aircraft. This has been an issue throughout 2024 but was compounded by the planemaker’s recent strike.
Ryanair suggests that delayed deliveries will result in a 5 million passenger shortfall in the coming years. Despite this well-documented obstacle, the airline has still been able to flex its muscles in the marketplace. Ryanair has used 2024 to grow traffic, open new routes and bases, and generally make life tough for competitors.
What’s Happening at Wizz Air?
Budapest-based Wizz Air delivered a first-half net profit of €315.2 million ($328m), down 21.3% year on year. Its Q2 profit was down 7%. For the year, Wizz Air has issued profit guidance of between €350-450m, down around €150m against earlier estimates.
While Ryanair’s aircraft challenges are largely driven by Boeing delivery delays, Wizz’s problems are arguably more complex. The carrier is being hit with lengthy engine repairs to its Pratt & Whitney GTF-powered Airbus jets. These fuel-efficient aircraft are the core of its fleet and its growth plans, yet Wizz finds itself with around 40 planes grounded over the next 18 months. The airline is far from alone in facing these operational headaches, with global operators including Spirit, JetBlue, and IndiGo also navigating the problem.
Wizz has had to retain older aircraft and lease in additional capacity to back-fill for the grounded planes. The timing is troublesome. This should be a strong growth phase for the airline, but it is having to sit with virtually flat capacity in the current financial year. In real terms, Wizz has had no option but to cut capacity or cancel routes completely to focus finite resources on its most profitable markets. For context, in the first half of 2024, 14 airports and 116 fewer routes were served compared to the previous year.
On top of engine challenges, Wizz expects delivery delays from Airbus in the next two to three years. This has forced the airline to revise its annual growth targets downwards for the remainder of the decade.
Wizz’s Untapped Potential
The additional frustration for Wizz Air is that it is not lacking opportunities. The carrier has huge potential, not only in its core European markets but more recently with its expansion into the UAE and Saudi Arabia.
Against this backdrop of tight capacity, Wizz has been more impacted by geopolitical upheaval than its peers. It had heavy exposure to both Ukraine and Israel and has had to quickly move capacity to other areas. While this may not sound problematic, Wizz has had to offer lower prices to stimulate traffic at short notice, however, it has not experienced the sharp fare declines witnessed more broadly at Ryanair.
While its aircraft issues continue, Wizz has had to work hard this year on a separate challenge. After being severely criticized coming out of the pandemic for poor punctuality and high cancellation rate, the company is trying to restore operational stability and discipline.
In the context of aircraft groundings, delays, and the need to restore operational reliability, management has no option for now but to sacrifice short-term profitability and rein back planned growth levels for the next few years.
The Latest from EasyJet
UK-based easyJet recently reported its 12-month results to the end of September, with a profit of £610 million ($764m). This was up 34% on the previous year. In many respects, the airline had a far smoother time than its two largest peers.
Whilst easyJet’s network has a significant Mediterranean focus, exposing it to challenging air traffic control delays, the carrier reported upbeat trading with strong demand for its services. The airline delivered robust traffic growth and unlike Ryanair, it actually saw modest improvements in passenger fares and ancillary revenues.
Notably, easyJet has managed to avoid the severe aircraft delays and groundings experienced by Ryanair and Wizz. Its newest Airbus planes are powered by CFM LEAP engines which, while not entirely free of their own challenges, are nothing like the intensity of those besetting Pratt & Whitney models.
As a result, its fleet has not faced severe disruption. Similarly, while it is exposed to Airbus delivery delays, the number of new aircraft deliveries due in the period was minimal. Bosses at easyJet have managed to find workarounds avoiding any limitations on planned capacity.
A further factor driving decent financials at easyJet is a growing contribution to profits from its holidays division which accounted for £190 million of the headline profit figure this year.
Expect to see these performance differences continuing to develop into 2025. We’ll have a clearer indication in the next round of quarterly earnings in late January and February.
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