Shares in Easyjet, Wizz and Jet2 slumped in early deals this morning after Ryanair issued a warning over ticket prices.
Ryanair, Europe’s largest airline by passenger numbers, said ticket prices in the coming months would be “materially lower” than expected as customers have been “a bit more cautious” with their money.
“Fares are now moving materially lower than the prior year and pricing… continues to deteriorate,” its boss Michael O’Leary said in a presentation announcing its latest results.
By mid-morning, Ryanair shares had fallen over 12 per cent after announcing a sharp drop in profit in its quarterly results.
Shares in the IAG, the airline conglomerate which owns British Airways, also suffered a 4.28 per cent slump.
Shares in peers Easyjet, Wizz Air and Jet2 had fallen by between 7.5 per cent and 5.5 per cent in early morning trade.
Ryanair’s warning seems to have taken investors by surprise. Air travel has boomed over the past two years, driven by a rebound in travel following the Covid-19 era lockdowns, and carriers have been able to push up ticket prices.
However, the sector has been less bullish in recent months.
Jet2 said in early July there would be only “modest” modest price increases over the summer, in contrast to prevailing opinion over the first half of the year. Lufthansa has also flagged “negative market trends.”
Alongside the volatility in ticket fare prices, a number of other factors have conspired to disrupt airlines worldwide.
Ongoing supply chain issues at Boeing and Airbus have left airlines short of the capacity necessary to meet such resurgent demand.
Air traffic control strikes have also caused chaos across European airspace in recent years, at a time when flight routes were already being altered due to conflict in the Ukraine and, more recently, Israel.
The sell-off has also been worsened by the prospect of the airline industry taking the rest of the week to recover from last Friday’s global IT meltdown.
“It’s a chaotic time to run an airline as there are so many factors causing turbulence in the sector,” Dan Coatsworth, investment analyst at AJ Bell, said.
“Cheaper air fares are great for travellers but bad for airlines trying to repair their finances after the pandemic. It puts more pressure on airlines to put bums on seats and fill planes to maximise the revenue potential.”
He added: “While travel demand has bounced back since the pandemic, travellers are reluctant to book too far ahead. That’s possibly because they are feeling the pressure of persistent high interest rates or because they are holding out for a bargain.
“It’s starting to feel clear that 2024 is not going down in history as a good year for the airline sector.”