Ryanair on course to return €1.6bn a year to investors from 2025

Ryanair is on a path to pay out more than €1.6 billion a year to shareholders from 2025 through dividends and share buy-backs, as the airline transforms its selling point to investors from revenue growth to capital returns, according to US investments giant AllianceBernstein.

AllianceBernstein analysts Alex Irving and Clementine Flinois estimate that Ryanair will have almost 600 aircraft by the end of its financial year to March 2024, rising to nearly 700 in 2027, compared with 523 currently.

“Ryanair is set to undergo a metamorphosis over the next 18 months, transforming from a revenue growth stock into a cash return one,” the analysts said in a report sent to clients last week. “This looks like the right move for the company and for shareholders, as structural demand growth in Europe slows.”

“Some opportunities remain: incremental market share gains in western Europe, meaningful structural expansion in central and eastern Europe and the possibility to capture some more corporate travel.”

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Ryanair returned more than €6.8 billion to investors through share buy-backs, a special distribution and special dividends between 2008 and 2020, but payouts have been on hold since then as the carrier grappled with the pandemic and, more recently, focused on paying down debt. It has never paid a regular dividend.

[ Ryanair passenger numbers continue to climb in January ]

Group chief executive Michael O’Leary signalled last week that the low-cost carrier may turn to paying out modest dividends in 2024, if its net debt has been cut to zero by that March. The AllianceBernstein analysts see Ryanair with €3.7 billion of cash balances by that stage, eclipsing its €3.2 billion of total debt.

They forecast Ryanair will buy back €1 billion of shares and hand out €606 million in dividends in the year to March 2025, with total returns rising to €1.85 billion the following year and almost €2 billion in 2027.

Ryanair provided service to 242 airports last year, with more than 2,500 point-to-point city pairs, the largest of any airline worldwide, they said. The average city pair has one flight per day in either direction.

The UK and the Republic accounted for more than half of seat capacity two decades ago, but last year Italy accounted for the biggest share, at 22 per cent, followed by Spain, at 18 per cent, and the UK, at 14 per cent. Only 14 per cent of capacity left central and eastern European airports.

[ Ryanair dividends unlikely before next year ]

“Demand growth in western Europe may be limited from here on out, but central and eastern Europe continues to offer significant expansion potential,” the analysts said, adding that they expected the amount of seats sold per capita by the airline industry in the latter region to more than double in a little over a decade, to 1.2 seats by 2030.

“The region’s market structure is also more fragmented than western Europe, with a greater capacity share among smaller, weaker airlines,” they said, adding that this provides a consolidation opportunity for Ryanair.

Mr O’Leary, who has been group chief executive since 1994, extended his contract last December by a further four years to 2028, in a deal that also pushed out the lifespan of a potentially highly lucrative share options scheme that was originally due to end next year.

He has the right to buy 10 million shares at €11.12 each if Ryanair’s annual net profit topped €2.2 billion, or if its share price exceeded €21 for a period of 28 days before the end of the contract. If the options were triggered by the stock breaching €21, it would deliver an almost €100 million gain for O’Leary.

Shares in the company closed at €15.25 on Friday. The AllianceBernstein analysts see Ryanair’s underlying net income reaching €2.3 billion in 2027, compared with €1 billion in 2020.