Ryanair’s outlook revised to positive by Fitch, IDR affirmed at BBB+

Fitch Ratings has revised Ryanair's outlook to positive from stable, affirming its 'BBB+' Long-Term IDR, reflecting expectations of a strong financial profile consistent with an 'A-' rating. This upgrade is driven by projections of solid operating performance, positive free cash flow, and a sustained net cash position, with EBITDAR leverage forecast to average 0.3x in FY26-FY28. The airline's superior unit cost structure, aggressive passenger growth targets to 300 million by FY34, and ability to repay significant bond maturities from cash reserves underscore its robust financial health and operational efficiency, positioning it favorably within the European airline sector.

Analysis

Fitch Ratings has revised Ryanair Holdings plc's outlook to positive from stable, affirming its 'BBB+' Long-Term Issuer Default Rating, signaling a clear path towards a potential 'A-' category rating. This revision is predicated on Ryanair's robust financial profile, underscored by a forecast EBITDAR leverage decreasing to an average of 0.3x for FY26-FY28 while maintaining a net cash position. Despite a decrease in EBITDAR to €2.8 billion in FY25 from €3.1 billion in FY24, this was a direct result of a strategic 7% reduction in airfares that successfully drove passenger growth to 200 million. The company's financial strength is further demonstrated by its plan to repay €2.05 billion in upcoming bond maturities using available cash. Operationally, Ryanair continues to execute an aggressive growth strategy, targeting 300 million passengers by FY34, supported by a large order for 300 Boeing 737 MAX-10 aircraft. This expansion is buttressed by a significant competitive advantage in its unit cost structure, which continues to widen against European rivals, and a manageable cost inflation outlook of 1%-3% for FY26.

Key Decisions for Investors

• For credit investors, the positive outlook revision and commitment to repaying €2.05 billion in bonds from cash significantly de-risks the balance sheet, strengthening the investment case for Ryanair's debt instruments.
• Equity investors should interpret the strategy of lowering fares to capture market share as a long-term bullish driver, as it solidifies the airline's dominant position and is supported by a widening unit cost advantage and a strong balance sheet.
• A key catalyst to monitor is the funding strategy for the large Boeing 737 MAX-10 order post-2028, as a prudent capital plan could secure an 'A-' credit rating upgrade and unlock further value.
• Considering the projection of a sustained net cash position and exceptionally low leverage, investors should anticipate the potential for enhanced shareholder returns following the repayment of near-term debt maturities in 2025 and 2026.