Ryanair Group CEO Michael O’Leary has forecasted that capacity constraints will persist across Europe for the foreseeable future, pushing air fares higher, driven by such factors as industry consolidation, aircraft delivery delays, and supply chain issues.

The projection came after the Irish airline group reported an 11% growth in traffic, reaching a record 105.4 million passengers in the six months to Sept. 30, with average air fares seeing a substantial increase of 24%. O’Leary indicated that fares for the current quarter, concluding in December, were expected to rise by “a mid-teens percentage” compared to the same period in the previous year.

“We continue to see a constrained supply situation across Europe, and I think that’s fundamental not just to Ryanair’s strong results in the first half, but also the very strong results reported by many of our competitors in recent weeks,” O’Leary said on a conference call with analysts. He added there was “no danger” that intra-Europe pre-pandemic capacity would return “for the next two or three years.”

O’Leary said the imbalance between European supply and demand was being caused by Airbus and Boeing aircraft delivery delays. Ryanair previously expected to take delivery of a further 57 737-8200s by the start of the northern summer 2024 season but has expressed concern that up to 10 may be delayed until winter 2024-25.

“Boeing has contracted to deliver 57 MAX aircraft between now and the end of April,” O’Leary said. “We’re not sure they’ll deliver all 57, but we’re confident that we’ll get about 45 to 50 of those aircraft by the end of June, which will be in time for the summer peak in 2024. That will be critical to our traffic growth next year.”

Additionally, O’Leary anticipates capacity of competitors in Europe will be “substantially” curtailed between 2024 and 2026 because of Pratt & Whitney engine issues, saying that it has not yet been “well factored into the capacity story for summer 2024” by A320 operators. “We expect there to be material groundings of competitor capacity through the summer of 2024, and we think that will run into 2025 as well,” he added.

As such, O’Leary said there was “very little prospect” of capacity within Europe returning to its pre-pandemic level between 2024 and 2026, which is expected to bolster Ryanair’s pricing power even in the face of challenging consumer demand.

Ryanair reported first-half revenues of €8.58 billion ($9.22 billion), marking a 30% increase over the same period in 2022. Like-for-like profit after tax surged by 59% to €2.18 billion, despite operating costs rising 24% to €6.16 billion, primarily due to a €600 million increase in fuel costs. In response to strong profits, Ryanair outlined plans to initiate regular dividends for the first time, commencing with €400 million over the next 12 months.

The airline also expanded its operations during the summer of 2023, opening three new bases and launching 190 new routes. For winter 2023-24, Ryanair is set to open bases in Athens; Belfast; Copenhagen; Girona, Spain; and Spanish islands Lanzarote, and Tenerife; along with 60 new routes, including the company’s first services to Albania.

Looking ahead, Ryanair disclosed that nearly 85% of its full-year fuel requirements until March 30, 2024, are hedged, providing substantial protection from recent short-term fuel price fluctuations. The group expects its overall passenger numbers for the current financial year to reach approximately 183.5 million, a 9% year-on-year increase, though it acknowledges that the final figure will depend on the timing of aircraft deliveries from Boeing. Full-year profit after tax is projected to fall within the range of €1.85 billion to €2.05 billion.