Vacation travelers are currently no longer willing to travel at any cost and will retaliate if ticket prices are set too high. Unexpectedly weak results in Ryanair's first quarter show that air passengers punish airlines when they raise prices too much.

For investors, this means caution across the entire industry – even though delivery delays for aircrafts from Boeing and Airbus could bring some relief in the coming years.

The stocks of all European airlines fell on Monday after Ryanair reported a 46 percent decline in quarterly post-tax profit to 360 million euros, significantly below the expected 538 million euros. The main reason was a reduction in average airfares by 15 percent to less than 42 euros.

The low-cost airline, leading in European pricing policy, transported 5.1 million more passengers than in the same period last year. However, as CEO Michael O'Leary emphasized, consumers were willing to travel "but only at a certain price." Although overall traffic for the year is expected to increase by 8 percent to 200 million passengers, Ryanair anticipates that fares during the important summer season will be "significantly lower" than previously forecasted.

The company's efforts to limit discounts over the past weekends were not well received by customers. Therefore, Ryanair will now 'aggressively' promote low fare availability, O’Leary warned.

Given Ryanair's low cost base, this is bad news for competitors. By the end of June, Ryanair had a net liquidity of 1.74 billion euros, an increase of 27 percent.

There were already warning signs. Some US airlines and hotel operators reported a drop in demand in the leisure sector at the beginning of 2024. EasyJet indicated in May that revenues for the summer quarter might not be as high as expected. Even before Monday, the stocks of many European airlines had fallen in 2024. The valuations were already below pre-pandemic levels.

Consumers who have not yet booked their summer or autumn holidays will welcome a price war – even if cheaper than expected does not necessarily mean rock-bottom prices. The average ticket price of Ryanair in the first quarter was still 6 euros higher than before the pandemic.

Ryanair anticipates that delivery delays at Boeing and Airbus will benefit the industry in the coming years by limiting capacity.

Nevertheless, the assumption that limited capacities should now support significantly higher ticket prices appears shaky. Capacity in Europe is still about 5 percent below pre-pandemic levels in 2024. Thus, investors should remain strapped in.