Ryanair Holdings plc (RYAAY) reported fiscal third-quarter results Monday that tell two stories at once. The headline numbers look disappointing—profit down, earnings missing estimates—but strip out a regulatory penalty the company insists it'll overturn, and you've got a budget airline humming along quite nicely with packed planes and rising fares.

Shares slipped in early trading as investors digested the mixed results, down 3.62% to $68.40 in premarket action.

That Italian Fine Really Stings

Here's the thing dragging down the numbers: Ryanair booked an 85 million euro exceptional charge as a provision for roughly 33% of a fine slapped on them by Italy's AGCM competition authority. The airline doesn't think much of this penalty, calling it "baseless" and expressing confidence it'll get tossed on appeal. But provisions are provisions, and they show up on the income statement regardless of how loudly you complain about them.

Without that charge, fiscal third-quarter profit after tax came in at 115 million euros, down from 149 million euros in the same quarter last year. With the charge included, profit plummeted to just 30 million euros.

The airline posted quarterly sales of $3.742 billion, just barely edging past the $3.740 billion analyst estimate. Earnings of 7 cents per share, however, missed the 18-cent consensus forecast by a wide margin.

The Underlying Business Looks Pretty Healthy

Ignore the regulatory drama for a moment and look at what's actually happening with the airline. Third-quarter revenue rose 9% to 3.21 billion euros, driven by a 6% increase in passenger traffic to 47.5 million people. The load factor—how full the planes are—held steady at an impressive 92%.

Average fares ticked up 4% to 44 euros, while revenue per passenger climbed 3%. Scheduled revenue increased 10% to 2.10 billion euros, and ancillary revenue (all those add-ons for bags, seats, and priority boarding) rose 7% to 1.11 billion euros.

Operating costs before that exceptional charge increased 6% to 3.11 billion euros, but the company pointed out this was flat on a per-passenger basis. Unit costs stayed level too, excluding the regulatory provision. The airline noted that other income dipped in the quarter partly because last year's figures included compensation payments for aircraft delivery delays—money that didn't repeat this time around.

Cash Position and Fleet Growth

Ryanair ended December with gross cash of 2.4 billion euros after paying down 1.2 billion euros in debt, spending 1.4 billion euros on capital expenditures, and returning 0.6 billion euros to shareholders. Net cash stood at 1 billion euros, with an additional billion euros available through an undrawn revolving credit facility.

The fleet now includes 206 of Boeing's 737-8200 "Gamechanger" aircraft out of a total 643 planes. The company expects to receive its final four Gamechangers by the end of February, which should enable 4% traffic growth to 216 million passengers in fiscal 2027.

On the fuel front, Ryanair has hedged 84% of fourth-quarter fiscal 2026 fuel at $77 per barrel and locked in 80% of fiscal 2027 jet-fuel requirements at about $67 per barrel—decent protection against oil price volatility.

The airline launched a 750 million euro share buyback program in May and by year-end had repurchased and cancelled over 13.1 million shares at a cost exceeding 340 million euros, completing roughly 46% of the program. An interim dividend of 0.193 euros per share is scheduled for late February.

What's Ahead

Ryanair now expects fiscal 2026 traffic to grow 4% to nearly 208 million passengers and guided full-year profit (pre-exceptional) to a range of 2.13-2.23 billion euros. Management described this guidance as cautious, which in airline-speak usually means they think they can beat it but don't want to promise anything.

The projected traffic increase reflects strong underlying demand and faster-than-expected aircraft deliveries from Boeing Company (BA). Unit costs remain under control, with modest inflation expected as efficiency improvements largely offset higher regulatory and environmental costs.

Despite missing an Easter boost in the fourth quarter this year, fares are running ahead of last year's levels. That prompted the company to raise its full-year fare growth outlook to 8-9% from a previous forecast of 7%.

The airline cautioned that the final outcome remains vulnerable to "adverse external developments" in the fourth quarter, including potential conflict escalation in Ukraine and the Middle East, macroeconomic shocks, and continued European air traffic control strikes and mismanagement.

The Elon Musk Effect

In what might be the most entertaining part of the earnings discussion, CEO Michael O'Leary revealed that a public spat with Elon Musk actually boosted bookings. O'Leary thanked Musk for generating "three or four million hits" for Ryanair's "great idiots" seat sale, which led to a "very significant" 2-3% surge in bookings over just five days. Sometimes there really is no such thing as bad publicity.

O'Leary also explained why Ryanair won't be installing Starlink satellite internet on its planes: installation costs and "fuel drag" would increase the airline's annual fuel bill by somewhere between "100 euros and 200 million euros." That's quite a range, but the point stands—it's expensive.

On the possibility of Musk investing in Ryanair, O'Leary kept it diplomatic: "We're a publicly owned company. He's free to do so at any time." He noted the regulatory constraint that "non-European citizens cannot own a majority of European airlines," then added with characteristic cheek that Ryanair would be "a significantly better investment" than Musk's "$44 billion acquisition of X."