What happened

Ryanair (RYAAY -0.06%) flew more passengers than anticipated over the holiday season, leading the European discount airline to up its forecast for the year. Shares of Ryanair enjoyed their own "Santa Claus Rally" as a result, up as much as 12% for the week, according to data provided by S&P Global Market Intelligence.

So what

While the travel focus over the holiday season in the U.S. was on weather-related delays, it was apparently smooth skies over Europe. On Wednesday, Ireland-based airline Ryanair upped its yearly earnings forecast, saying strong demand over Christmas and New Year's would boost its results.

Ryanair said it expects to report a profit of between 1.325 billion euros and 1.425 billion euros in its current fiscal year ending in March, up significantly from previous guidance for a profit in the range of 1 billion euros to 1.2 billion euros.

"Strong pent-up travel demand over the holiday season for the first time in three years, with no adverse impact from COVID or the war in Ukraine, stimulated stronger than expected peak Christmas/New Year traffic and fares," Ryanair said in a statement.

Ryanair flew 11.5 million passengers in December, up 21% year over year. In the past 12 months the airline has flown 160.4 million passengers, up 121% from the prior period.

Now what

Investors will learn more on Jan. 30, when Ryanair is scheduled to release full results from its recently completed fiscal third quarter. But it appears after a pandemic-related lull, air travel is finally recovering in Europe.

If so, there could still be room for Ryanair to fly higher. Even after this week's rally the stock is still down 22.9% over the last year. The first attempt at a European "reopening rally" was thwarted by the war in Ukraine. If Ryanair is correct, the European travel industry might finally be back to business as usual after years of issues.