Ryanair's constant change in prices?

Hi Mongu

What the Nominal Accounting boys do with the revenue after they get my journals, I would have to say I do not know the technicalities involved there in depth enough to give you a too detailed discription. Sorry! I supervise one of 7 sections in our Accounts Dept, so my knowledge is limited to my job together with a bit of common sense and initiative.

I hear what you say about bookings taken in one period for travel in another though, and we put all future flights’ revenue into a forward sales suspense account. After the flying month is completed a whole range of reports etc are used to determine the facts of what we have actually earned from the flights. Whether you can answer the question yourself from this, or not, I do not know.

As an aside and not as an argument, the credit cards funds are usually in the bank account within 3 days of the booking being made. Also, in our airline, all sectors are sold individually and not as return fares. A return fare is just made up of two one-ways. So whether or not you could recognise revenue from a booking after just the first sector, I’ll let you decide for yourself.

Hope this helps. I wouldn’t like to be our auditors!

Originally posted by Duesseldwarf
Mongu

With the exception of group bookings, low cost, ticketless airlines typically charge the credit card for the booking before the booking is confirmed nowadays. Traditional airlines will collect the payment upon issuing the ticket. The (sale) revenue is recognised once the booking is confirmed, as you’d probably expect.

However, airlines are obviously interested in how much money a flight has actually earned once it has flown, so the earned/flown revenue is recognised after the flight is closed. There may well be a change inthe numbers due to changed dates, death, refund of flexible tickets etc etc.

With the low cost airlines, who don’t offer any refunds, I’d imagine the three things (booked seat/payment/earned revenue) could more or less be recognised at the same time as nothing will (or nothing should) change (perhaps except death?). It varies from airline to airline, but I expect most airlines look at all the figures from bookings made to earned revenue at the different stages.

At the end of the day – we all want to see the money in the bank. Not something all airlines have the luxury of being able to see unfortunately!

I’m still confused.

If the financial year end is (say) 31 January 2004, but a credit card is charged for a flight in (say) November 2004….what happens with that reservation in the books?

It would be incorrect to take the profit straight away, because it relates to a different (future) period.

Also, the airline may well “charge” the credit card, but they won’t receive the cash from the card company until maybe a month later.

My guess would be to take the sale to the Balance Sheet, as an asset (credit card debtor firstly, then cash when the credit card company pays up) and a matching liability (the obligation to provide the service). When the first leg is completed, I would release the liability to profit. Maybe I’d apply the rules on long term contracts to future travel, taken collectively…

The costs would be treated differently, on the basis that they ultimately filter through and it would be more prudent to simply treat them as expenses.

But I’m just guessing – I’ve never worked on the accounts of an airline and I’m just curious as to how the bookkeeping is done.

Originally posted by Jeanske_SN
Ok then the route to Lubeck is probbaly going to close if it doesn’t imrove. LCC need a load factor of 75% otherwise they start loosing money.

How can you say an airline needs 75% or it loses money? That’s a very tidy number indeed! Surely it all depends on the cost of operating a sector versus the number of and price of the seats sold? I think airlines may compare costs incurred to revenue earned, rather than just look at the load factor. Also, in the case of Ryanair – they do have the fantastic ability to negotiate their costs to rock bottom meaning that they can sell seats for the prices that they do. I think their Lübeck routes are safe for now. Remember it was the worst day of the week at the worst time of year that I travelled. Incidentally, there was a healthy load factor on the return journey from LBC to STN on Wednesday night.

LBARULES – I quite agree with you though!! 😀

Ok then the route to Lubeck is probbaly going to close if it doesn’t imrove. LCC need a load factor of 75% otherwise they start loosing money.

Duesseldwarf- I dont care how busy it is when im getting at that price!
Wannabe pilot- Ryanair had a very short offer on a while ago for certain flights on weekdays for 50p all in.

Originally posted by Duesseldwarf
The flight I was on yesterday to Lübeck, despite selling seats for £0.50 inc tax was almost empty – probably only 30-40 passengers on the B738.

Wow! When did you get that offer? I have seen flights for 50p but then about £10 of tax added on top, but never an offer for that price!

Mongu

With the exception of group bookings, low cost, ticketless airlines typically charge the credit card for the booking before the booking is confirmed nowadays. Traditional airlines will collect the payment upon issuing the ticket. The (sale) revenue is recognised once the booking is confirmed, as you’d probably expect.

However, airlines are obviously interested in how much money a flight has actually earned once it has flown, so the earned/flown revenue is recognised after the flight is closed. There may well be a change inthe numbers due to changed dates, death, refund of flexible tickets etc etc.

With the low cost airlines, who don’t offer any refunds, I’d imagine the three things (booked seat/payment/earned revenue) could more or less be recognised at the same time as nothing will (or nothing should) change (perhaps except death?). It varies from airline to airline, but I expect most airlines look at all the figures from bookings made to earned revenue at the different stages.

At the end of the day – we all want to see the money in the bank. Not something all airlines have the luxury of being able to see unfortunately!

Revenue Recognition

Dusseldwarf:

When do airlines typically recognise a sale?

Is it when the tickets are booked, when payment is received, when the outbound leg has departed or when the flights have been completed?

LBARULES

What I did forget to mention, is that January and February are traditionally the worst months for passenger loads for airlines. I don’t think you will be seeing Ryanair do this (very often) in the more popular travel months. The flight I was on yesterday to Lübeck, despite selling seats for £0.50 inc tax was almost empty – probably only 30-40 passengers on the B738. With 189 seats less 36 seats blocked off equals 153 seats for sale – a 26% load factor! I’m not surprised they are selling seats on more flight on more days of the week at this time of year.

Im flying on a friday night returning on a sunday night for 1p plus taxes.

Ryanair’s frequent changes in prices are all to do with a procedure called Revenue Management. All airlines will apply revenue mangement to their seats in some way, shape or form. Ryanair are very clever and I too have noticed that the prices don’t just seem to go up – they do go down too. However, has anyone ever noticed that when Ryanair give away 1 Million free seats, that what usually is the case is that these seats are only applicable on Tuesdays, Wednesdays and Thursdays and at certain times of the day on certain other days? The reason for this is simple – these are the days/times when they carry less passengers. A Wednesday fare, for example, of £9.99 before the free seats sale may well go down to £0.01 but the weekend fares – when people are much more likely to want to travel, have gone up by approx £10.00. So, while they have reduced 1 Million seats to £0.01, they have increased seats at weekends to compensate (probably the same amount of seats as were reduced?).

The point of this? Well, from what I have noticed, when Ryanair advertise 1 Million free seats in the press, it is going to generate a lot of interest. When people search on their website and realise that it is only applicable at certain times of days or on certain days of the week, this doesn’t deter them – some may be looking for a daytrip during the week and get a £0.01 fare on both sectors (like myself! :D) plus taxes, however, most people, I suspect, will be looking to have a (long) weekend away and may well get a £0.01 fare on one of the flights and then a non-reduced fare on the other sector. The non-reduced fare has likely actually INCREASED during the free seats offer – but who is going to know that when the seats are still cheap in comparison to the competition???

That’s the secret!

For people like me who travel during the week on Ryanair, we win – we pay less and can travel often all for a days leave from work. Yesterday, I was in Lübeck in Germany for 13 hours out and back on Ryanair – all for £1 (inc. taxes!) and next Wednesday, we are all off again, to Barcelona Girona for £16. I don’t really care how Ryanair do it – as long as they do it!!

My tickets are now £119.99 one way and £89.99 the other. Makes you feel satisfied when you know youve booked well in advance and got a bargain 🙂

Flight are bound to get more expensive with Ryanair, but why would they have gone from £2.50, down to 52p, up to £21.99 and back down to £12.99 again? The prices are just going crazy.

Yep, my Dublin flight that cost £21 all in return is not £59.99 each way + taxes! Though this is expected as it is the day before.

Indeed, they make the biggest profit out of the last seats that are booked. That’s how they mostly keep the demand and supply in balance – if there are still seats a few days before the flight, they raise the prices because there are people who pay this amount (mostly businesss people).

the more passengers there are, the more expensive the flight gets