RYANAIR Beats Recession as Traffic Grows 13%

Of course, Ryanair have another “cheat” with the latter by sometimes cancelling flights that don’t make sense for them economically, whilst the legacy carriers tend to tough it out more when demand is low (another reason IMHO to stick with legacies).

Andy

I’m not sure where you count FlyBe on the legacy/LCC scale, but my friend who is a pilot for them says he (grudgingly) looses more hours on a Friday morning and Monday afternoon than any other times because if the loads are low then BE do this, and those are the two lowest demand periods. I know Deano flies for them too and may deny this, but I’m only passing on what I’ve been told.

‘Ryanair, Europe’s largest low fare airlines today, (2 Feb) announced a Q3 loss of €102m, (compared to a profit of €35m in last year’s Q.3). Average fares fell by 9% to €34, while fuel costs rose by 71% to €328m. Revenues rose by 6% to €604.5m, as traffic grew 13% to 14m, as more consumers switch to Ryanair’s low fares from high fare competitors.’

More Info: http://www.ryanair.com/site/EN/news.php?yr=09&month=feb&story=fin-en-020209

The above does demonstrate a flaw in Ryanair’s model…

The loss is to some extent irrelevent – the figures clearly demonstrate that whilst they are taking in more revenue, the revenue is not increasing as fast as is their traffic (6% increase in revenue versus 13% increase in traffic). With Ryanair being very committed to increasing capacity, there is only so far the business can go with increasing traffic but revenue not increasing as quickly. Furthermore, the higher fares charged by Ryanair (mentioned above) are needed to subsidise the rediculous low fares, and those high fares will come under more pressure as the economy tightens further – not only will there be less business travel, but also people travelling on business will increasingly question paying Ryanair a high fare when other carriers offer a better product for a similar amount of money. {The legacy carriers are vulnerable due to the decline in true business class traffic but less so as their higher economy tarrifs do not subsidise the cheap seats to the exent they do on Ryanair, whilst Ryanair is rather vulnerable on the high-yield fares it charges at short notice} Finally, Ryanair is more dependent on the discretionary spend – cheap weekends away – which will be eroded both by the downturn in the economy and the substantially weakened pound/euro exchange rate.

Whilst (sadly) I don’t see Ryanair going away, I think that they will face more pressure to increase the lowest fares to compensate for a reduction in top end revenue – of course they won’t actually do that, and instead they will just reduce the number of seats available at those cheap fares so as to appear not to have had to change things – and also because of their commitments to capacity increases necessitated by their ongoing aircraft acquisition program. Of course, Ryanair have another “cheat” with the latter by sometimes cancelling flights that don’t make sense for them economically, whilst the legacy carriers tend to tough it out more when demand is low (another reason IMHO to stick with legacies).

Andy

So why wont you fly with them, Deano? I understand you may want to be loyal to other carriers (such as BEE, BAW, BMA, VIR) but why are you so adamant about flying with Ryanair?

I have nothing against what they do, they do it well, they get you from A to C (c-b is normally on public transport). All I’ll say is if you know of a Ryanair cadet who has made it onto the flightdeck then ask him about what he has had to pay out from day 1.

rdc

Fair enough, but they are still losing money, they have to tempt punters onto their aircraft, the only way to do this is to charge less than their competitors, hence the fare reduction of 9%, they can’t keep reducing fares, something has to give.

I’m very aware of the yield management and ancillary revenue (the whole essence of the low cost model), but the price you stated above (£330) proves the point, the model isn’t working in this economic climate because they now have to charge £330 return on higher yield seats. This seems over and above the usual Ryanair ticket pricing. I’ve never flown them, and I never will so long as I have a hole in my backside so maybe others can confirm what a “typical” return ticket set them back let’s say, a year ago?

Not at all, this has always been the policy of Ryanair, day before tickets have always been extremely high, I have the yield data sat on my laptop to show that (although obviously cannot use this, but it does inform my comments). When on work business with RYR these days they just provide us with the seats, but in the early days we paid and recharged back and it was regularly in excess of £250-£300 for a fare.

As B77W points out, if they can return the yields they need with their top end fares matching those of the legacy carriers (on their good days!), then it is a more efficient system than any of the other airlines if they can still charge 1p for a proportion of the tickets.

I’m very aware of the yield management and ancillary revenue (the whole essence of the low cost model), but the price you stated above (£330) proves the point, the model isn’t working in this economic climate because they now have to charge £330 return on higher yield seats. This seems over and above the usual Ryanair ticket pricing. I’ve never flown them, and I never will so long as I have a hole in my backside so maybe others can confirm what a “typical” return ticket set them back let’s say, a year ago?

On the same dates;
Flybe – £288.88 (SOU-DUB-SOU)
British Airways – £253.00 (LGW-DUB-LGW)
Aer Lingus – £307.54 (LHR-DUB-LHR)

FR’s fares aren’t far from other well established airlines, and I’m yet to have a bad experience with them. So why wont you fly with them, Deano? I understand you may want to be loyal to other carriers (such as BEE, BAW, BMA, VIR) but why are you so adamant about flying with Ryanair?

These airlines don’t offer flights anywhere near the same price which RYR frequently do, so overall i’d say the price management is working.

You must misunderstand their business model then because if you want to book from Manchester to Dublin (as an example) on Monday for a day return then it’ll set you back £330 (as of the search I just did) so you need to remember that Ryanair do yield manage, just like your airline does. The reason they sell 1p fares is to hit load factor targets and website hits, both to drive ancillary revenue.

I’m very aware of the yield management and ancillary revenue (the whole essence of the low cost model), but the price you stated above (£330) proves the point, the model isn’t working in this economic climate because they now have to charge £330 return on higher yield seats. This seems over and above the usual Ryanair ticket pricing. I’ve never flown them, and I never will so long as I have a hole in my backside so maybe others can confirm what a “typical” return ticket set them back let’s say, a year ago?

Poor results for one quarter might be fine, but they may also be the harbingers of doom. I still don’t agree that they are ‘beating the recession’ as they claim (says the person who once calculated losses for IATA airlines on international scheduled services as being $5Bn and we thought that was bad back in 2002).

Somehow those financial figures don’t strike me as ‘beating the recession’…

Well, Ryanair lost about €90m in the third quarter, but what you have to bear in mind about aviation is that a quartely loss of €90m is small fry, bearing in mind some airlines have in recent years been posting annual losses in the billions. So long as the year overall is good then a single or couple of quarterly losses is fine. By comparison, BA is forecasting a £150m loss for the year (whereas RYR should be profitable for the year overall), KLM/Air France lost €200m in the third quarter. In the third quarter, Delta Airlines (of the USA) lost $1.4billion, although $900m of this was to do with aqcuisition costs associated with its merger with Northwest. American Airlines had a fiscal year ending 31st Dec, so we know that in 2008 they lost a whopping $2.1billion….so overall you can see why Ryanair are very succesful in the current trading conditions.

That’s the flaw in their their business model unfortunately, it doesn’t matter if you have a full aeroplane if they only pay £0.01 for their flight.
Because their model is so streamlined and refined as soon as there is a downturn they have nowhere to go with it. Oh, and they did hedge their fuel at $128 per barrel. My heart bleeds for MOL

You must misunderstand their business model then because if you want to book from Manchester to Dublin (as an example) on Monday for a day return then it’ll set you back £330 (as of the search I just did) so you need to remember that Ryanair do yield manage, just like your airline does. The reason they sell 1p fares is to hit load factor targets and website hits, both to drive ancillary revenue.

That’s the flaw in their their business model unfortunately, it doesn’t matter if you have a full aeroplane if they only pay £0.01 for their flight.
Because their model is so streamlined and refined as soon as there is a downturn they have nowhere to go with it. Oh, and they did hedge their fuel at $128 per barrel. My heart bleeds for MOL

Somehow those financial figures don’t strike me as ‘beating the recession’…