Credit: Ryanair

Ryanair gains altitude as costs fall

Cheap oil helps the low cost carrier increase profits by 24%.

by Adam Gale
Last Updated: 09 Sep 2015

While oil firm executives are sweating over the return of $50 crude, airline bosses have plenty of reason to be chirpy. Michael O’Leary certainly seemed characteristically upbeat as he delivered Ryanair’s latest results, including a 24.2% increase in pre-tax profits to €277.8m (£197.2m) for the three months to June 30.

‘We are pleased to report strong growth in traffic and profits in Q1,’ he said. ‘Our mix of low fares, best on time performance (91% in Q1) and enhanced customer experience under our "Always Getting Better" ("AGB") programme, continues to attract millions of new customers.'

Cuddly customer service, including a second free carry-on bag policy, may have played its part, but it has never been the driver of Ryanair’s success. That’s always been its low fares, and cheap oil is really helping out in that department, enabling the airline to drop fares by an average of 4% to entice more customers.

Passenger numbers were up 16% (perhaps a sign people were taking Ryanair up on its €5 flights to Greece), with revenues up 10.5% to €1.7bn. Costs, however, rose only 8%, with total fuel costs actually falling slightly, despite the higher volumes.

The price war between Saudi sheikhs and American frackers may be working wonders with Ryanair’s bottom line, but it isn’t all rosy for O’Leary. While he expects to make savings of €250m in 2017 from advantageous oil price hedging, he’s expecting an ‘aggressive pricing response’ from competitors.

Ryanair thus remains ‘very cautious about weaker prices’ this winter, with fares to fall ‘towards the higher end of our -4% to -8% guidance range’.

Caution aside, the airline is still happily happily growing. It is, however, also saying a sad farewell to its Aer Lingus stake, which it recently sold to IAG. Or, not so sad, as the case may be.  

‘As the Ryanair brand develops and continues to grow strongly, the original rationale for acquiring Aer Lingus no longer exists,’ O’Leary said, referring to the airline’s success in getting access to more large airports. No hard feelings at all then.


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