Ryanair profits soar despite price cuts

Cheaper fuel and rising passenger numbers helped Ryanair to a much bigger profit than this time last year.

Last Updated: 31 Aug 2010

Ryanair might spend a lot of its time complaining, but it’s clearly got fewer worries than most airlines at the moment: it said today that pre-tax profits jumped to €137m between April and June, up from a mere €21m in the same quarter last year. This was largely thanks to lower fuel bills; passenger numbers were up an impressive 11%, but with Ryanair slashing fares to keep the punters coming, this didn’t really boost the bottom line. Nonetheless, the low-cost Irish carrier is still expecting to make twice as much money this year as it did last year – and passengers may worry that this vindication of its model might compel other airlines to start following its lead…

Ryanair has clearly been cutting fares aggressively to try and boost market share. And it seems to be working: passenger numbers rose to 16.6m, at a time when most other airlines have been reporting huge drops in traffic. However, with average fares down 13%, Ryanair’s revenues actually remained pretty flat – the reason for the big jump in profits was that its fuel bill (which accounts for about a third of its costs) almost halved to €214m. Whereas the likes of BA trapped themselves into fuel deals when prices were high, Ryanair didn’t – allowing it to cash in when prices plummeted. Now prices seem to be rising again, it’s locked in a relatively low price. Another example of it out-manoeuvring some of its more blue-blooded rivals…

Of course this wouldn’t be a Ryanair statement without CEO Michael O’Leary having a moan about something: this time it was the UK and Ireland’s tourism taxes and airport charges, which he says are hammering the tourism industry. He wants them scrapped, and he may well have a point – several other European governments have already come to that conclusion. (He’s also voting with his feet, scrapping some flights from Stansted this winter)

Ryanair’s share price actually fell 10% today, because all this fare discounting is likely to push full-year profits towards the bottom end of expectations. However, that still means it should bank more than double the €105m it made last year – in these tough times, passengers are clearly willing to put up with its ‘low-key’ approach to service (costs were down a further 5% last quarter). And with rumours that BA is also planning to slash service levels to cut costs, we’re slightly nervous it might become the norm before too long.

You pays your money and you takes your choice, and all that. But MT staffer Emma De Vita, who flew back to London from Nice with BA this weekend (following her own mini Tour de France), was reminded of the benefits of airlines with frills: 'For £48 including free carriage for my bicycle it was great to be treated like a human being again. Having your own allocated seat felt like a luxury; there was a decent sandwich and good French wine in a real glass bottle (no Bullseye Baggies in sight) included in the price; and the check-in staff fell over backwards to allow forgotten bike tools to be taken from hand luggage and separately bagged for the hold.' Enjoy it while it lasts...

In today's bulletin:

Ryanair profits soar despite price cuts
Irate Chinese steel workers kill boss, scupper merger
Shell prepares cull of top managers?
Nick Hood: Paris looks bleak in the global meltdown
MT Expert's Top Ten Tips: Beat negative perceptions of your brand

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