The contraction of services by other carriers is causing a financial chill at many European airports, as a result of which 75 European airports are trying to attract Ryanair to make up their passenger shortfalls.
YOU’RE mistaken if you thought that sardine seating, next-to-no customer service and an obstacle course of “optional” extras you must navigate every time you buy an airline ticket online were going to go away anytime soon.
Airline investors right down to mums-and-dads stock market dabblers are flocking to low-cost carriers (LCCs), which pioneered el cheapo one-class scheduled airline services* and the latest craze, ancillary services.
On Monday, Europe’s biggest LCC announced record profits. Its €718.2 million ($US926.5 million) gross margin on €4.88 billion ($US6.3 billion) in revenue – 14.7% — dwarfs the returns in the industry as a whole, which is forecast to make just $US10.6 in 2013, or 1.6%.
In Europe, the traditional airlines’ market share is shrinking and flying sardine class is booming. Ryanair turned in net profits of $734 million for the year ending January 31, up 13% on the previous year’s figure of $649 million, Air Transport World reported. Passenger numbers rose 5% to 79.3 million.
Eating the competition alive: Ryanair deputy CEO Howard Millar.Ancillary revenues – all the extras for everything from baggage to priority seating – leapt 20% to $1.37 billion, or 22% of total income and $17.33 per passenger. A significant factor in this was the rapid increase in seat reservation fees, which Ryanair has increasingly rolled out in recent years, ATW reports.
These are proving particularly popular on sectors of more than 2.5 hours and with business passengers who want to exit the aircraft quickly on arrival, says Ryanair deputy chief executive Howard Millar.
Because Europe is on the brink of recession, several major European carriers are cutting back services, creating gaps into which Ryanair is inserting itself.
Millar says Ryanair’s route development team is handling more growth opportunities than its current fleet expansion allows.
Significant opportunities are opening up in Germany, Scandinavia and central Europe in particular, where Air Berlin, Scandinavian Airlines and LOT Polish Airlines continue to restructure, he says.
The contraction of services by other carriers is causing a financial chill at many European airports, Millar says, as a result of which 75 European airports are trying to attract Ryanair to make up their passenger shortfalls.
Millar says discussions are underway with new managements at Dublin and London Stansted airports over reinstating or growing services there. Ryanair has cut services at Stansted in recent years in protest at charges levied by former owner, Spanish-owned BAA. “Our deal is that we would grow significantly at Stansted in return for a substantial reduction in charges,” Millar said.
Ryanair anticipates that continuing high fuel costs will be a significant factor in further contraction and closure of rivals. This winter, Ryanair will ground just 60 of its 305 Boeing 737-800s, compared to 80 in previous winters to take advantage of the contraction by competitors, Millar says.
In the past year, Ryanair says it has has opened seven new bases and added 217 new routes, taking its route network map to more than 1600 sectors.
Aircraft from the carrier’s recent order for 175 189-seat Boeing 737-800 will start to arrive in late 2014 and continue until 2018. Once these have all arrived, Ryanair will have 375 of the type, compared to today’s figure of 305.
This would allow the company to boost passenger numbers from today’s 80 million to “over 100 million”, Millar says.
*The European charter carriers that preceded the LCCs pioneered no-frills sardine class, but aren’t usable by people off the street without advance purchase and don’t publish schedules.