Low-Cost Ryanair Adjusts Its Methods, A Bit

By Cathy Buyck
Source: Aviation Week & Space Technology

The LCC is also still growing its passenger traffic, albeit modesty, in spite of a decline in capacity. Ryanair is not taking any new aircraft this year, and by the end of its fiscal year will have reduced its Boeing 737-800 fleet to 300 from 305. In the first six months, traffic rose 2% to 49 million, and the airline is expecting a 2% increase for the full fiscal year.

Europe is a low-fare environment for now and, says O'Leary, “if that's where the market is, that's where the market is.” Our business model is “load factor-active, yield-passive,” therefore, well-suited to capitalize on the prevailing low-fare trend, he notes. “We will take whatever pricing we get to ensure we hit load factors of 82-83 percent year-round, because that continues to drive both the cost reduction on the airport side, the unit-cost efficiency on the employee and aircraft side, and the very strong performance in ancillary revenues.” Ryanair posted a 6% rise in October traffic and a 1% increase in load factors as a result of a range of lower fares and aggressive seat sales.

The airline will remain true to its historic strict cost decline. Unit costs, excluding fuel and adjusted for sector length, fell 2% in the first half. They are expected to fall 7% in the second half, and this will “widen the gap between us and every other competitor in Europe even further. Ryanair is well-positioned to return to strong, profitable traffic growth from September 2014 onward,” asserts O'Leary. The LCC will start to take delivery of its order for 175 new 186-seat 737s in September.

Ryanair is not the only European airline to feel the effects of Europe's persistent sluggish economies, resulting in low demand for air travel and strong price competition on short- and medium-haul routes. Irish peer Aer Lingus, for instance, in September, revised its full-year guidance for an operating profit, before exceptional items, to about €60 million from €69.1 million, citing weakness in short-haul bookings and yields.

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