Ryanair 'will take years to catch rivals on margins'
Published 05/09/2014 | 02:30
Ryanair's structural advantages over its peers have not been fully reflected in recent financial performance, according to a new report on the airline from Barclays.
The bank said that Ryanair has significant scope to implement self-help measures to improve margins and returns in order to make them comparable with those of rivals such as Easyjet, Allegiant and Spirit.
But the Barclays analysts warned that it will probably take Ryanair "many years" to approach the benchmark set by airlines such as Easyjet.
"Even before last year's profit warning, which saw (Ryanair's) margins fall to their lowest levels since 2009, we think a notable performance gap has been emerging between Ryanair and some of its more innovative hybrid low-cost carrier competitors," said Barclays' analysts in their report.
They noted that in its last financial year, Ryanair generated a return on capital employed of 15.5pc. "While perfectly respectable, this is some way behind the mid-20 percentages that the company historically delivered," they said.
"More importantly, it is distinctly behind the global best-in-class, and has also been overtake by Vueling and Wizz Air." Vueling is the carrier that's part of British Airways and Iberia owner IAG.
Barclays argues that Ryanair's 'net revenue' production has "heavily lagged" that of peers.
"In other words, even allowing for the fact that Ryanair's business model has been focused on thin routes that can only support low fares, the company appears to be fundamentally inefficient at generating revenue," the analysts said.