Saturday 24 June 2017

On-board sales keep airline flying higher

ANALYSIS

John Mulligan

John Mulligan

THE end to Ryanair's growth trajectory has been predicted before, and some commentators wonder just how many aircraft it can deploy at airports dotted all over Europe before the well dries up.

Equally, there's the question of how much money can be squeezed from passengers who've already got used to paying to put their baggage in the hold, doling out cash just to get on board first and being assailed in-flight with attempts to sell scratchcards.

But Ryanair has proved resilient, despite what it throws at its customers. The European-wide downturn has certainly worked in its favour and, rather than keep buying aircraft after failing to strike a cut-price deal with Boeing, the airline put future purchases on hold instead and focused on generating more income from existing passengers. Flyers, meanwhile, continue to grumble about the Ryanair hard sell and pricing but seem perfectly content -- or at least resigned to -- flying with the airline.

Analyst Stephen Furlong at Davy Stockbrokers said yesterday that Ryanair's DNA is "built for recession" and that the airline's ability to maintain low costs, while at the same time growing the yield it gets from each passenger, is "stellar". Its operating costs, excluding fuel and adjusting for increased average route lengths, rose just 1pc in the second half.

Ryanair's average fare rose 13pc in the first half of its financial year to €50, due in part to its average flight length increasing. The average revenue generated per passenger -- including the airline's slice of hotel bookings, insurance, car hire sold via its website, and on-board sales -- rose 11pc to €61.

But the persistent high price of fuel is a major headache. The airline has hedged 90pc of its fuel requirements for the first half of its next financial year, and 50pc of the requirement for the second half, at €990 per tonne. Chief operating officer Michael Cawley said yesterday that the airline would need to raise the average fare per person by €3, or 8pc, in its next financial year just to keep its profits flat. "How are we going to do it? We don't know," said Mr Cawley. "Some of it will be through keeping other costs down, but we can't just put prices up."

Ryanair expects to carry 75 million passengers this year, but its expansion plans haven't ended just because it failed to reach agreement to buy more Boeing aircraft.

Chief executive Michael O'Leary will this month jet off to China to further build on a nascent relationship with aircraft maker Comac. He's previously said the airline could buy as many as 300 of a Comac model still in development. Ryanair's bid for Europe-wide domination is far from over.

Irish Independent

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