Low fares airline Ryanair has posted net profits of €
Ryanair’s traffic grew by 22 percent to
Unit costs increased by nine percent mainly due to a 50 percent increase in fuel costs. Despite this significantly higher fuel bill, Ryanair maintained an industry leading after tax margin of 18 percent, according to the company.
“Ryanair’s “lowest fare” business model is strongly cash generative. Cash on hand at March 31st 2007 amounted to €2.2bn,” stated the airline.
Ryanair’s CEO Michael O’Leary said: “The unusual feature of these results was the seven percent rise in average fares, despite the 22 percent growth in traffic. This increase was largely driven by competitor fare increases and competitor fuel surcharges, as well as our checked baggage fees which are designed to encourage passengers to travel with carry-on luggage only. Ancillary Revenues grew by 40 percent thanks to a better passenger spend, increased penetration, and the growth of excess baggage revenues.”
“Forward bookings and yields continue to be soft and Ryanair continues to respond with aggressive price promotions including a current offer of Ł20 off all return fares on all flights. As has always been the case, Ryanair will lead and win every fare war in Europe, because Ryanair has the lowest costs and the lowest fares.”
“Whilst we remain confident that traffic over the coming year will grow by 22 percent to over 52 million passengers, we believe that if trading conditions continue to be soft, then yields will fall by up to five percent compared to last year’s figure. Unit costs will rise over the coming year by six or seven percent, largely due to longer sector lengths (plus seven percent), substantially higher airport charges at Stansted and Dublin and a one time increase in cabin crew ratios, although these will be partially offset by the lower fuel costs already secured through our hedging programme. As a result we expect profit growth over the coming year to be more modest and to rise by approximately five percent.”
As per the information available, O’Leary and Deputy Chief Executive, Frank Millar, both said they expect European Union competition authorities to reject Ryanair’s takeover bid, which has been on hold since December. The EU verdict is expected by July 4.
Operators know online sales are increasing, however, agents will continue to be a sizeable sales force for them when it comes to package holidays.
Endacott and Rheinsberg said there are two major reasons for the change of heart. The first is that the cost of online advertising has become too inflated, which means the online model is not economically viable.
The second reason is that we are living in an ageing population and, although older people are comfortable booking online, most still prefer to book through an agent.
"Much of our customer base is in this age group, so most holidaymakers still want to talk to someone when booking a holiday," said Rheinsberg.