The irish low cost low fare carrier has posted exceptional half year results. While average fare was down 17 per cent to 39 Euros, traffic grew 15 per cent to reach 36 million passengers, and unit cost drop 27 per cent. Net profit gained 80 per cent compared to last year at the same period. Ancillaries revenues represented 20% of total revenues. How do they manage to post insolent results in time of deep recession? lets go for a one minute Airline Business MSc course:
-They Fly to low cost secondary uncongested airports, and avoid delays generating big hubs
-They operate a young modern low fuel burning fleet
-They practice fleet commonality (Single type aircraft)
-They Fly point to point shorthaul routes
-They're no frills to the extreme
-They optimize frequencies by reducing turnaround times to the minimum
-They employ a highly productive staff
-They only sell one-way seats and they are 100% web check in
-They charge every additional service
-They manage to lower maintenance costs without reducing safety margins
-They bargain everything
-They are the champions of economies of scale and scope
-They are truly low cost and low fare and stimulate demand
-They Fly to low cost secondary uncongested airports, and avoid delays generating big hubs
-They operate a young modern low fuel burning fleet
-They practice fleet commonality (Single type aircraft)
-They Fly point to point shorthaul routes
-They're no frills to the extreme
-They optimize frequencies by reducing turnaround times to the minimum
-They employ a highly productive staff
-They only sell one-way seats and they are 100% web check in
-They charge every additional service
-They manage to lower maintenance costs without reducing safety margins
-They bargain everything
-They are the champions of economies of scale and scope
-They are truly low cost and low fare and stimulate demand
Guess what! RyanAir has freezed its staff pay as a continuation of its cost discipline policy. They are putting pressure on their main suppliers ans service providers to maintain costs as low as possible. This is nothing new from Michael O'Leary. They are complaining about UK and Ireland Governments plans to raise PFCs rates and are threatening to switch capacity to low costs airports in continental europe this winter. They are campaining for monopoly break up in UK, and if Boeing does not accept to reduce its prices, Ryanair says they will rather use that money to pay dividends to its shareholders. This is not high flying bargaining strategy, but it sometimes works with ryanair. Their results allow them to fly high while their competitors are grounding capacity and loosing money. They don't know what crisis means.
Source: Financial times
FRANCIS, IT'S CALLED THE RYANAIR MODEL. THEY CAN SELL A DUBLIN-STANDED ONE-WAY TICKETS AT 1 POUND EXCLUDED VAT AND STILL MAKE PROFIT. THERE ARE ALWAYS SOME LATE BOOKING WEALTHY BUSINESS PAX TO PAY THE MAXIMUM PRICE AND ALLOW THEM TO BREAKEVEN AT THE NETWORK LEVEL.
ReplyDeleteEvans, I thought there were limited network component in low costs airlines' strategy. They fly point to point routes and try maximize profits fort each leg. That's all.
ReplyDeleteThese people have hidden costs; for instance, they oblige customers to opt out insurance choice which is contrary to what EU Recommends.And just have a look on the additional fees they impose to customers. They're pretending to offer the lowest fares, which is questionnable with regard to the extra fees the passenger has or could have to pay in addition to the ticket price: Registration fees, Administration fees, Priority boarding, checked bagage, sport and music equipment...You better be aware of these fees and get ready if you plan to travel with them.
ReplyDeleteevans, when you say "excluded VAT" i guess you mean all taxes including airport and air navigation charges. They are clever enought to market taxe free tickets. So are all major airlines.
ReplyDelete