February 04, 2008 – Business Management Article

RyanAir: The ‘Southwest’ of European Airlines in 2007

Download Case Study on Ryanair in pdf format

The low point…

Ryanair, Europe’s biggest low-cost carrier reported its third quarter results with net profits dropping 27 percent compared to a net profit of 48 million a year earlier. Ryanair cited poor market conditions, fuel costs (oil prices at $90 a barrel) and concerns on recession in the UK and many other European economies for its current performance and not so strong future profit expectations. With average winter fares dropping almost 5 percent its’ underlying net profit in the three months to end December fell to 35 million euros ($52 million). Other factors that contributed included doubling of airport charges combined with reduction of winter capacity at Stansted, significant cost increases at Dublin Airport combined with longer sector lengths and staff costs which increased by 18 pct to 67 mln euros. Ryanair’s net profit figure excludes a one-off gain of 12.1 million euros ($17.99 million) arising from the disposal of 5 Boeing 737-800 aircraft.

A year earlier and a different story…Ryanair, hedged fuel and had a performance to envy

The high point

Last year, in February 2007, British Airways (BA) had announced that its third-quarter earnings had plummeted 14%. BA attributed its poor performance to fuel charges, fog-related delays and the cost of heightened security requirements at London’s Heathrow Airport. Ryanair on the other hand reported enviable results. Its third-quarter earnings had increased by 30% to 47.7 million euros ($61.8 million), while sales rose 33% to 492.8 million euros ($638.4 million). While fuel costs had so dragged on the earnings of BA, Ryanair had a string of advance supply contracts that had adeptly locked in prices.

History of Ryanair

Ryanair which was set up in 1985 is one of the oldest and most successful low-cost airlines of Europe. In fact Ryanair was one of the first independent airlines in Ireland. In 2001, many compared Ryanair and drew similarities with Wal-Mart and Southwest Airlines. Ryanair transformed the Irish air services market where other airlines like Avair failed to compete with the more powerful national carrier Aer Lingus.

Airline Industry, European markets, Low-cost airlines, Ryanair