Annual profits increased a whopping 66% for Ryanair Ltd. as the airline undergoes a brand makeover attracting more passengers by lowering the prices. It has come as a relief for the entire sector, which was running low for quite some time.
The Ireland-based Ryanair Ltd. (RYAAY, Financial) posted a huge leap in profits of 66% for the past one year with the help of reduced prices and rising passenger numbers. The success story has been attributed to the image makeover that the airline underwent becoming more flexible in its policies, softer in approach and lowering of prices. The passenger number also increased three times more than expected.
The profits
Ryanair is popular for its low-cost business model and is operating in over 30 countries in Europe and Morocco. The airline was going through a rough phase since sometime ago, but its makeover activity, which took place in the end of 2013, did wonders for the company by increasing the passenger numbers by almost three times faster than it was expected. The focus was put upon a lot of damaged areas including poor customer service, non-flexible approach and increasing fares.
As a result, the company witnessed higher profits, which took its share price up by 5.4% as against its nearest competitor EasyJet that could record only 0.4% rise in share prices. The company is further looking at increasing profits and raising investors’ trust as it announced creating a healthy competition for attracting passengers who are not very price-sensitive. This decision took company’s shares up by 58% a year ago while EasyJet could record an increase of only 1%. Number of passengers was up by 11% to 90.6 million as of March 31, as against the expectations of 4%. The target set by the management of achieving 100 million passengers for the current fiscal year looks already completed with 6 months still in hand. An enormous 867 million euros was recorded as the profit after tax in the previous fiscal year that ended this March and the company is hoping to take it to 970 million euros by fiscal 2016. The airline has already crossed the analyst’s expectations of a total of 866 million euros in profit for the year ended March.
Success Formula
Ryanair posted better profits helped by its newly launched services like reduced fees, more carry-on baggage, and selection of seats. The company also attracted business passengers and as a whole, it’s “always getting better” strategy worked really well and brought back lost passengers and reduced the dampening of profits.
Ryanair has not only improved on its outlook, but has also posed as a tough competitor to its peers EasyJet and other European carriers. However, analysts have claimed that EasyJet need not worry with the success of Ryanair considering that the latter operates only in 5% of the total route area of the former. EasyJet still may lead in the primary airports where Ryanair isn’t operational. It is interesting to note here that Ryanair has taken a big leap while taking lessons from the approach taken by EasyJet.
Maintaining the lead
Going forward, the airline hopes to further add 10% in its profits in the upcoming fiscal year, though the company has no plans to further lower the prices, bringing relief to the investor circle of the company. The company has expressed that the prices will remain flat in the six months until September. The company expects another 10 million passengers flying from primary airports this year. Though there have been news of competitors playing foul by cutting prices irrationally, Ryanair remains positive as it banks upon its passengers for whom the company is ready to take any price if the flights fly 90% full of the operational capacity.
