Ryanair is reaping the reward for being nicer to its customers
Europe’s favorite–well, most-used–airline continues to go from strength to strength, raising its profit forecast for the year and downplaying a looming price war.
Ireland-based Ryanair Plc (RYAOF) said Tuesday it now expects to turn a profit of around 955 million euros ($1.04 billion) in the year to March 2016, 10% more than in fiscal 2015, on a strong response from business and family customers to its efforts to be nicer to them.
Ryanair’s traffic rose 11% in its fiscal 2015 year, as its load factor (the proportion of seats sold relative to total seats offered) rose to 88% from 83%. The company expects that to rise to 90% this year. It said much of the improvement was down to its new Business Plus and Family Extra services, which were introduced to take some of the pain out of its notoriously poor customer experience, which combined a minimum of frills with a maximum of add-on charges.
The company had warned that it might be vulnerable to a price war from its competitors after it locked in its fuel costs for the current year before the collapse in oil prices at the end of 2014. That means that other airlines who either hedged later or didn’t hedge at all are paying much less for a key input.
Ryanair has done a lot better at hedging the cost of new aircraft, generally priced in dollars, having locked in dollar/euro rates for the next three years well above what the market is expecting.
Aside from its financial report, the Irish company, which has made a habit of getting under the skin of European authorities with accusations that they protect vested interests, took a fresh swing at the U.K.’s antitrust regulator Tuesday for its “manifestly erroneous” pressure on the company to cut its 29.8% stake in Aer Lingus, Ireland’s legacy flag carrier.
The Competition and Markets Authority is afraid of Ryanair monopolizing routes between Ireland and the U.K.. International Airlines Group, the parent company of British Airways, has been trying to buy Aer Lingus since last year, albeit less for the sake of making money in Ireland, than in increasing its dominance of London’s overcrowded Heathrow airport by snapping up its 23 landing slots.
The CMA had argued that no other company would bid for Aer Lingus as long as Ryanair held such a large stake, a view subsequently disproved by IAG’s approach.
Never one to refuse a tilt at windmills, Ryanair inevitably has a suggestion on how the U.K. should solve its politically-explosive problem with increasing airport capacity around London: simply let market forces decide.
Given the level of noise and air pollution from Heathrow and its two smaller rivals at Gatwick and Stansted, and given the issue’s impact on dozens of tightly-fought electoral districts in and around the capital, the chances of that happening (even under a notionally pro-business Conservative government) is pretty close to zero.