Ryanair and EasyJet have one thing in common: They both offer dead cheap flights across Europe.
But that’s as far as the similarities go. Their earnings in recent months have diverged dramatically—the Dublin-based Ryanair suffered a 46% profit drop in the three months to June 30, while its British rival saw profits jump 16% during the same period.
Now, Ryanair wants to up its game, even if that means expanding its business into an area it previously shunned, but that’s proved to be a success for its rival.
The low-cost carrier is considering offering vacation bundles along with flights in hopes that this will help Ryanair reverse its fortunes.
“I wouldn’t rule out setting up a holidays division,” Ryanair CEO Michael O’Leary told the Telegraph in an interview. “The holiday product is probably a reasonable way of charging higher fares and yields and for wrapping it into a package.”
Ryanair is Europe’s largest airline, competing in a market marred by “frugal” customers, holiday poverty, and more. That’s caused its earnings to take a beating during its peak summer months, typically a lucrative time for the likes of Ryanair. The company previously said it would not explore package holidays. It has even been at loggerheads with travel platforms that offer similar services at supposed markups.
Is Ryanair’s foray into holidays well-timed?
As more customers struggle to afford vacations this year, holiday packages have been a game changer for some competitors. EasyJet’s holiday segment has seen a 73% jump in customers between the 2022 and 2023 financial years and is expected to spur profit growth of 48%.
“Capitalizing on its strong position in the airline market, it’s a no-brainer for EasyJet to bundle up flights and accommodation, and holidaymakers are clearly putting trust in the business to lay on a decent experience from departure through to return,” AJ Bell investment analyst Dan Coatsworth said in a July note.
Meanwhile, airline Jet2, headquartered in Leeds, England, has found the holiday business critical to its success. In July, it said the holiday bundles were a “resilient and popular product which remains high on the priority list for our customers, even during uncertain economic times.”
Holidaymakers have increasingly opted for such packages because they’re easier to arrange, provide good value, and are offered through a trusted travel company.
Given that the airline’s fame comes from its no-frills, budget-tight offerings, it’s hard to predict whether Ryanair’s holiday operations will prove a success. It also has a notoriously poor customer service score, according to Which?, a consumer advocacy group.
take a nap https://t.co/UiArzsWpzF
— Ryanair (@Ryanair) August 19, 2024
If Ryanair does pursue the holiday business, it wouldn’t be its first rodeo—the Irish carrier launched a similar product in 2016, hoping it would become the “Amazon of air travel.” But in three years, it announced the program’s closure as it’s a different beast compared with purely air travel.
Many of the budget airline’s problems have recently stemmed from customers asking for more discounts, so tapping into the high-demand holiday segment might just help its business.
“Accommodation in the Canaries, Spain, Italy, Greece has been appreciably more expensive, and that has maybe pushed more people into these kinds of holiday packages,” O’Leary said.
Ryanair also services significantly more passengers than EasyJet or Jet2, which means the stakes are higher if it wants to enter the holiday-making business.
Either way, the airline behemoth will wait to take a call on this until it receives its delayed Boeing order, as that will help it expand its capacity and yield success with its current model. After all, that’s what took Ryanair from being doomed to fail to becoming Europe’s largest airline in just two decades.
Representatives at Ryanair didn’t immediately return Fortune’s request for comment.
