As the travel industry continues to bounce back, there are some companies that continue to feel the pressure of a downturn in their profits. One such airline is the low-budget carrier Ryanair. This discount airline recently reported that it lost €35 million in the third quarter. This does not stack up well to the €18.1 million that it was able to post during the same period of time in 2012.
The current chief executive of Ryanair, Michael O’Leary, tried his best to explain the losses. He said that it is completely due to the 9 percent fall in average fares. Of course, a weaker sterling also played a factor in this decline. Despite all of this, he did remind everyone that these losses were completely in line with what they had previously predicted. Thus, this loss should not come as a shock to anyone.
O’Leary also said that his company responded to the weakening price environment last September. It did this by announcing a seat promotion to get in more customers. However, in order to stimulate traffic, it had to lower fares. The goal was to stimulate traffic across all of its markets. In total, this led to an increase of 6 percent in growth for Q3. It also led to a 1 percent increase in Ryanair’s monthly load factor.
Overall, Ryanair enjoyed an increase in the number of passengers it received during Q3. Ryanair saw passengers increase by 6 percent to 18 million. The problem is that the revenue for each passenger fell by 6 percent. The budget airline saw a nice 13 percent increase in add-on sales. This was mostly due to the fact that the airline has seen a high uptake in its new reserved seating program. High credit card fees also led to this 13 percent increase. This helped the airline offset a huge 9 percent fall in the average prices of fares.
Of course, budget carriers have to deal with full-service airlines again. During the economic downturn, budget airlines saw a huge increase in the number of passengers they were getting. This was because people simply could not afford to fly on any airline that was not budget. However, as the global economy slowly turns around, more and more people are able to fly with full-service airlines again. This has led to a slight decrease in the average number of people who are flying with budget carriers. For budget airlines to continue attracting consumers, they have to undercut these full-service airlines by a lot.
O’Leary added that the airline expects that its strategy of lowering all fares while increasing bookings will help it bring in more sales in the summer of 2014. In total, it believes that traffic in 2014 will jump to 81.5 million. This is just slightly higher than what it had first predicted.