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Ryanair profits soar as evolution of business model delivers results
On Tuesday 26th May, Ryanair Holdings (Ryanair), a low-fares scheduled passenger airline serving 1,600 short-haul, point-to-point routes across Europe; announced a 66% year on year increase in net profit. The company’s growth is no surprise to Marketline- the evolution of Ryanair’s business strategy was extensively examined in a March 2015 Case Study, Cheap but no longer nasty: evolution at Ryanair, which predicted Ryanair shareholders were set to benefit from a sustained period of strong cash generation, as the ‘Always Getting Better’ program delivered continued growth in passenger volumes. The program, launched in 2014, marked an apparent change in direction designed to improve the brand image of the business centred on reducing fees, improving digital platforms and focusing on business passengers. The benefit has been twofold: ancillary revenue, generated from additional services grew 12% in FY2015, as passengers purchase new add-on services such as Business Plus (a package which includes flexible ticketing and baggage allowance); while passenger volumes increased 11% for the same period. Indeed, the company predicts FY2016 will see a 10% improvement in profits, (to a mid-range estimate of EUR955m (approximately $1266.6m)), almost solely attributable to passenger volume growth.
The continued expansion of Ryanair at primary airports poses a significant competitive threat to rivals such as IAG Group’s British Airways, Deutsche Lufthansa AG, Air France and EasyJet; as Ryanair narrows the gap in perceived service quality while maintaining a unit cost advantage over its competitors. Ryanair is therefore very likely to increase its market share in primary airports across the key European markets of France and Germany over the next 12 to 18 months, at the expense of incumbents.
For more on the Ryanair Case Study, click here.