An “increased focus on internet based promotions” has helped Ryanair reduce its marketing costs in a quarter when the airline saw net profits drop by 85%. The airline, which takes virtually all of its bookings direct and online, still made a profit of Euro 21 million in the three months to end-June, compared with Euro…
Ryanair puts faith in web-based promotions
An “increased focus on internet based promotions” has helped Ryanair reduce its marketing costs in a quarter when the airline saw net profits drop by 85%.
The airline, which takes virtually all of its bookings direct and online, still made a profit of Euro 21 million in the three months to end-June, compared with Euro 118 million in the same quarter last year. However, it warned that if fuel prices remain high it could end the full-year up to Euro 60m in the red.
Yields are under pressure and fell 8% in the quarter, despite passenger numbers increasing 19% to reach 15 million with revenues up 12% to Euro 777 million.
Fuel costs have doubled since the first quarter last time, although chief executive Michael O’Leary also said yields were also being impacted by passengers checking in using ryanair.com rather than the airport check-in desks.
He suggested that the cost of running check-in desks outweighed the money it earned from customers using them. It is planning to introduce check-in kiosks at its most expensive airports – Dublin and Stansted – to reduce costs further.
“Customers will use the web or kiosks to check in, so airports don’t need to build terminals to handle check-in queues,” he told analysts.
He also revealed that passengers are checking in fewer bags, and within two years it expects only one-in-four passengers to pay for hold baggage. He said that the airline was thinking about introducing hand luggage/web check-in only flights in some routes to minimise the need for any airport infrastructure.
Unit costs excluding fuel actually fell during the quarter by 6%. Marketing and distribution dropped by 64% to Euro 3.0 million “due to the tight control on expenditure and the increased focus on internet based promotions.”
Ryanair has declined to comment on whether this translates to a reduction in its print advertising spend.
Despite more online check-in and fewer hold baggage fees, the airline’s ancillary revenues in the quarter increased by 25% to Euro 147 million, “faster than the rate of traffic growth”.
O’Leary promised an aggressive price-led campaign would start this weekend, intended to ensure that loads ‘remained in the high-80s’ during the traditionally weak third and fourth quarter.
His outlook for the industry was that consolidations and bankruptcies were inevitable if fuel remained high, and that Ryanair was ready to mop up any potentially profitable routes which came its way.
“We’ve heard BA is thinking of pulling some of its short-haul Gatwick routes,” he said. ‘If they do, we’d be interested.”
He also hinted that the airline has been expecting a bloodbath in Q3/4. “We’ve been preparing for twelve months and we’ve got bundles of cash,” he said.
