Low-cost airline Ryanair has shown that it is capable of attracting more passengers onto its flights by reducing its fares.
The airline’s results for the three months to end of June 09 showed a profit of €135.6m compared with €21m for the same three months last year.
Ryanair admitted that this increase was “distorted” by a big reduction in its fuel costs.
Costs excluding fuel were also reduced by 5%. Marketing and distribution costs for example fell to €29.7m compared with €35.7m last time. Ryanair said part of this reduction was down to “the increased focus on internet based promotions.”
Numbers relating to general travel patterns suggests that demand can be stimulated by price, or at least that price-sensitive customers will continue to travel at the correct price.
Compared with the same quarter last year, load factors were up 2% at 83% with the number of passengers carried increasing from 15m to 16.7m.
However, the average fare dropped by 13% to €37, and the amount of revenue per passenger dropped by 10%.
Ancillary revenues are a big part of Ryanair’s business. In this quarter they accounted for €165.3m, an increase of 13%. Despite the increase in passenger numbers, the scheduled revenues dropped by 3% to €609.4m.
This includes flight-related ancialries and card payment chargs as well as the income derived from ryanair.com partners such as Hertz, booking.com and Isango!
By this October , Ryanair will only offer online check-in. This not only reduces its costs at the airport, but also drives more traffic to its web site. The lost revenue from charging passengers to check in at the airport is felt on the balance sheet before the reduction in costs.
O’Leary also acknowledged that the less baggage was being checked in, reducing long-term costs but hitting short-term revenues.
The business remains cautious for the full year. O’Leary is confident that the passenger number will hit 67m for the year, but is less sure about the yields. Nonetheless, it still expects to make a full year net profit of between €200m-€300m.