It's been a busy few days for budget-airline reporting. Last Tuesday, EasyJet(LSE:EZJ) said it made a pre-tax loss of £53m in its half-year results. And today, Europe's biggest no-frills airline, Ryanair (LSE: RYA), announced its full-year results.
The last few months have clearly been tough on both airlines. Higher fuel costs and a weaker pound have been the main contributors to the heartache. Ryanair's fuel bill (which counted for 46% of the airline's total operating costs) rose 7% to just over €2bn in the year to March.
At the same time, Ryanair was forced to lower its fares by 4%, which it partly blamed on last summer's heatwave in northern Europe. Presumably, would-be passengers were content to bask in their back gardens rather than migrate south. This year, Ryanair said it will raise airfares by 2%. But who's to say we won't have another scorching summer? Will Ryanair be forced to lower its fares again?
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
That said, Ryanair has been successful in attracting more passengers. In fact, passenger numbers were up by 3% to 81.7 million people last year. The airline expects that number to rise by a further 4% this year. To achieve that aim, Ryanair has gone on a full-blown charm offensive.
For years, Ryanair has been plagued with a bad reputation when it came to customer service. So it's made much of its new customer-friendly website. Whereas it used to take 17 mouse clicks to make a booking, it now takes just five. It is also the first of the budget airlines to sign up to Google's new Flight Search' function. This allows customers to book tickets through the search engine itself.
Passengers also now have the option of carrying on extra hand-luggage; they can also reserve seats.
But not all of its customers have been impressed by the changes. On Friday, The Guardian reported a customer complaining of hidden charges when trying to reserve a seat. This maybe suggests that Ryanair hasn't kicked all of its old habits.
But it is going all out on its marketing strategy. Whereas the airline spent just €10m in 2014, it plans to spend around €35m this year attracting customers. And like all airlines, it's particularly interested in business flyers, who book later and spend more on extras.
This autumn, Ryanair is rolling out a new service aimed at stealing more business customers from other airlines. This will include the ability to make same-day changes to flights, an increase in baggage allowance, premium seat allocation and a fast-track route through security.
On fuel prices, Ryanair says it has a large hedged position of 90%, which will amount to cost savings of €70m in 2015. Ryanair has also ordered 180 new planes to be delivered between now and 2018 and last year, it opened eight new bases from Athens to Warsaw.
However, for the first time in five years, Ryanair reported a fall in profits. Post-tax profits fell 8% to €523m. The airline is no stranger to profit warnings, issuing two last year and the results were, in fact, better than many analysts had feared.
As a result, the shares have risen by almost 10% today to just shy of €7. That puts Ryanair on a price/earnings (p/e) ratioof 16
-
House prices rise 2.9% – will the recovery continue?House prices grew by 2.9% on an annual basis in September. Will Budget policies and ‘higher-for-longer’ rates dent the recovery?
-
Nvidia earnings: what to expectNvidia announces earnings after market close on 20 November. What should investors expect from the semiconductor giant?
-
Ryanair share price struggles to regain altitudeFeatures Ever since Ryanair’s dispute with the pilots’ union in September 2017, the airline has been struggling, with the share price down by half from its peak.
-
It’s time for Ryanair to grow upOpinion As a young upstart airline, a combative approach was just what Ryanair needed. Now it needs to mellow, says Matthew Lynn.
-
Ryanair loses altitudeFeatures Europe’s biggest budget airline will profit from rivals’ problems this winter. But it has also been making its own life difficult. Marina Gerner reports.
-
Low-cost flights hit air pocketFeatures A ferocious price war has killed off the weaklings in the airline sector. But the survivors are well placed to thrive. Chris Carter reports.
-
Ryanair: being nice pays offNews Shares in Ryanair have jumped following an overhaul of the airline's customer services.
