Ryanair: the Tesco of the skies?
Ryanair hasn't had a bad recession. And while other airlines cut capacity, the Irish airline is expanding the size of its fleet by 15%.
It hasn't been a bad recession for Ryanair. In the past 12 months, it has overtaken both Air France-KLM and Germany's Lufthansa to become Europe's biggest airline by market value. Helped by an 8% drop in average fares, passenger numbers rose by 15% in 2008 to 58.5 million when most other airlines were losing theirs. If it hadn't been for the €222m write-down of an investment in Irish rival Aer Lingus, the low-overheads carrier could have turned a profit last year.
"Michael O'Leary is living proof that you can get away with just about anything in business as long as you deliver value for money," said Damian Reece in The Daily Telegraph. On top of a ridiculous £5 check-in charge soon to be levied on most passengers, he's now proposing to rip out two of the three loos on Ryanair's Boeing 737s. That will make space for six more seats. He's even suggested that Ryanair could buy Lufthansa for cash.
"Yet this grandstanding has always been just a marketing tool to highlight the growth and ruthless cost cutting of Ryanair," says Lex in The FT. While other airlines cut capacity, Ryanair is expanding the size of its fleet by 15% and promising further reductions in fares.
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O'Leary expects net profits to hit between €200m and €300m next year, which looks conservative. As O'Leary puts it, "low cost always wins". His formula of recycling cost savings straight back into lower fares is also Sir Terry Leahy's approach, said Reece. "Look where it got Tesco."
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