Here’s how Ryanair’s credit rating took a knock from their reputation…
We all know how they work – they do and say as they please, hoping that rock bottom fares will stifle customers cries for customer service. This strategy has worked so far. They went from a small Irish airline to one of the largest low cost airlines in the world.
In this effort to expand and take over the world comes new routes and therefore a need for new fleet.
Yesterday Ryanair announced a major expansion of routes from Dublin and London. 175 new planes are expected as a result and are worth more than $15b over the next five years.
How will they pay for this? Well, they are considering a bond issue – the first of which will not be backed by an official export agency. This requires a credit rating.
Stay with me.
Standard & Poor rate the airline as BBB+ which is an outstanding investment grade rating for an airline. However, it could’ve been higher.
How? It was docked marks in part due to the money tied up in the new aircraft and S&P said they could do more to attract higher spending business travelers. S&P noted that one of Ryanair’s negative risk factors is its “reputation for providing less customer-friendly services than some of its peers.” That is the diplomatic, responsible credit rating agency answer.
I deduce that it may mean, and in O’Leary’s own words, they could do more to “stop unnecessarily pissing people off.”
We’ve seen grand efforts to move away from that reputation already this year but it seems it will take much longer than a few months to shake that rep.
What do you think?