Why has Ryanair seen their profit drop for the first time in five years?


Ryanair have recently been seen trying to re-adjust their image in a bid to reinvent themselves. In doing so, they have tried to concentrate in particular on their customer service by looking into factors such as allocated seating and cuts to excess baggage fees. They have really began to sit up and listen to the critical feedback, and they appear to be walking in the right direction.   However, on Monday they unveiled that for the first time in five years they had faced their first annual profit fall in five years, so why did it drop so significantly for the  ‘low cost’ carrier?

The recent net profit fell to 523m euros ($717m; £426m) for the year to March, down from 569m euros in the previous year,  despite a three per cent rise in passenger numbers to 81.7m and a three per cent increase in revenue to €5bn. Ryanair chef executive, Michael O’Leary,  put the losses down to competition from other airlines, which had meant they had to lower their flight costs.  Price wars have been the burden on most airline’s shoulders in recent years, especially with the power of such websites like ‘Skyscanner’ which quickly compares the market.  As O’Leary suggests; Ryanair have ‘worked hard to improve customer experience in the past 12 months. Fares had been falling because of increased price competition, softer economic conditions in Europe and the weaker euro-sterling exchange rate.’

However, it isn’t all doom and gloom for the airline, who predict that things will pick up drastically over the next few months.  They have suggested that they expect to see a boost in  passenger numbers by 4% over the next year. They also firmly believe that their profits in the current financial year will rise by 10-20% over the next few months, due to a large quantity of summer bookings.

The head of their marketing campaign, Kenny Jacobs, comments that although Ryanair did not move quick enough with the times initially, they have now realised what is needed, and are working hard to catch up with their competitors;  “There were improvements we wanted to make. Some elements if we had done them sooner it would have helped. We’re moving ahead quickly.”

Come join us and hear directly from Kenny on the rapidly changing Ryanair business model at the Global World Low Cost Airlines Congress in September.

[Picture: Chris]

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