What is Ryanair?
Founded in 1984, Ryanair is a low fare, low cost airline group based in Dublin, Ireland that serves short-haul, point-to-point routes from 90 bases to airports across Europe and North Africa, which together are referred to as “Ryanair’s bases.”
As of June 30, 2022, the Ryanair Group had a fleet of 483 owned Boeing 737s, including 73 Boeing 737-8200 “Gamechanger” aircraft. In addition, the Group had 29 leased Airbus A320 aircraft.
The Group offers approximately 3,000 short-haul flights per day serving 225 airports across Europe and North Africa.
How Cheap are Ryanair’s plane tickets?
As of the date of writing 15 Oct 2022, a plane ticket from London to Italy on 7th Nov 2022 costs you around €10.
From Ryanair’s 2022 financial results, the average booked passenger fare is around €27.33.
However, the cost per booked passenger costs Ryanair €30, making them lose €2.67 per passenger before the planes even took off.
So, how does Ryanair make up for the loses per ticket sold? The answer is Ancillaries.
Revenue
Ancillary revenues
Ancillary revenues comprise of revenues from non-flight scheduled operations, internet-related services, and the in-flight sale of beverages, food, duty- free and merchandise.
Non-flight scheduled revenue arises from the sale of priority boarding, allocated seats, car hire, travel insurance, airport transfers, room reservations and other sources, including excess baggage charges and other fees, all directly attributable to the low-fares business
This cross-and-upsell revenue that makes up the difference includes:
- Baggage charges;
- 10 kg check-in bag €12 – €25
- 20 kg €18 – €50
The privilege of selecting a seat on the aircraft;
- Extra Legroom Seats €14 – €30
- Front Seats €7 – €19
- Airport check-in fee
They also charge Airport check-in fee €55, and sell in-flight meals like €9.99 for 1 drink + 1 Snack + 1 main course
These Ancillary revenues can take up to half of the companies’ total revenue, bringing in more than 1 billion € to the company in 2022, delivering over €22.50 per passenger.
Low-Fares
Ryanair sets fares on the basis of the demand for particular flights and by reference to the period remaining to the date of departure of the flight, with higher fares typically charged on flights with higher levels of demand and for bookings made nearer to the date of departure.
Ryanair’s Discounted fares are driven by Ryanair’s “load factor active – yield passive” strategy whereby seats are priced to ensure that high load factor targets are achieved.
All tickets can be changed, subject to certain conditions, including fee payment and applicable upgrade charges. However, tickets are generally non-cancellable and non-refundable and must be paid for at the time of reservation
Ryanair’s low fares are designed to stimulate demand, particularly from fare-conscious leisure and business travelers who might otherwise use alternative forms of transportation or choose not to travel at all.
Ryanair also periodically runs special promotional fare campaigns, in particular in connection with the opening of new routes, and endeavors to always offer the lowest fare on any route it serves. Promotional fares may have the effect of increasing load factors and reducing Ryanair’s yield and passenger revenues on the relevant routes during the periods they are in effect. Ryanair expects to continue to offer significant fare promotions to stimulate demand in periods of lower activity or during off-peak times for the foreseeable future.
Frequent point-to-point flights on short-haul routes
Ryanair provides frequent point-to-point service on short-haul routes. Short-haul routes allow Ryanair to offer its low fares and frequent service, while eliminating the need to provide unnecessary “frills”, like free in-flight meals and movies, otherwise expected by customers on longer flights.
Point-to-point flying (as opposed to hub-and-spoke service) allows Ryanair to offer direct, non-stop routes and avoid the costs of providing “through service”, for connecting passengers, including baggage transfer and transit passenger assistance.
In fiscal year 2022, Ryanair flew an average route length of approximately 772 miles and an average flight duration of approximately 2.2 hours. This allows it to use its planes more times per day than its competitors, and according to their reports, each airplane flies 6.88 hours every day, meaning each planes takes off 3 times a day.
How Ryanair keep their costs so low
Ryanair Group’s operating costs are among the lowest of any European scheduled-passenger airline group.
Boeing Aircraft
Ryanair currently operates mainly Boeing 737s. The operation of primarily a single aircraft type enables Ryanair to limit the costs associated with personnel training, maintenance, and the purchase and storage of spare parts while also affording the Company greater flexibility in the scheduling of crews and equipment.
Their seats are non-retractable meaning they have no moveable parts, hence won’t break that often and require less repair.
Airport Access
Ryanair prioritizes airports that offer competitive prices. The Ryanair Group’s record of delivering a consistently high volume of passenger traffic growth at many airports has allowed it to negotiate favorable growth contracts with such airports.
That’s why you may find destinations like London (Stansted), Paris (Beauvais), Rome (Ciampino / Fiumincino), all of which are secondary airports that aren’t even technically in the same region as they’re supposed to represent.
Handling Costs
Ryanair endeavors to reduce its airport charges by opting, when practicable, for less expensive gate locations as well as outdoor boarding stairs, rather than jetways, which are more expensive and operationally less efficient to use.
Ryanair requires all passengers to check-in on the Internet, which reduces waiting times at airports and speeds a passenger’s journey from arrival at the airport to boarding, as well as significantly reducing airport handling costs.
Ryanair also charges a checked-bag fee, which is payable on the Internet at the time of booking or post booking and is aimed at reducing the number of bags carried by passengers in order to further reduce handling costs.
Reservations
Passenger airlines generally rely on travel agents (whether traditional or online) for a significant portion of their ticket sales and pay travel agents’ commissions for their services, as well as reimbursing them for the fees charged by reservation systems providers.
In contrast, Ryanair requires passengers to make reservations and purchase tickets directly. The majority of such reservations and purchases are made through the website Ryanair.com, thereby saving a large commission.
Recent Operating Results
The Company’s net profit for the quarter ended June 30, 2022 (the first quarter of the Company’s fiscal year 2023) was €188m.
Total operating revenues is around €2,602m in the first quarter of fiscal year 2023, while Operating expenses sits at €2,362m, making it one of Europe’s most profitable airlines.
