When will Ryanair’s flight price drop stop?
Despite posting a net loss of 20 million euro for the end of 2018, Ryanair is still set on offering the cheapest plane ticket prices in Europe. It even plans to reduce them by 7% to cut the grass under its competitors’ feet and to gain back some unhappy customers after the series of strikes. When will the price drop end, and are low prices sufficient to seduce passengers?
Monday, the cheap flights company, Ryanair, announced that it ended 2018 in the red. It posted a net loss of 20 million euro compared to a benefit of 106 million euro for the same period last year. Strong competition and cancelled planes due to strikes handicapped the company’s operation but it still recorded an 8% increase in passengers and a 1,53 billion euro turnover (+9%).
Autumn profit loss
All airlines know that autumn isn’t the best period. If often coincides with a lower passenger number and falling results. “This loss is entirely due to lower than expected flight prices so that our customers can benefit from prices that have never been so low”, declared Ryanair CEO, Michael O’Leary, adding that the sector has experienced an overcapacity that has caused the offer to be largely superior to the demand.
Ryanair’s average price has dropped by 6% to sit under the 30-euro mark. While the company deplores historically low fares, it tends to forget that it is at the birth of this ‘low-price war’.
Divide and rule
To face this difficult time, Ryanair has decided to reorganize itself. The airline will now be composed of four companies: Ryanair DAC in Ireland, Ryanair UK, Laudamotion (Nikki Lauda’s ex-airline bought last year) in Austria, and Ryanair Sun in Poland. All of those subsidiaries will have their own CEO while Michael O’Leary will become CEO of the Ryanair Group.
The idea is to create a structure similar to IAG, grouping numerous airlines, such as Iberia and British Airways, to ease the purchase of small and struggling competing companies.
Are low prices enough to get back passengers?
According to different analysts, Ryanair’s low prices at all costs is it’s only advantage. Yet, an increasing number of passengers have other expectations from a flight, such as comfort or a more convincing after-sales service. If this trend is confirmed in the upcoming years, Ryanair could be in trouble for having put all its cards on the low-price strategy.
The company took the opportunity to announce the arrival of a fleet of new Boeing 737 MAX models in April. This new plane consumes 16% less kerosene and produces 40% less noise. By 2020, 10% of Ryanair’s fleet will be composed of those planes.