Is Ryanair putting profits before passengers? How no-frills airline made a record £1.8bn after squeezing every penny from customers – from air hikes to charging through the nose for luggage, speedy boarding and seats
Ryanair is set to make a record £1.8billion (€2.05bn) this year after hiking its air fare and charging passengers astronomical fees for luggage, speedy boarding and reserved seating.
The budget airline – which touts itself as being the lowest-fare air carrier – has hiked fares by nearly 33 per cent since the pandemic began, making the average fare now about £70 (€81) per passenger.
But that so-called low fare does not include the costs associated with bringing luggage along or having the luxury of sitting with loved ones during the flight.
Now, as holidaymakers already hard-hit by the cost-of-living crisis are feeling the impacts of Ryanair’s soaring fares and laundry list of add-on fees, the airline has cautioned over ongoing steep hikes in air fares despite posting a 59 per cent jump in first-half earnings.
Ryanair said fares surged by 24 per cent on average to around £50 (€58) in the first half of its fiscal year after record summer demand and higher prices offset rising fuel costs.
The airline is now forecasting a ‘mid-teens percentage’ rise in average fares over the final three months of 2023 and warned that restrained air capacity across Europe and engine repair woes for some of its rivals is set to mean average fares will remain firmly in double digits this winter.
Ryanair is set to make a record £1.8billion (€2.05bn) this year after hiking its air fare and charging passengers astronomical fees for luggage, speedy boarding and reserved seating
Ryanair has claimed to be the lowest fare air carrier, but by imposing added travel fees it isn’t necessarily as low-cost as holidaymakers would hope.
The Irish carrier rose basic fees by 24 per cent this summer, with the average traveller paying roughly £77 (€88) per flight for fares plus add-on charges in the quarter ending in September this year.
READ MORE: Ministers plot crackdown on budget airlines like Ryanair and EasyJet
On the contrary, passengers on rival EasyJet were paying £105 (€120) – 36 per cent more – on average for fares and amenities.
But Ryanair has now warned it is expecting average fares to rise 15 per cent this quarter due to Christmas and holiday travel demand.
In addition to the soaring fares, no-frills Ryanair will charge customers between £18.99 and £59.99 for each checked bag they bring on holiday. Priority check-in, which includes a cabin bag and small personal items, will also set travellers back anywhere from £6 to £38 depending on the route.
Similarly, rates for seat selection begin at £4.50, but could cost travellers as much as £33. Families travelling with children aged 12 and younger are required to buy a reserved seat and sit with them. Ryanair’s so-called Mandatory Family Seat costs between £6 and £10.
Analysts allege that Ryanair’s anticipated financial success this year has been fuelled in part by higher fares and the additional fees for travel amenities such as baggage, allocated seating and priority boarding.
Ryanair – which touts itself as being the lowest-fare air carrier – has hiked fares by nearly 33 per cent since the pandemic began, making the average fare now about £70 per passenger
Ryanair has cautioned over ongoing steep hikes in air fares as it posted a 59 per cent jump in first-half earnings after record summer demand and higher prices offset rising fuel costs. The budget airline said air fares surged by 24 per cent in its first half, but warned that fares will remain firmly in double digits this winter
Although Ryanair expects to be lossmaking in the beginning of 2024, predicts full-year earnings to rise by up to 30 per cent, forecasting after tax profits of between £1.6billion (€1.85bn) to £1.78billion (€2.05bn) at the end of its fiscal year in March – up from £1.24billion (€1.43bn) in 2022-23.
If the forecast proves true, Ryanair will surpass its record profit of £1.26billion (€1.45bn) in 2017/18 by 35 per cent.
What does a Ryanair flight really cost?
Base fare: £77 per traveller on average
Seat selection: £4.50to £33
Cabin baggage and priority check-in: £6 to £38
Checked baggage: £18.99 to £59.99
Excess Baggage Fee: £9 to £11 per kilo
Mandatory Family Seat: £6 to £10
Infant fee: £25
Airport check-in fee: £55
Rising prices, together with a marked recovery in demand for air travel over Easter and the summer, helped counter a 29 per cent rise in first half fuel costs to help it post a 59 per cent surge in after-tax profits, to £1.89billion (€2.18bn) for the six months to September 30.
The airline flew 11 per cent more passengers at 105.4 million over its first half of the year, with the group hailing its highest ever passenger numbers over the peak summer months.
Removing operating costs – which are approximately £51 (€59) per passenger, per flight – Ryanair recorded a profit of about £26 (€30) per passenger over the summer.
The budget air carrier is expected to service a total of 183.5million travellers this year, meaning the airline is on track to make a profit of £8.70 (€10) per passenger each flight.
Ryanair on Monday announced the start of regular dividends to shareholders for the first time in its history after net profit surged.
The carrier announced ‘a maiden ordinary dividend of 400 million euros’ spread across two equal payments in February and September next year.
In the years ahead, Ryanair said it expects to pay about 25 percent of net profits in dividends.
But the half-year was marred by disruption from wildfires across Europe in searing heatwaves, air traffic control (ATC) strikes and a system failure across the UK over the August bank holiday that saw airports grind to a halt at one of the busiest weekends.
Ryanair boss Michael O’Leary (pictured in September) said the full-year out-turn would be held back by a steep increase in fuel cost, ‘making it unlikely that we’ll replicate last year’s bumper third quarter performance’. However, the group said its forward bookings are ‘robust’ heading into the Christmas season
Ryanair on Monday announced the start of regular dividends to shareholders for the first time in its history after net profit surged. The carrier announced ‘a maiden ordinary dividend of 400 million euros’ spread across two equal payments in February and September next year
Michael O’Leary, chief executive of Ryanair, said the full-year out-turn would be held back by a steep increase in fuel cost, ‘making it unlikely that we’ll replicate last year’s bumper third quarter performance’.
However, the group said its forward bookings are ‘robust’ heading into the Christmas season.
Mr O’Leary said the expected rise in full-year profits comes ‘despite uncertainty over Boeing deliveries, a significantly higher full year fuel bill (up around 1.1 billion euros on last year), very limited fourth quarter visibility and the risk of weaker consumer spending over coming months’.
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He added the guidance ‘remains highly dependent on the absence of any unforeseen adverse events (for example such as Ukraine or Gaza) between now and the end of March 2024’.
It also comes as the aviation sector is enjoying a strong recovery after suffering heavy losses at the start of the decade when the pandemic grounded flights worldwide.
‘We want to thank those shareholders for their support during a very difficult Covid period,’ added Mr O’Leary.
Ryanair is not the only airline cashing in on passenger extras. Rival carrier EasyJet earned £790million from ancillary revenue in the fourth quarter alone, up from £641million during the same period last year, it emerged last month.
The FTSE 250 airline expects ancillary revenue, which comes from payments for things like seat selections, extra baggage or food, to come in at £2.17billion for the year, up from around £1.59billion in 2022.
Bolstered by a strong summer, easyJet is now proposing to resume dividend payments for shareholders and expanding its fleet of aircraft.
Allocated seating up-front costs start at £7.99, while selecting seats in the front row with extra legroom cost from £12.99, easyJet says on its website.
Fees for additional hold luggage up to 23kg per flight per item start from £9.49 and stand at £40 if done at the check-in desk at the airport.
Mr O’Leary said the expected rise in full-year profits comes ‘despite uncertainty over Boeing deliveries, a significantly higher full year fuel bill, very limited fourth quarter visibility and the risk of weaker consumer spending over coming months’
Add-ons: EasyJet’s ancillary revenue in its fourth quarter came in at £790million
The airline said it expects its profit before tax between July and September to reach between £650million and £670million. The group is on a mission to enjoy pre-tax profits in excess of £1billion a year.
It saw an 8 per cent year-on-year rise in passenger numbers and a 9 per cent increase in fares in its fourth quarter.
It said: ‘Pricing remained ahead year on year during the quarter for both ticket and ancillary revenue, demonstrating the continued success of easyJet’s network optimisation and ancillary products.’
READ MORE: EasyJet to earn more than £2bn from add-ons this year
EasyJet’s profit before tax for the year to the end of September is expected to be between £440million and £460million.
The group is proposing to resume paying dividends to shareholders in early 2024 at a rate of 10 per cent of annual profit after tax. This is expected to climb to 20 per cent for the following year.
EasyJet has placed firm orders with Airbus for 157 new aircraft, which is subject to the approval of the airline’s shareholders.
Boss Johan Lundgren said last month: ‘We have delivered a record summer with strong demand for easyJet’s flights and holidays with customers choosing us for our network, value and service.
‘This performance has demonstrated that our strategy is achieving results and so today we have set out an ambitious road map to serve more customers and deliver attractive shareholder returns, underpinned by a continued focus on costs and operational excellence.
‘Our new medium-term targets provide the building blocks to deliver a PBT (profit before tax) greater than £1billion.
‘This will be driven by reducing winter losses, upgauging our fleet and growing easyJet Holidays.’
Extra cash: EasyJet expects to make over £2billion from ancillary revenue in 2023
Mr Lundgren said the aircraft order would provide ‘substantial benefits including cost efficiencies and sustainability improvements’.
He added that the airline was experiencing ‘good demand’ for this winter compared with a year ago and expects capacity through December to be 15 per cent higher than the same period last year.
He added: ‘In situations like this with the cost-of-living squeeze, people gravitate more than ever towards value and brands that they trust.
‘That will work very well for easyJet. We continue to see demand is strong going forward.’
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