April 15, 2021

Ryanair shoots its revenues for the new restrictive baggage policy | Economy

Ryanair shoots its revenues for the new restrictive baggage policy | Economy

Ryanair it recorded losses of 19.6 million euros in its fiscal third quarter that ended in December 2018, compared with gains of 106 million in the same period of the previous year. The first low-cost airline in Europe attributes this change in trend to a 6% decrease in fares during the winter season, within a sector punished by overcapacity.

Ryanair traffic increased by 8% to 33 million passengers during the first nine months of fiscal year. As a result, revenues grew by 9% to 1,530 million euros, but especially driven by complementary revenues (reserve seats, luggage, priority boarding, etc.) that increased by 26% to 557 million euros.

In this way, it is denied as the company said that your new restrictive baggage policy would not mean a significant increase in revenue but only to lighten the boarding of the passengers, as Ryanair justified when he launched it last November. And is that, with tariffs to the downside by the increasing competition and costs of fuel and personnel firing, the main measure that Ryanair has to improve their profits are these extras, which countries like Italy have banned as a hidden price rise.

And is that with the new policy, the Irish airline de facto forces passengers to scratch their pockets if they want to carry luggage, even if it is a small hand luggage, which until then were free. From November 1 only allows carrying a bag, a briefcase or a small backpack, but the suitcases of classic measures (55x40x20) have to pay between six and eight euros, depending on the class contracted

The financial data now shows that the main reason for Ryanair to introduce this limitation was not to reduce the delays although the company said when the change was implemented it would not affect 60% of the passengers and that the remaining 40% would hire the priority service or leave to carry this suitcase of up to 10 kilos, which would not pay much more.

The increase in income associated with the seat and baggage partially offset the rise in fuel prices (+ 6%), personnel (20% in pilots' salaries) and the costs derived from the cancellation and delay of the flights due to the strikes of the own personnel and the controllers.

New structure

The Irish company also announced on Monday that the CEO, Michael O'Leary, will leave his current daily management functions of the company to commission a new group structure very similar to that of IAG, owner of British Airways and Iberia, with four airline subsidiaries: parent Ryanair DAC, Laudamotion, Ryanair Sun and Ryanair United Kingdom. Each subsidiary will be led by its own directors and management teams that will apply an independent labor policy.

O'Leary will oversee cost efficiency, capital and aircraft allocation among airlines in their new role, as well as possible small-scale acquisitions, in a five-year contract with a reduced base salary and a lower bonus.

The company has started work to find a new CEO for Ryanair in the next twelve months. In addition, the current president of the company, David Bonderman, will remain in office until the summer of 2020, when he will be relieved by Stan McCarthy, former CEO of the food company Kerry Group. 30% of the capital of Ryanair opposed the renewal of Bonderman in his post.

Brexit without agreement

The company warned that the risk of a Brexit without agreement "remains worryingly high", although it notes that they have obtained three UK permits for British national routes, and established restrictions on voting rights and will share the sales of non-EU shareholders for a period to guarantee that Ryanair remains at all times an airline owned by the EU and controlled by the EU.

The firm, which obtains most of its profits in the summer, expects to continue lowering the rates, which have fallen by 1% in the reserves from April to September, with a little less than one fifth of the reserves implemented. which points to a "flat to slightly low" trend for the year to March 2020, if the excess short-distance capacity in Europe continues.

"We have seen comments from some low-cost competitors with very few reserves implemented for the summer of 2019 that promise huge rate growth," O'Leary said. "Frankly, with overcapacity in the European market, we do not see it, we do not share optimism and, in some cases, irrational optimism. They have been too optimistic before and in general we think we should be cautious. "

Ryanair shares, which fell more than 40% from a maximum of 19.39 euros 18 months ago before a wave of labor relations problems, fell 3.3% on Monday, to 11.01 euros, in the first operations.


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