Sally White analyses recent moves at the airline that wants to be the Aldi and the Amazon of the skies
Ryanair is flying more passengers than ever before. Less good news has been that while costs have dived, so have ticket revenues and profit as the airlines’ fierce market-share grabbing price war escalates. Hence the bumper marketing bundle Ryanair has just released!
Ryanair is hitting all fare, service, ancillary and digital buttons hard. Especially the digital ones to increase revenues from its sales campaign for goods and services to become the ‘Amazon of air travel’! The last quarter showed a 4% fall in ticket sales (at €951 million) but non-ticket revenue was up 15% at €395 million.
Ryanair is hitting all fare, service, ancillary and digital buttons hard
So, no wonder it sees ancillaries as its best hope for profits and has raised its ancillary sales target to 30% of total revenue by 2020 (against 24% in 2015). There certainly seems to be scope for growth, the Irish Times noted last year, as Ryanair was only the sixth biggest earner among 67 global airlines. According to the annual review of ancillary revenue at top-performing airlines by consulting firm IdeaWorksCompany, the leader was US airline United, followed by American, Delta, Air France/KLM and Southwest Airlines, on which Ryanair once modelled itself.
Currently Ryanair has its plate full. Sterling’s post Brexit-vote volatility is a nightmare as Ryanair takes a huge whack of its revenues in pounds, while the vast majority of expenses are in Euros and other non-sterling currencies. A weak pound translates through to a weak share price, another problem it doesn’t need right now.
Hence its reduction of planned growth at UK airports (from 15% down to 6%) and its shift of emphasis to mainland euro-denominated markets, such as Germany. It is targeting a 20% share of the German market by seats, up from about 5%. Given the cutthroat conditions in the US market, it has decided to expand eastwards instead, for example challenging Wizz Air in Ukraine and possibly elsewhere.
The problem looming is that post Brexit shareholders could be ordered to sell their stakes to EU nationals to keep the company majority-owned by EU nationals - a condition of EU licences. The current 60% EU ownership will drop to 40% once UK shareholders are excluded.
Since the Brexit vote Ryanair has been struggling to get the UK government to acknowledge the problems that a hard Brexit will cause it. Flashing ‘Mayday’ signs, Ryanair has criticised the “mildly lunatic optimism” of the British government on Brexit. The company’s chief financial officer, Neil Sorahan, told the Guardian newspaper that it could have to halt flights from the UK for “weeks or months” if Prime Minister Theresa May, who called a snap election last week, does not seal an early bilateral Brexit deal on international aviation.
Last, but not least, to keep shareholders sweet while profits slip and disruption mounts, it is having to find the money for share price-supporting buybacks. It had spent by end-February the €550 million that the board had approved only four months before!
However, there is no denying Ryanair’s huge success in pulling in passengers. Latest numbers show that rolling annual traffic to March grew 13% to 120 million customers.
Of course, it is no surprise either that the Ryanair response to all these woes seems to be a foot-flat-to-the floor to outdistance the problems. That means adding new routes, new bases and new ideas - such as selling other airlines’ flights as a further step to becoming the ‘Amazon of air travel’, as Ryanair has been touting itself. First partnership will be (sometime soon) with Norwegian, to offer transatlantic flights from Gatwick, Cork or Barcelona to New York. Next will probably be Aer Lingus.
This came top of its latest marketing ‘on offer’ list. This very digital-heavy list is:
Connecting flights – on Ryanair’s network, then on other airlines
Even lower airfares and more of them
New bases (Frankfurt Main, Naples) and improved schedules
‘My Ryanair’ Phase 2 – improved profile, offers and incentives
‘Plus’ products improved– Regular, Plus, Flexi-Plus and Family Plus
Ryanair Holidays rolling out across all markets – 3,4 and 5 star hotels
Ryanair Rooms – more partners and more choice
Amazon of Travel – New search function
Into the Blue – bespoke travel content in the app in five languages
Express booking – pre-saved preferences for faster bookings (three clicks)
Auto check-in – for both flights once return seats are booked
And for all its protests and statements that the emphasis on growth would be ex-UK, April’s news has so far included three new UK announcements, in addition to the mega-sale at Easter. These were new Luton-Poland and Prestwick-Poland routes (Ryanair is launching a new Polish charter airline) and new routes from both Stansted and Leeds Bradford.
The strategy for 2017 is to be like Aldi when it comes to price and choice, be like Amazon when it comes to digital and move faster than anyone else
Keep the products rolling, is the Ryanair motto. As marketing director Kenny Jacobs says: “The strategy for 2017 is to be like Aldi when it comes to price and choice, be like Amazon when it comes to digital and move faster than anyone else.”
That is the marketing line. Being Ryanair there is, of course, no shortage of lines and there another one aimed at shareholders. This includes the impact on costs of the new Boeing 737 Max 200 aircraft: Ryanair has 100 on order and options on a further 100 with the promise of a 16% cut in fuel costs and greater passenger capacity. There is talk of sales-and-lease-backs to help financing. And of course, now that over 11 million customers have entered their profiles into ‘My Ryanair’, hopes of a mega boost from those ancillaries!