Sponsor Message:
Civil Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
Where Do Ryanair Make Their Money?  
User currently offlinenema From United Kingdom, joined Feb 2006, 707 posts, RR: 0
Posted (2 years 4 months 3 weeks 1 day 17 hours ago) and read 10111 times:

Although i am quite distanced from being a Ryanair fan, i do wonder from which area of their business they make their most profits. Considering the cost of buying aircraft, even at the cheapest price, then the fuel costs, even when hedged, then the airport costs, even when discounted, then the staffing and head office and branch costs....plus anything else I've missed, then divide that by the cheap fares and i wouldn't imagine, even with the passenger numbers game, that the main profits if any, came from actual flight only takings.

Any clever finance people out there who see the light?

Is it the huge mark up on their on board catering that does it? Or maybe the charges that have been added to bookings over the years for checking in, hold baggage etc. etc.

It would be interesting to see if an airline like FR actually makes their profit, not from flying people from A to B, but from add-ons that are cleverly marketed to the flight.


There isnt really a dark side to the moon, as a matter of fact its all dark!
14 replies: All unread, jump to last
 
User currently offlineBeakerLTN From United Kingdom, joined Jul 2009, 290 posts, RR: 0
Reply 1, posted (2 years 4 months 3 weeks 1 day 16 hours ago) and read 10027 times:

For every person paying £1 for a ticket, there will be a good number paying a damn site more! (from my business days flying FR I rarely paid less than £250 ew for last minute* flights)

add to that a good profit margin on every ancillary item and huge numbers of passengers, it's profit profit profit..

saying that, If you divide passenger numbers by turnover they really are one of the cheapest airlines (I think about £30 per passenger when I last worked it out.) It's just about large numbers I guess

*within a couple of days, anyway!

[Edited 2011-12-03 01:24:42]


300/319/320/321/330/732/733/734/73G/738/744/772/77W/146/EMB135/EMB145
User currently offlinegoldorak From France, joined Sep 2006, 1779 posts, RR: 4
Reply 2, posted (2 years 4 months 3 weeks 1 day 15 hours ago) and read 9914 times:

Don't forget the very high sums FR is having from airports and cities/regions to start or maintain flights. Without this racket, FR model would not be viable.

User currently offlinenema From United Kingdom, joined Feb 2006, 707 posts, RR: 0
Reply 3, posted (2 years 4 months 3 weeks 1 day 15 hours ago) and read 9894 times:

Quoting goldorak (Reply 2):
Don't forget the very high sums FR is having from airports and cities/regions to start or maintain flights

Now that's one area i hadn't considered, but you say high sums? How much would a region / airport pay i wonder?



There isnt really a dark side to the moon, as a matter of fact its all dark!
User currently offlinejoost From Netherlands, joined Apr 2005, 3154 posts, RR: 4
Reply 4, posted (2 years 4 months 3 weeks 1 day 15 hours ago) and read 9866 times:

Quoting nema (Thread starter):
It would be interesting to see if an airline like FR actually makes their profit, not from flying people from A to B, but from add-ons that are cleverly marketed to the flight.

One thing I like about Ryanair, is their no-nonsense way to publish their financial data on their website, easy to find.

On this URL http://www.ryanair.com/nl/investor/investor-relations-news you'll find 4 presentations per year about the results, and PDF's explaining the results in detail. The presentations are really interesting to see.

This document http://www.ryanair.com/doc/investor/2012/q2_2012_doc.pdf , pages 5 and 6 show it all.

The half-year income was as follows:
- Scheduled revenues (flights incl. bags): EUR 2225M
- Ancillary revenues (excl. bags): EUR 486M

- Operating expenses (staff, lease, fuel, etc): EUR 2061M

- Operating profit: EUR 650M

So they do already make profit on the scheduled revenues (flights & bags), but the ancillary revenues add a significant amount of turnover.

Quoting BeakerLTN (Reply 1):
(I think about £30 per passenger when I last worked it out) It's just about large numbers I guess.

The average fare has increased to EUR 50 this year, up from under EUR 40 a couple of years back. Costs per seat are now averaging at EUR 46.

As you say correctly, it's about large numbers.

Quoting BeakerLTN (Reply 1):

For every person paying £1 for a ticket, there will be a good number paying a damn site more! (from my business days flying FR I rarely paid less than £250 ew for last minute* flights)

When the average fare is indeed EUR 50, that means that your GBP 250 (~EUR 300) flight, compensates for 5 fellow EUR 1-passengers  

Me too, I've been paying over EUR 100 per one-way on FR quite often, especially during school holidays in summer. (Then still, all these times they were considerably cheaper than the alternatives).


User currently offlinejoost From Netherlands, joined Apr 2005, 3154 posts, RR: 4
Reply 5, posted (2 years 4 months 3 weeks 1 day 15 hours ago) and read 9805 times:

Quoting goldorak (Reply 2):
Don't forget the very high sums FR is having from airports and cities/regions to start or maintain flights. Without this racket, FR model would not be viable.
Quoting nema (Reply 3):
Now that's one area i hadn't considered, but you say high sums? How much would a region / airport pay i wonder?

There is little to no money flowing to FR directly from airports or regions. However, there are other means how they 'subsidize' Ryanair's operations.

Most of the time, this is done by:
- Airports not charging the full amount of airport / handling fees
- Regional governments paying (part of) the airport / handing fees
- Airports or governments paying for advertisement campaigns rather than FR paying for it

This isn't accounted for as revenues, however, Ryanairs handling costs are pretty low.

From the link posted above, in the period April-Sept 2011, FR payed EUR 316.3M for airport and handling charges, for 44.7M passengers. This is EUR 7.06 per passenger.

For comparison, easyJet, over 2010, payed GBP 16.48 (EUR 19.17) per passenger for airport & handling charges.

Of course, this has much to do with the airport choice. easyJet has operations from big airports like LGW, CDG, FCO or AMS, which are less prone to lower fees in order to get additional airline service. Many airports FR flies to are willing to lower their fees considerable (even below cost price, and that's when it starts to become a subsidy, when it's a public-owned airport), in order to receive service.

Of course, even easyJet is paying below-average prices for handling, as they always choose for low-cost terminals, etc. LGW is still cheaper than LHR, etc. Network carriers will be paying well over EUR 20 per passenger just on airport charges. Then again, they can charge higher fees.


User currently offlineGT4EZY From United Kingdom, joined Dec 2007, 1760 posts, RR: 3
Reply 6, posted (2 years 4 months 3 weeks 1 day 5 hours ago) and read 7784 times:

Low cost airlines in general, simply put, stacks them high (capacity) and sells them low (price). It's a concept used in various businesses. Contary to what many believe on here, LCC's are by and large, cheaper than their legacy counterparts. To compensate this they have to sell lots of seats. In other words, high load factors and high break even points are the order of the day. True, the extra's such as baggage contribute to that profit. Onboard sales contribute but perhaps not quite as much as one would think. That side of things is, in many ways, a different business but with airline branding. Certain flights do very well in this area whilst others don't and in certain countries the culture of spending onboard just isn't there.

I'm not entirely sure about FR but certainly at Easyjet profit per seat is less than £5. That perhaps demontrates how tight margins are and that critical mass is required in order to remain successful and above all, competitive. It also demonstrates how little we now pay for air travel. The margins of legacy's are somewhat helped by the premium classes the LCC's have there additional charges. When you look at it that way the decision process of adding extras is no different to adding extra's that are business class. That doesn't mean I agree with all charges/extra's. Checking in online and certain card charges perhaps overstep the mark but it goes to show how difficult it is to make money in this industry. Nevertheless, the LCC is an extremely viable model and despite not being a Ryanair fan, they are very successful and are Europe's largest carrier by pax carried. Easyjet are regarded as being a cut above in many ways and certainly have not gone quite in the same direction as Ryanair and are 3rd largest, but again are very successful in gaining revenue whether that be by increasing yields, additional charges, ancillaries or marketing agreements with third party businesses. i.e europcar.



Proud to fly from Manchester!
User currently offlineghifty From United States of America, joined Jul 2010, 841 posts, RR: 0
Reply 7, posted (2 years 4 months 3 weeks 1 day ago) and read 5891 times:

Living in the US, I'd have to think that with FR's super-low fares that, despite their customer service lackings, they'd have a considerably strong returning customer base. Much like SW. Loyal passengers is always a good thing, and if FR's load factors are high.. not to mention the advertised "low fares" are only if you book in advance, like any airline.

I'm sorry if this is off topic, but how does FR compare to NK as far as cost-cutting?



Fly Delta Jets
User currently offlineB17GUNNER24 From UK - England, joined Apr 2011, 25 posts, RR: 0
Reply 8, posted (2 years 4 months 3 weeks 23 hours ago) and read 5773 times:

They have lots of hidden costs and because of this people avoid bringing luggage therefore they save on fuel and can do more flights a day. Also they pull out of any airport that won't meet a low cost for ryanair to operate from there so they have saved money buy pulling routes from certain airports and also they didn't spend much on their 737-8AS's because they bulk bought them just after 9/11 when hardly any airlines were buying planes so they got them cheap. Also the on board catering you need to buy for ridiculous prices but people buy them anyway so they get a pretty good sum of money from each customer and each passenger will soon need to pay to go to the toilet on ryanair and they are thinking about making passengers stand up in stand up seats.




Hope this helps



callum



The sky is a open space for the raw power of jets to roam free
User currently offlinelmml 14/32 From Malta, joined Jan 2001, 2565 posts, RR: 6
Reply 9, posted (2 years 4 months 3 weeks 15 hours ago) and read 4509 times:

Quoting joost (Reply 5):
There is little to no money flowing to FR directly from airports or regions. However, there are other means how they 'subsidize' Ryanair's operations.

There is a LOT of money flowing into FR's coffers from state governments, airports, hotels etc. In Malta it is rumoured that FR gets €23 per passenger from the government alone. Plus other discounts and preferential treatment, like always being allocated inner bay parking where pax walk to/from the terminal and no coaches are required. This is at the expense of other airlines.

[Edited 2011-12-04 02:54:12]

User currently offlinePe@rson From United Kingdom, joined Jan 2001, 19108 posts, RR: 53
Reply 10, posted (2 years 4 months 3 weeks 14 hours ago) and read 4480 times:

Quoting lmml 14/32 (Reply 9):
it is rumoured that FR gets €23 per passenger from the government alone. Plus other discounts and preferential treatment, like always being allocated inner bay parking where pax walk to/from the terminal and no coaches are required. This is at the expense of other airlines..


Of course, MLA, or any other airport, could say no to FR's demands for "preferential treatment". FR's negotiating ability merely represents good business sense in obtaining the best deals for the airline (perhaps if other airlines had this ability...). But as they said yes, there is little point arguing about it: they were clearly willing for it to happen irrespective of other airlines.

[Edited 2011-12-04 03:12:31]


"Everyone writing for the Telegraph knows that the way to grab eyeballs is with Ryanair and/or sex."
User currently offlinejoost From Netherlands, joined Apr 2005, 3154 posts, RR: 4
Reply 11, posted (2 years 4 months 3 weeks 13 hours ago) and read 4356 times:

Quoting lmml 14/32 (Reply 9):
There is a LOT of money flowing into FR's coffers from state governments, airports, hotels etc. In Malta it is rumoured that FR gets €23 per passenger from the government alone.

Read my text. I didn't state that there was no money supporting FRs operations, I was rather stating that most of these subsidies are in the form of discounts on airport and handling charges, and paid-for advertisement.

EUR 23 may sound like a lot, but it's not totally uncommon. For winter-flights to unserved markets, it can be true; summer-services like LTN-MLA almost certainly get lower subsidies.

All these incentives are open for all airlines that are willing to operate services to Malta. The discounts offered by the airport operator are up to EUR 9.50 per passenger, and the full incentive scheme is on the website of the airport:

http://www.maltairport.com/filebank/...nts/MIA2010IncentiveProgrammes.pdf .

So for example, for FRs winter-flights NYO-MLA, they receive a EUR 9.50 discount on airport handling charges. Other destinations (like summer-flights to the UK), receive lower subsidies.

Next to subsidies provided by the airport, the Malta Tourist Board is providing subsidies. These aren't published on-line, but up to EUR 10 for marketing support isn't uncommon.

It's not just FR receiving subsidies. One can be sure that DY receives similar amounts of money for it's CPH-MLA service, as FR gets for it's NYO-MLA.

For a country which relies heavily on tourism in a competitive market (in the end, for many sun-seekers, it's simply one of the alternative for the Spanish coast, Greek islands, Croatia, Cyprus), EUR 23 can be explainable.

But even large airports with plenty of demand give away many incentives for new routes:
- AMS refunds up to EUR 10 per passenger for new destinations: http://www.schiphol.com/B2B/RouteDev.../AviationChargesAndConditions1.htm
- PRG gives up to 95% discount on landing fees for new destinations: http://www.prg.aero/en/business-sect...eme/new-destination-new-operation/
- HEL gives up to 90% discount on landing charges for new destinations: http://www.therouteshop.com/helsinki-airport/#marketingTab

You should take a look at http://www.therouteshop.com/ , to see how airports try very hard to get airline service. The airports first pay EUR 2299 just to get listed on the site for 6 months, in order to promote their incentive and subsidy schemes.

Ryanair, with it's low cost base, is able to make these kind of routes work. But other airlines use them too; however legacy airlines aren't often opening new routes. But when they do, you can bet they'll receive similar subsidies.


User currently offlinenema From United Kingdom, joined Feb 2006, 707 posts, RR: 0
Reply 12, posted (2 years 4 months 3 weeks 8 hours ago) and read 4094 times:

Quoting joost (Reply 5):
From the link posted above, in the period April-Sept 2011, FR payed EUR 316.3M for airport and handling charges, for 44.7M passengers. This is EUR 7.06 per passenger.

For comparison, easyJet, over 2010, payed GBP 16.48 (EUR 19.17) per passenger for airport & handling charges.

That is a remarkable comparison Joost and, your input to this thread has been both very interesting and extremely informative. In thanks for that, i have added you to my Respected Members list.



There isnt really a dark side to the moon, as a matter of fact its all dark!
User currently offlineEagleboy From Niue, joined Dec 2009, 1745 posts, RR: 2
Reply 13, posted (2 years 4 months 3 weeks 7 hours ago) and read 4038 times:
Support Airliners.net - become a First Class Member!

To give another example of the FR benefit from deals with airports, approx 3 years ago FR still had a base at SNN. Under the terms of their 'new airline' deal with the airport they paid E1 per passenger for the first 3 years (it may have been 5 years though), at the same time EI were paying E10 per passenger.*

So a concession like this from the airport could very easily allow FR (or whichever airline benefits) to lower their averga fare below their competitors and still make a small profit per pax.



*This deal ended after the agreed term, SNN refused to renew it and FR pulled out citing 'high charges' as the reason.


User currently offlinejoost From Netherlands, joined Apr 2005, 3154 posts, RR: 4
Reply 14, posted (2 years 4 months 3 weeks 7 hours ago) and read 3981 times:

Quoting Eagleboy (Reply 13):

To give another example of the FR benefit from deals with airports, approx 3 years ago FR still had a base at SNN. Under the terms of their 'new airline' deal with the airport they paid E1 per passenger for the first 3 years (it may have been 5 years though), at the same time EI were paying E10 per passenger.*

Most likely 3 years. When public money is involved (which in SNNs case, it is), 3 years is a legal (EU) maximum duration of start-up incentives. These rules have been defined following the Ryanair - Charleroi case.

Privately-funded incentives (from hotels, privately owned airports, privately-funded tourism board-funds, etc) can last as long as wanted by those who want to pay.

Quoting Eagleboy (Reply 13):
So a concession like this from the airport could very easily allow FR (or whichever airline benefits) to lower their averga fare below their competitors and still make a small profit per pax.

These kind of deals are favorable for any airline that is pursuing a growth-strategy. Indeed, when having a mix between 'old' and 'new' routes, the average amount of charges per passenger, is lower than for carriers who keep their operations as they are.

However, EI could - just like FR - have tried to start new routes and apply for the incentives. The main difference is, they decided not to.

Promoting airlines to grow at your airport doesn't seem to be such a bad idea.

I once read an easyJet publication, claiming that a route - on average - takes 18 months to become profitable. It takes time to promote the service, find passengers, have passengers get used to the availability of the air link. A start-up subsidy for the first few years can work very well for an airline in order to take the step to start the service. It also shows commitment from the airport to the airline.


Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
Where Do LH Send Their A346? posted Tue May 20 2008 03:56:56 by MSYYZ
How Do Airlines Make Their Wine Selections? posted Sat May 27 2006 21:14:54 by 777fan
Where Do Airlines Get Their Int'l Demographic Data posted Thu Apr 20 2006 22:09:27 by MSYtristar
Where Do Airlines Wash Their Planes? posted Sat Feb 4 2006 06:29:30 by LH492
Where Do Cathay Fly Their 777s To? posted Mon Nov 28 2005 15:07:10 by Fbm3rd
Where Do BD Operate Their Regionals To From LHR? posted Wed Jun 29 2005 09:26:23 by Lhrmaccoll
Where Do QF Fly Their 744ERs? posted Tue Feb 22 2005 22:18:12 by SDLSimme
Where Do BA Fly Their 777s To? posted Mon Aug 21 2000 17:12:49 by Gtarrowhead
Where Do Airlines Fly Their 777's? posted Tue May 9 2000 04:02:25 by Boeing747-400
How Do Airlines Make Money? posted Fri Aug 7 2009 14:41:53 by DocLightning