Ryanair struggles to fill seats

[Ibis]

Loadfactor down (http://www.reuters.co.uk/newsPackageArticle.jhtml;jsessionid=VXKI1QSEEWK2CCRBAEZSFFA? type=stocksAndSharesNews&storyID=469019&section=finance)

[RowleyUK]

Probably the extra 50p per ticket increase is turning people away!:ooh: :ooh:

[hobie]

quote .....

"The airline said passenger traffic grew by 45 percent to 1.9 million in February versus the same month last year"

another way to look at the numbers .....

cheers ....

[stormin norman]

you can only p...s the travelling public about for so long and treat the needy (wheelchair users) as badly as o'leary does

[WHBM]

Surprising to see the FR load factor is down from 81% to 77% while Easyjet have maintained theirs at 89% (which I would have thought on an extensive network is almost as high as you can get).

http://news.bbc.co.uk/1/hi/business/3535221.stm

Now I know, being a humble beancounter, that load factor beauty contests are meaningless, especially for LCCs, and can be just an indication of who is giving their seats away for £1 each, and the only real indication at the end of the day is cash in the bank, but Ryanair do seem to have lost the "golden aura" of recent years, and almost every bit of news about them seems to be negative now. Are they trying to grow a bit too fast ?

[Runway 31]

It is not surprising that the load factor is down while the number of passengers carried has increased.

Last January their fleet was largly made up of 200 series aircraft. Since then a large number of newly delivered 800 series which carry 40 or so more passenger are in the fleet.

Given the extra seats now available this will take a lot of additional passengers to make up the difference.

[mono]

Stormin,

The wheelchair thing is not really fair, Ryan were only passing on the charges that practicaly all airports charge to the airlines for assisting wheelchair passengers.

To my mind the passenger in question should have sued the airports as it is they who discriminate.

[Young Paul]

I don't think the wheelchair thing is the real issue. The larger aircraft is more likely to be. However, I think a business model predicated on a (pretty much) continual increase in flights taken is flawed. It's like cable TV. You simply aren't going to get millions of viewers for the 232 new channels that it brings. "Freedom of choice" - yeah, right - and what quality of programs do you think the income of the average cable TV station will allow?

Same for airlines. Of course there has been a huge growth in the number of profitable flights - well above what players like BA, EI and bmi might have imagined - as people discover they can affordably just pop over to Biarritz or whatever for the weekend. But there is a limit to the number of weekends people will take - and a limit to the number of people that will do it. It is high - but I suspect that we are getting towards it, and growth of >10% per year will not be possible for ever.

Also, the traditional airlines are fighting back. A large amount of growth was at their expense to begin with - but people have realised that you can get seats almost as cheaply on bmi and BA and still get free drinks and a complaints policy thrown in. So (this is what will hurt the LoCo's most) whereas people were buying one way tickets from STN to EDI for £150 with EZY etc at one stage, they have realised that there are other cheaper options. The high yield pax which gave the LoCo's their amazing profits for several years have discovered that they don't need to spend so much.

I have no doubt that EZ and FR have a few good years still to come - but I have doubts about their ability to go on producing double digit growth - and they have already committed themselves to acquiring the infrastructure that needs this growth to pay for itself.

[Wee Weasley Welshman]

Young Paul - your parochial views seem to ignore growth on the continent and in the regions. Ryan and Ezy are not constrained like BA and BMI and Lingus to operating solely in their national market.

Double digit growth is possible when Europe boasts only 24% of the low cost flights operated profitably in the United States.

Cheers

WWW

[chiglet]

Errmm,
Is it a "relevant" question to ask just how much RYR are paying Icelandair for the lease or said a/c?
watp,iktch

[52049er]

Trouble is, Ryanair have faled to make any routes match the success of the dub-lon ones. Something like 40% of their profits still come from that route alone. As someone said last month "There may be a business case for flying from london to nowhere, but not from nowhere to nowhere".

For evidence, the analysts are not impressed with rya's success anywhere else than their 'original' routes

[Rocco in Budapest]

The more 800´s in the fleet probably explains alot the drop in load factor, after all the Ryanair 800´s carry over 50% more passengers.

Like someone said earlier the load factor race is irrelevant. Ryanair has a 55-60% break even loadfactor compared to easyJet´s 75-80%. You do the math.

The bottom line is Ryanair carries 200.000 more passengers a month than easyJet, makes a s**t load more money than easyJet and will continue to do so with or without the wheelies.

As for the DUB-STN theory, analysts must agree that that a single route can´t carry an airline of 70 odd airplanes and over 140 routes, just wouldn´t make sense to keep expanding.

[birdbrain]

Perhaps its got nothing to do directly with the lo costs.
People are beginning to shop around a bit more again with some national carriers creating competition..
I for example, priced 4 seats Dublin-Prague a few weeks ago.
EI gave a price that was lower than any of the so-called Low cost airlines, it was also a direct flight - no 2or 3 hr London stopover...
Spoke to someone recently also, who has just returned from a few days in Prague... travelled with a stopover in both directions 2 seats for €50 less than my 4... !!!
I think more people are not just automatically assuming the loco's are cheaper without checking elsewhere...

Are the public beginning to vote with their feet ?
shiver me nice new alu tubes !!!

[Young Paul]

WWW - wwwhatever, dude. Could you give a comparison of GNP as well? Given that people will only start flying for leisure when they have a certain level of disposable income, and given this is the market that the LoCo's are targeting, and given that most people in that situation are in Northern Europe, and a good 50% of Europeans (more so once we have enlarged) are significantly below the level of income that they would think about going away for holidays, I think you are being blithe in your assessment. Remember the LoCo's don't make money from people paying €5 per ticket - they are relying on a goodly number paying €100, which is a significant amount if your family income is €12000.

[cwatters]

To my mind the passenger in question should have sued the airports as it is they who discriminate.

This has been covered elsewhere in detail but my understanding is that he did take both the airline and the airport to court.

I believe the judge said the airline had to pay up only because the airline had previously agreed (eg contracted) with the airport to be responsible for looking after pax once they check in. The fact that the airline had in effect "subcontracted" the provision of some services from the airport is another matter.

I guess in the future the lawers will write their contracts more carefully so that it's clear who provides what exactly.

Prior to check-in the airport is responsible. so had the airport charged for a chair to get the person from car park to the check-in then they would have lost that part of the case. As it happens I believe the airport did/does provided one free.

[Wee Weasley Welshman]

Young Paul - well for example easyJet now have two bases in Germany (higher GNP than UK) and one base in France (same GNP as UK). Whilst it boasts ten bases in the UK.

LoCos do NOT target solely leisure travellers looking for low low prices. Business travellers form a large percentage of easyJets customer base. You may be thinking more of Ryanair in this regard but I think you'll find they have a lot of suits boarding their aircraft as well.

The average fare an easyJet customer pays is just under £40.

I think thats affordable to pretty much anybody in the EU.

Whatever you may think somebody somewhere has persuaded both Michael O Leary and Ray Webster to order over 200 new jets between them. They ain't going to fit in the UK are they?

Cheers

WWW

[Young Paul]

Well I agree with that much - they aren't going to fit in the UK! And as I've already said, I have no doubt that they have profitable years ahead. I just don't think they can keep growing forever, and the fact that their aircraft are getting a bit less full might suggest they are getting towards the boundaries of the area which will benefit from the gospel according to Southwest.

[mikekilo]

... by the way, Ryanair is expecting delivery of 30 B737-800's this year. Enevitably load factors in the 80-90% range are going to be difficult to maintain over the next 12-18 months...

[WHBM]

they are getting towards the boundaries of the area which will benefit from the gospel according to Southwest.
One of the gospels according to Southwest is "expand gradually, not too fast". So they've only taken 54 new aircraft into their huge fleet (what is it, 400 ?) over the last 3 years, an average of 18 a year, and some of these have replaced their first 737-200s.

Seems to be one of the lessons that Ryanair have dropped. Easyjet are not quite so bad.

[FougaMagister]

Maybe now would be the time for Ryanair to consider swapping some of their 737-800 options for smaller 737-700s. They could thus adapt capacity to routes that don't justify a 737-800 (incidentally the largest low-cost aircraft in Europe at 189 seats).

Since both versions are so similar (same type rating for Flight deck and Cabin Crew, similar spares support/engineering, etc), that might be a wise move. After all, better get an 80% load factor on a 737-700 than a 70% load factor on a 737-800 on the same route.

Just a thought...

[FlyingIrishman]

You're right, the 2 versions are very very similar. So similar in fact that they have near enough identical fuel burn. This means that on an 800 there is 40% more capacity at nearly the same operating cost. Thus, it doesn't make sense to swap to the 700's.

[FougaMagister]

Now I hadn't thought about that :O I stand corrected...

Cheers

[WHBM]

Flying Irishman:

You're absolutely right, of course, that most costs for the -700 and -800 should be be pretty much the same. So the opposite question is why would any LCC (including Southwest) want to bother with the -700 then, which so many do ? There must be some reasoning there.

And why is the -600 such a sales flop when the same-sized -500 did very well and is still popular secondhand, even among LCCs

[Young Paul]

Typical single class -600 132 seats; -700 149 seats; -800 189 seats according to BCAC website.

Both 600 and 700 require 3 cabin crew; 800 requires 4. Manpower costs are one of the most significant factors. No cost advantage for 700-600 from a manpower POV; cost advantage 800-700 - especially if you don't think you are going to actually sell those 40 seats.

[MarkD]

As regards the -600, the difference with the -500 is that they are used, not new and are a bit cheaper (especially with airlines getting shot of them like EI for buses). New customers are liking the look of EMBs rather than 736s, just as with A318s for that matter.

[runawayedge]

Few points.

1. With huge expansion comes maturity. Even allowing for a small (even in loco terms) maturity discount of 10% FR must still be ahead.

2. The wheelchair issue were it to effect them will not impact until March results - allowing for forward bookings. My own opinion is public perception is not that fickle, yesterday's news.

3. I'm surprised that the choice between a 700 and 800 has entered this forum. The difference in operating costs between both is neglible. Add up the daily sectors, multilply by 40 seats multiply by 364. Even if you don't fill them (and they will) at least you have room for expansion through marketing, without additional capital costs.


For what it's worth!

[iceman51]

runawayedge is perfectly right!

Let's do some math, now:

40 seats, 6 sectors a day, 365 day in a year = over 87.000 additional pax

let's assume that FR is earning 1.50 euro for each booking made with a credit card ( you for sure will not believe that FR is incurring a total cost per transaction higher than 1.00 euro, isn't it?), therefore 87.000 times 1.50 makes over 130.000 euro straight down to the bottom line of their profit and loss account per aircraft! :ok:

let'assume now that these 87.000 pax will spend on board on average 0.80 euro, that is an additional 70.000 euro to the bottom line ... :ok:

so 200K euro of additional profit without incurring in any significant additional costs, times xx 738 they have in the fleet ... ;)

and it might also be than 10K of these pax are booking a car with Hertz, and Hertz is paying FR - say - a 5.00 euro commission, that is an additional 50K euro to the bottom line, always per aircraft of course, etc., etc., you can spote other sources of income.



I agree, FR is expanding fast, it might be too fast. They must be very careful, other travel opportunities are emerging and the concepts of TTC - Total Travel Cost and TTT - Total Travel Time are becoming pretty well known.

Furthermore customers in the continental Europe are different than those in the UK or Ireland, let's say they are less "tolerant" (e.g. the checked baggage allowance of only 15kg per person is too tight, as well as the fact that only one small piece of hand baggage weighing not more than 7kg and being less than 50cm x 35cm x 23 cm in dimensions is allowed in the cabin, that equals to have no trolleys in the cabin, so a businessman will try to avoid FR!) and more "sensitive" to several other issues.

FR sould be very aware that pricing is not the only important item when a flight is booked, passengers are actually looking value for money.


One final comment on load factor ("LF"). In principle to have a low or a high LF is irrelevant. What is really important is to have the right yield per passenger, which means that a LF of just 1% with a terrific yield can produce exactly the same number for your bottom line as a 90% LF with a very, very small yield. The real problem is to get that number, i.e. to have the right yield.

I hope tha MOL & Co. will be able to manage their growth (yield).

[Young Paul]

Your maths is flawed. They may not be able to get 40 extra pax per flight; although the specific fuel burn is right, 40 pax weigh 4 tonnes, which does represent an additional cost overhead (15 kg/hr - perhaps 100 kg/day - plus the extra ZFW - again not much, but the benefits you sketched out were pretty marginal). And having an extra crew member per aircraft (as they would have to on a UK AOC - dunno about Irish) would also cost. Also, aircraft don't do 365 days flying a year (though there is probably only 10 days downtime, at a guess, so not a huge cost). Also, pax don't all use credit cards - and given that supermarkets pay 2.5% costs for credit card transactions, it wouldn't surprise me if £2.50 is closer to an accurate figure for how much FR have to spend on a credit card transaction. Basically, it is too simplistic - that's how bad business plans are made.

[Tom the Tenor]

I know this is very likely to be a crazy, crazy idea - but if FR are receiving so many new 737s this year and if they are caught for not being able to dream up loads of new routes around Europe with them why not try flights from the UK/Ireland to somewhere like Orlando with a fuel stop in either Gander, St Johns or even Bangor, Maine? Or somewhere in the opposite direction to the Orient? Dont shoot me, just a crazy suggestion!

[Findo]

You are right Tom a crazy idea.


RYR's business model is running as many short sectors per day as possible. People will pay 20 to 50 pounds for a flight of only 300 to 400 miles but they won't pay 200 to 500 for a flight of 3000 miles. Add in all the extra costs of crewing and night stopping and you are in a no win situation.

The win every time they turn round the aircraft in 25 minutes and get an extra rotation in per day by comparison to those airline shwich still schedule 50 - 60 minute turn rounds. An extra return flight with money straight on the bottom line. :O :O

[iceman51]

Young Paul

I did'n want anybody to assume that my maths were perfect!

That was only; I believe, a good example of what FR is able to squeeze out of 40 additional pax, not to mention that FR is normally getting - lets' say - a "donation" either by the (small) airport authority or by the local Tourism Authority for EACH arriving passenger, provided that a minimum agreed number of arriving pax is reached over a set period of time.

As far as credit card charges are concerned the so called commission or handling or etc. fee of 2.5% you mentioned is right and true (and even too low) for a small retailer shop only.
But, actually, this is the "window" fee, the published one.
Medium-Large shops have a decreasing fee related to the amount of purchases funneld through the card system, and quite often it goes well below 1%.
Big shops or chains (i.e. Harrods, Boots, Safeway, etc. and of course FR) are able to negotiate a "flat" fee contract, again quite often on a decreasing basis: more you do with the credit cards, less you pay.
Would you imagine, for instance, Safeway to give away 2.5% of their profit to make happy the greedy Visa, Mastercard & Co.?
No, isn't it?
I also remember that last year FR dropped Amexco, the most expensive one, possibly beacuse they refused to move to a flat fee system or even to a decreasing flat fee contrac.

As far as the extra crew member is concerned, I am not to familiar with UK and/or Irish AOC. What I can tell you is that it seems that FR is having 1 cabin crew every 50 pax on board, and operating a point to point system and knowing in advance how many pax are on board of the two legs, they either can drop a crew member or take on board an extra one. And if they take on board an extra one because there are 152 pax, they will try to do their best to take on board 47 more pax, it might be at only 0.01 euro plus taxes, but they will get some extra money rolling in! (I do rember a BGY-NYO flt with only 3 cabin crew last January).

In conclusion, I just wanted to explain, to give an idea on how very small things are so important for a LCC to become successful (and forgiven by the major).
:ok:

[sparkymarky]

I thought the 2.5% flat fee was a VAT avoidance mechanism. i.e. customer buys £100 of goods, Tesco, Asda or whoever, bills for £97.50 including VAT and the £2.50 is billed via Supermarket Card Processing Ltd who don't pay VAT as it isn't applicable to such fees.

[FougaMagister]

The required number of cabin crew is one per 50 SEATS, whether or not these are occupied - therefore a 737-800 with only 150 pax on board still requires 4 Cabin Crew. Imagine what would happen if a 737-800 left, say DUB with only 3 Cabin Crew and ended up with 50 extra pax turning up at, say, BVA at the last minute (cut-out time 40 minutes before STD); FR would have to deny them travel on flight safety grounds even though there would be empty seats onboard...

Cheers

[codpiece face]

Can anybody explain why EZY opted for the 700 if the difference between that and the larger aircraft is negligble. how much further is the range typically on the 700 over the 800?.

I would like to add that wether you love or hate Ryanair they have done an excellent job in bringing indirect jobs to all of these out of the way airports creating excellent oppurtunities for people to get into this beloved industry.

Prestwick is a shining example of how an airport can be turned around from having zero passengers in the early nineties to around 2 million now. Although Ryanair is the main airline at the airport it has also brought in other airlines and this has created probally thousands of jobs in a big unemployment blackspot.

It is not alone in the UK of areas that have been bypassed for development because of the near monopoly of certain airport operators.

[Kinetic]

Quote:

... by the way, Ryanair is expecting delivery of 30 B737-800's this year. Enevitably load factors in the 80-90% range are going to be difficult to maintain over the next 12-18 months...

Not quite accurate, it was due to be 29, 6 replacing older 200's and 23 net additions, now I believe 5 of the 23 net additions are to be deferred.

Some excellent opinions, I would not be to worried at either of the two main Lo-Co's in question for the immediate future, May the 1st is a breath away and both will be blitzkrieg-ing their way into the new markets generated by the introduction of our new EU cousins in eastern europe.

Both are still going all out for capacity growth, but saturation and consolodation will occur at some point, if one of them doesn't go pop.

As stated by the wise and the learned the load factor really is a red herring when compared to aircraft sizes operated and break even costs. FR is has the lowest cost base of any Airline in Europe and is currently the richest Airline in the world by all important profit margin so I wouldn't be overly concerned at the original article on load factor.

I have a friend who was a high ranking former member of Air Europe (international leisure group) who continully sites the apparent similarities of them with the Orange team, popular public perception, moving to swanky offices, premuim airports/charges, veering away a bit at a time from their original business model, two aircraft types. He says everything looked rosy for the future at Air Europe........ the day before the shock announcement that they were no more...

One thing that does seem apparent to me is that both Ezy and FR rely heavily on UK-Irish bookings, since the Lo-Co boom in the 90's the economic climate in UK-Ireland has been reasonably bouyant, low interest rates and the like, neither have known a recession. If that occured and John Leisure traveller is skint then surely, as with BA post 9-11, the cost base becomes all important and break even load factor even more so. Ryan seem to be a step ahead in the current favourable market, my guess is they would be more so in a depressed market?

Only time will tell

[johnpilot]

Ryanair are not defering any aircraft for the coming year. In RYR terms, a year starts on 1 April and ends on 31 March. Various people quote different numbers, but if you include the aircraft that have arrived since January then the number 35 will be reached. The 200s are back flying again, and they will be flying until they need a C or D check, or when they become to expensive to keep flying. RYR has been rethinking its market strategy and its route structure, and it is my understanding that they will be concentrating more towards the south and definetely more bases in the UK. Cost wise they are the cheapest in Europe but competition is rising and in many ways we are becoming a victim of our own success. We used to be the small guy attacking the big guys, well now we are one of the big guys and the small guys are eating into our markets.
JP:D
By the way, all 800s fly with four cabin crew and not three as some people have indicated. With the variable weight schedule boeing offers on the NG one can keep costs down regarding landing, parking, and overflying fees