Ryanair announced a record-breaking annual profit on Tuesday, affirming its strategy of reducing fares to gain a larger market share and hinting it will intensify competition with other airlines.
This announcement coincided with British Airways dealing with the aftermath of a massive IT failure that left 75,000 passengers stranded over a holiday weekend.
Ryanair, the largest airline in Europe by passenger numbers, has contributed to lowering short-haul ticket prices in the region by expanding its capacity by 33 percent, which amounts to about 30 million seats over the past two years.
Ryanair’s low operational costs, stemming from affordable plane purchases, maintenance, and staffing expenses, have enabled it to offer cheaper fares than its competitors while still turning a profit.
The Irish airline reported a post-tax profit of 1.3 billion euros (£1.1 billion) for the year ending in March, aligning with analysts’ expectations. This was accomplished even as the airline reduced ticket prices to fill nearly 14 million additional seats during this period.
CEO Michael O’Leary expressed confidence in their ability to increase profits even when fares dropped by 13 percent, noting that profitability had doubled over the past three years. He saw no reason why this trend wouldn’t continue.
Looking ahead, Ryanair plans to slow its capacity growth to around 8 percent, or 10 million seats, for the coming year. They anticipate ticket prices will drop by 5-7 percent, which will likely reduce average fares by about 5 percent during the crucial summer months, putting more pressure on competitors.
O’Leary commented that many airlines were optimistic about the first half of the year and their revenue per passenger yield performance, but he believes this optimism may be somewhat overstated.