DUBLIN: A sharp rise in earnings from add-on charges for items such as baggage and pre-assigned seating helped boost Ryanair’s earnings above expectations in the past year, lifting its shares to a record high.
Ryanair, which helped pioneer a business model in which low ticket prices are supplemented with charges for extras like printing boarding passes and carrying luggage, flew 5 percent more passengers last year, but earned 20 percent more on extras.
That helped lift net profit 13 percent to a record ¤569m ($730m) in the year through March, ahead of an average analyst forecast of ¤558m in a company poll.
Its shares rose more than 9 percent to a ¤6.90 peak.
Chief Executive Michael O’Leary said the result was a “testimony to the strength of Ryanair’s ultra-low cost model.”
Key to the increase in so called “ancillary” charges was the roll-out of a scheme to allow the advance booking of specific seats across the network, allowing passengers to bypass the sometimes unruly rush to secure good seats on Ryanair flights.
Ryanair said the service had proved particularly popular with businesspeople trading down from Europe’s older national carriers, many of which are struggling to deal with high fuel prices and more cost-conscious travellers.
Ryanair regularly raises the ire of customers and consumer groups by introducing charges for everything from printing boarding cards to booking flights on its web site.
But O’Leary, its outspoken boss, insists the fact Ryanair flies more international passengers than any other airline makes Ryanair the “world’s favourite airline”, a slogan previously used by British Airways.
It remains to be seen if Ryanair can sustain the same level of growth in add-ons. Chief Operating Officer Michael Cawley said in an interview last week it was difficult to predict ancillary revenues in the medium term, saying management had been surprised by the success of reserved seating.
He said ancillaries would likely grow a little ahead of passenger growth.
Reuters
