Hi All,
I once had a conversation with an Australian travelling in Europe. He told me that he flew from Poland to Dublin in November 07 with Ryanair, the flight costing in total €35 (all taxes, charges, baggage included). He was quite confused and was wondering how exactly Ryanair makes money.
I have followed Ryanair in the media for years, I have read the Ryanair book (2004) and the Michael O’Leary Biography (2007) and also saw the BBCs Money Show Ryanair episode. From all this, I conclude the below explanation. If anyone with greater knowledge in the area disagrees or knows something that I don’t, I’m all ears.
Thanks in Advance for all responses
My Explanation
Costs: Ryanair bulk buy planes and use cheap back end of nowhere airports where they turn the planes around quickly. This minimises the capital cost of the plane per passenger.
Ancillary Revenues: Ryanair have stripped airline travel to its very basic form ie a passenger sitting on a seat. They then turn cost items (eg food and drink, baggage) into revenue streams.
Off peak season: At off peak season, only a percentage of an airplanes seat capacity are made up of people who actually want to fly somewhere and hence are willing to pay for a seat. Ryanair have found a way to justify flying the plane in these conditions by giving the remaining seats away. Giving seats away has the following benefits:
The above is inspired by the Michael O’Leary quote “In the airline business, any idiot can make money during the summer, the trick is not to lose money during the winter”.
I once had a conversation with an Australian travelling in Europe. He told me that he flew from Poland to Dublin in November 07 with Ryanair, the flight costing in total €35 (all taxes, charges, baggage included). He was quite confused and was wondering how exactly Ryanair makes money.
I have followed Ryanair in the media for years, I have read the Ryanair book (2004) and the Michael O’Leary Biography (2007) and also saw the BBCs Money Show Ryanair episode. From all this, I conclude the below explanation. If anyone with greater knowledge in the area disagrees or knows something that I don’t, I’m all ears.
Thanks in Advance for all responses
My Explanation
Costs: Ryanair bulk buy planes and use cheap back end of nowhere airports where they turn the planes around quickly. This minimises the capital cost of the plane per passenger.
Ancillary Revenues: Ryanair have stripped airline travel to its very basic form ie a passenger sitting on a seat. They then turn cost items (eg food and drink, baggage) into revenue streams.
Off peak season: At off peak season, only a percentage of an airplanes seat capacity are made up of people who actually want to fly somewhere and hence are willing to pay for a seat. Ryanair have found a way to justify flying the plane in these conditions by giving the remaining seats away. Giving seats away has the following benefits:
- It can generate more of the above ancillary revenues (baggage, food/drink, hotel/car hire bookings).
- Reduced advertising costs: Everyone knows the airline that gives away free seats. The requirement to advertise is significantly reduced. (My Australian friend will tell everyone in Australia).
- Revenues from Ryanair’s “Billboard” advertising service (either on the plane itself or on the baggage cabins) will be higher as more people see them.
- Other companies, usually Financial Services, are willing to pay to use Ryanair’s brand name because of it’s reputation for free seats (eg Credit Cards, Insurance).
- Some regional governments love all year round tourism and are willing to subsidise Ryanair to deliver. This is probably illegal under EU law but I believe some have got around this problem by paying Ryanair over the top to advertise on their website.
The above is inspired by the Michael O’Leary quote “In the airline business, any idiot can make money during the summer, the trick is not to lose money during the winter”.