Ryanair Revenues

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RYANAIR CASE: REVENUES ANALYSIS

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According to the Profit & Loss accounts of Ryanair, the operating revenues are splitted into two categories: the scheduled revenues and the ancillary revenues. The scheduled revenues are generated through direct sales of flight tickets while the ancillary revenues1 are generated from other non-ticket sales. Figure 1 depicted the growth of the scheduled and the ancillary revenues from 2004 to 2011. While the scheduled revenues increases from € 924,5 mio to € 2.827,9 mio with an increasing return factor equals to 206%, the ancillary revenues increases from € 149,6 mio to € 801,6 mio with an increasing return factor equals to 436% during the period 2004 to 2011. 3.000.000 2.500.000 2.000.000 1.500.000 1.000.000 500.000 2004 2005 2006 2007 2008 2009 2010 2011 Year Scheduled Revenues Ancillary revenues K€

Figure 1. Scheduled & Ancillary Revenues Growth from 2004 to 2011 During the same period, Ryanair has produced an average annual increase of the ancillary revenues of approximately 27%. 25% 22% 20% 20% 16% 15% 14% 15% 16% 18% 22%

10%

5%

0% 2004 2005 2006 2007 2008 2009 2010 2011

Figure 2. Ancillary Revenues as Percentage of Total Operating Revenues from 2004 to 2011

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In the Airline industry, Southwest Airlines Company firstly introduced the ancillary revenues. 2

In Table 1, I have reported the evolution of the average scheduled and ancillary revenues with respect to the scheduled passengers. Scheduled Revenues (K€) 924.566 1.128.116 1.433.377 1.874.791 2.225.692 2.343.868 2.324.500 2.827.900 Ancillary Revenues (K€) 149.658 208.470 259.153 362.104 488.130 598.097 663.600 801.600 Scheduled Passengers (in Mio) 23,1 27,6 34,8 42,5 50,9 58,6 66,5 72,1 Average* Scheduled Revenue (€) 40,02 40,87 41,19 44,11 43,73 40,00 34,95 39,22 Average* Ancillary Revenue (€) 6,48 7,55 7,45 8,52 9,59 10,21 9,98 11,12 Average* Revenue (€) 46,50 48,43 48,64 52,63 53,32 50,20 44,93 50,34

Year 2004 2005 2006 2007 2008 2009 2010 2011

* per Passenger

Table 1. Evolution of the Average Scheduled and Ancillary Revenues per Passenger Clearly, the average ancillary revenue has significantly increased from 2004 to 2011, ranging from € 6,48 to € 11,12. As reported in the 2011 the annual report, the ancillary revenues comprise revenues from non-flight scheduled operations, in-flight sales and Internet-related services, more precisely: Non-flight scheduled operations: operations that are tied to the sale of air travel to include bus and rail tickets, hotel reservations, and excess baggage fees (checked baggage fees are counted as passenger revenues). In-flight sales: Onboard sales of beverages, food and merchandise. Internet-related services: Comprised of revenue from Ryanair.com including insurance, accommodation and car rental. In the following table, I have reported the ancillary revenues for 2011 and 2010 broken down by category. Category Non-flight Scheduled In-flight Sales Internet-related Total 2011 Revenue in €Mio 574.2 100.7 126.7 801.6 Percentage 71.6% 12.6% 15.8% 100.0% 2010 Revenue in €Mio 493.5 86.5 83.6 663.6 Percentage 74.4% 13.0% 12.6% 100.0%

Table 2. Ryanair Ancillary Revenue by Category: 2011 & 2010 Fiscal Years Clearly, the larger part (71.6% in 2011 and 74.4% in 2010) of ancillary revenues is due to the non-flight scheduled operations.

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The increase of Ryanair's ancillary revenue is not its own exception but it is a general trend in the area of airline industry, as reported by IdeaWorks Company2: “The world has changed dramatically in four years with 47 carriers disclosing 2010 ancillary revenue activity of €15.11 billion ($21.46 billion). This represents ancillary revenue growth of 38% over 2009 and 96% since 2008”. This is mainly due to the following two reasons: 1. Airline companies are bringing more products to market, thanks to the introduction of new à la carte features. 2. Many of these airlines are becoming perceptive retailers. Branding has been...
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