Europe's bloodbath (again)
1. Recessionary conditions suit true Low Cost Carriers best. The global economic recession has handed Ryanair and similar carriers near-perfect operating conditions. As Ryanair explains, "this recession has encouraged passengers to become much more price sensitive which is why they are switching to Ryanair's low fares and unbeatable customer service over all other competitors". Ryanair expects a 15-20% reduction in average fares this year to around EUR32 per passenger. Ryanair is expecting that several of its smaller rivals will not be able to withstand falls of this size over a longer period. This means that Ryanair is in a position to profit handsomely over the next 12 months. Ryanair's CFO, Howard Millar, summed it up; "we're the only airline in Europe predicting a profit for next year at this point in time". Ryanair forecasts a profit after tax of between EUR200 million to EUR300 million for the year ending 31-Mar-2010. 2. "Collapsing" aircraft order books: Ryanair is also on the offensive for a cheap aircraft deal to cover its requirement for 200-300 aircraft between 2013 and 2016. Talks with Boeing have reportedly been scheduled for late Summer. With its negative net order book this year and a customer that is arguably too big to lose, Boeing may be more willing to deal than Airbus. The US dollar is certainly heading in the right direction for Ryanair at present, with a substantial delivery log. But both manufacturers know Ryanair needs more aircraft to keep its model working next decade and will not be too eager to discount. Contrary to O'Leary's charge that the aircraft order backlogs of Airbus and Boeing are "collapsing", although there has been some churn in orders, the manufacturers still hold the upper hand. 12-18 months from now, it might be a different story.
CAPA Centre for Aviation. (2009). Ryanair SWOT analysis: addicted to growth, a model for bad times. Retrieved from...
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