Despite two profit warnings in as many months, Michael O’Leary is still on course to turn around Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) (LON:RYA)’s public image, while simultaneously growing the airline. As previously suggested, short of acquiring Aer Lingus, there appeared little O’Leary could do to put more bums on seats without tackling the subject of customer relations. However, O’Leary could be about to prove everybody wrong.
Ryanair turning around customer service
While it’s still probably too early to say what difference improving the website booking process, reducing controversial fees and allowing allocated seating will make to passenger numbers, Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) (LON:RYA) carried a record number of 5.2 million passengers in November, up by 300,000 from the same time last year. This was on top of a 6% rise in October. To put that into perspective, Aer Lingus fell 2.2% in October. And O’Leary appears to be just getting warmed up.
Still fuel in the tank
Regardless of profit warnings, Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) (LON:RYA) has already made €500 million in profit this year, so there’s little need for fare hikes yet. Lower penalties and fees for customers will mean lower profits, as will new customer-friendly projects (reducing the number of clicks to book a seat on the website from 17 to 5 cost €10 million), but O’Leary is committed to a target of 81 million passengers by the end of the year. By not raising fares to compensate for losses in other areas, in typical O’Leary fashion, Ryanair’s CEO is sending out a challenge to other airlines to lower theirs.
In a statement, the company says it expects changes to baggage fees in favour of the passenger will be ‘revenue neutral’. The latest news on the customer service front is that customers will be allowed a second bag. This came as big surprise to many, given the airlines intransigent policies in the past. With the playing field becoming more level in terms of customer care, Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) (LON:RYA)’s low fares have become attractive too. An 80% unit cost advantage over Easyjet isn’t going to be lost by being nice to people.
New deals and destinations
Next September, Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) (LON:RYA) will take receipt of 175 new planes. They’ll be needed. In the wake of air tax being axed in the Irish budget, new destination announcements are appearing with frightening regularity. Past disputes with the government and Dublin Airport Authority (DAA) have been laid to rest with a major growth deal expected to add an extra half million passengers to the capital airport. Eight new routes are planned from Shannon, doubling capacity there to 750,000.
In the UK, capacity cut at Stansted will be restored, thanks to a new ten-year deal on landing charges. Another ten-year deal has been thrashed out with Modlin airport in Poland, where O’Leary has also launched domestic flights. Permission has just been granted for the airline to fly in to destinations in Russia from next year. Spokesman, Robin Kiely said:
“Ryanair Holdings plc (ADR) (NASDAQ:RYAAY) (LON:RYA) has had discussions with a number of Russian airports, but they are purely exploratory at this time.”
In September, O’Leary said he was looking at routes in North Africa and Israel as well. Weak demand in Europe has meant where O’Leary once went looking for deals at regional airports, they now come looking for him.
Douglas McNeill, investment director at stockbroker, Charles Stanley, said:
“You’ve got to attract new customers, win them away from other airlines, and there’s no shortage of airlines around Europe who it can compete properly with on cost.”
With Ryanair intending to fly 100 million passengers annually by 2019, and €1 billion still safely banked for return to shareholders, some may say O’Leary his head in the clouds, but his feet are firmly on the ground.