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Ryanair is Europe's largest airline, the largest low-cost carrier, and one of the world's largest airlines as measured by international passengers carried. Ryanair has its largest base at London Stansted Airport, and second-largest base at Dublin Airport. Ryanair currently operates a network covering over 40 bases and 1,100 routes (with over 1,300 daily departures) across 26 countries, connecting some 155 destinations. Ryanair operates a fleet of over 250 B737-800 aircraft, with a large order backlog and employs more than 8,000 people.
Location of Ryanair main hub (London Stansted Airport)
Ryanair share price
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Ryanair fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
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Last month, Lufthansa confirmed plans to extend its low-cost operations under what it terms its 'Wings concept'. Short haul LCC subsidiary Germanwings will continue to expand, with a renewed emphasis on using group company Eurowings to provide it with capacity. Eurowings' pilots are under a separate (more flexible) contract from those of Lufthansa and Germanwings and its 23 Bombardier CRJ900s are to be replaced with an equivalent number of A320ceo aircraft.
Perhaps referring to this, and to Lufthansa's low cost long haul plans, Ryanair CEO Michael O'Leary* said that Lufthansa "has some bizarre plan about establishing a new low-fare airline.” He added: “Unfortunately they started with a high-fare airline called Germanwings and they’ll need to do a lot more than call it that and paint it yellow to make it a low-cost carrier.”
Lufthansa began transferring all its European point to point routes that do not serve its Frankfurt and Munich hubs to Germanwings in Jul-2013. Just over 15 months on, we review its capacity growth and the impact on the market share of Lufthansa/Germanwings in this segment.
easyJet: more aircraft come in as more cash to shareholders goes out. Stelios' baby is in good hands
After exercising its last 27 purchase rights over current generation A320s, easyJet's fleet now looks set to grow from 226 aircraft currently to 304 in FY2019. Although it will remain Europe's number two LCC fleet after Ryanair, it will be able to match the latter's growth rate before its A320 neo deliveries come on stream.
This increased fleet plan reflects easyJet management's confidence in its ability to continue to generate a value-creating return on capital, which was sector-leading in FY2013 and looks set to rise once more in FY2014. Total shareholder returns, which include both capital gains and dividends, have also led the industry. easyJet now proposes to increase its ordinary dividend payout ratio from one third to 40% of net profit.
The company's biggest shareholder, Sir Stelios Haji-Ioannou, a vocal supporter of higher dividends, has been critical of its fleet expansion. At easyJet's recent Investor Day, the airline's management team gave some strong reasons for all shareholders to trust its track record.
Wizz Air CEO Josef Varadi told a recent meeting of the Aviation Club in London that he ran a very disciplined airline. "We never grow for growth's sake", he said, explaining that the airline had clear financial targets and that growth was an output from this process.
Earlier this year, Wizz Air pulled out of a planned initial public offering (IPO) of its shares, which would have seen it floated on the London Stock Exchange. Investor appetite was dulled by geopolitical issues, a fuel price spike and profit warnings from other airlines, rather than any problems at the airline itself. Indeed, its most recent accounts show that it is now one of Europe's most profitable airlines, with significant cash reserves. An IPO could come back onto the agenda, but, Mr Varadi said, "we are not desperate".
Its results have not always been strong in the 10 years since its 2004 launch, but our analysis of its accounts suggests that it is now on a firm footing, supporting Mr Varadi's claim that "financial performance is at the core of the airline – we are not doing it for charity".
Ryanair's agreement to buy 100 Boeing 737MAX aircraft, plus a further 100 options, for delivery between 2019 and 2024 allows it to accelerate its traffic growth modestly. After four years of growing passenger numbers in the region of 3% to 5% annually, it looks set to step this up to 6% pa from FY2016 (year to March).
The greater fuel efficiency of the MAX and a higher number of seats (197, eight more than on its 737-800s) will give Ryanair significant operating cost per seat savings. Its negotiating power is likely to have secured favourable terms with Boeing and this should also give Ryanair an advantage over competitors in ownership cost per seat.
The recent evolution of its product and service add new elements to the basis of competition. However, low fares (based on low costs) will remain its key competitive advantage. In this report, we consider Ryanair's main strengths, weaknesses, opportunities and threats.
The government of Cyprus is currently assessing the expressions of interest it has received in connection with its controlling stake in the national carrier Cyprus Airways. The highest profile potential bidders are Ryanair and Aegean Airlines, who also happen to be the two most profitable European airlines in the first six months of calendar 2014.
For the outside observer, up to date analysis of Cyprus Airways' financial performance is not possible. Nevertheless, our previous analysis suggested that its unit costs were higher than those of its main competitors in the Cyprus market and it is unlikely that this situation has fundamentally changed. Moreover, its share of seats at its Larnaca base and in Cyprus overall is continuing to flow to others.
The sale of the airline could be its last chance of survival, although potential buyers may be tempted to use the process to find out as much as possible about an ailing competitor before letting it wither.
Europe's airlines: 1H2014 results season shows improving trend, but cost reduction is the key driver
Europe's airlines appear to be following a course to improved profitability, based on the 1H2014 results of the largest publicly quoted airline groups. Profits remain slender in most cases, but margins are improving in aggregate. Individually, financial performance varied widely, with LCCs both leading (Ryanair) and lagging (Norwegian) the operating profit margin rankings in 1H2014.
The European market offers volume growth, but is characterised by price pressure, with RASK falling for the majority of the larger airline groups and this points to the need for additional caution in capacity growth. The LCCs collectively enjoyed higher growth than the FSCs in 1H2014 and also achieved a more stable RASK performance (although not in all cases).
Profit improvement is largely being achieved through cost savings and CASK reduction. Although fuel prices are high on a longer term historic perspective, they are enjoying a period of relative stability and this has helped the cost picture. Although Europe's airline sector remains only thinly profitable, these 1H results hold out the prospect of better full year results in 2014 versus 2013.