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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's largest hub is at London Stansted Airport, with its second largest base at Dublin Airport. The carrier operates a comprehensive network of services across Europe, the Mediterranean and North Africa with a fleet of over 300 B737-800 aircraft.
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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Opinion polls are notoriously volatile and unreliable predictors. Nevertheless, a recent opinion poll* in the UK has indicated that voters favouring a British exit from the European Union now number more than those favouring the status quo. Whether or not the poll is totally accurate, it indicates that a so-called "Brexit" is a serious possibility.
UK Prime Minister David Cameron's Conservative government has promised UK citizens a referendum on this before the end of 2017. Meanwhile, he is attempting to renegotiate the UK's membership, so that he can then back a campaign to stay in the EU. He is now hopeful of securing a deal with the UK's European partners at EU summits in Feb-2016 or Mar-2016. This could pave the way for a referendum as soon as Jun-2016.
This Jan-2016 report considered the possible implications of a Brexit on the aviation industry in the UK and Europe, with a particular focus on airline traffic rights. Much will depend on how, and to what extent, a post-EU Britain chooses to replicate its existing access to the EU single market in aviation (and in other sectors). Suffice it to say - the situation is uncertain.
Air Malta: perennial loss-maker struggles with rising LCC competition. Alitalia considers investing.
On 27-Apr-2016, Alitalia signed an MoU with the Maltese government over the possible acquisition of up to 49% of Air Malta. The two airlines are linked through geographical proximity and by cultural and commercial ties between Malta and Italy. However, both are perennial loss-makers and Alitalia is focusing on its own turnaround eighteen months or so after receiving investment from Etihad. The Italian national airline will only proceed if it is confident that Air Malta can both complement its strategic development, yet not compromise its own restructuring programme.
Air Malta is now a Europe-only airline. Under its Nov-2015 three year plan, it is cutting overall capacity in 2016 and has discontinued its North Africa routes. Compared with 2013, when CAPA last analysed Air Malta in detail, its seat capacity this summer will be lower by 9% and it has reduced its fleet size by two, to eight aircraft. Air Malta's highly seasonal and strongly leisure-focused network is facing growing competition from LCCs. It has struggled to compete profitably with a short haul, non-premium, point-to-point product that has little with which to differentiate itself.
airberlin's 2015 losses highlighted its ongoing struggle to find a successful model. In 2012 airberlin received investment from Etihad (also entering into a close commercial partnership with it) and joined oneworld. These moves have brought it benefits in terms of traffic and revenue, but traffic and revenue continue to shrink and airberlin has remained loss-making.
Since 2011 airberlin has cut capacity heavily on the short/medium haul network (particularly in domestic markets). Short/medium haul still dominates airberlin's operation, but it is now growing its long haul network aggressively by adding capacity to North America and the Caribbean. Squeezed between lower-cost LCC competition on short/medium haul routes on the one hand, and legacy airlines with bigger long haul networks on the other, it is also now facing low cost long haul competition from Lufthansa's Eurowings.
On 31-May-2016 the Etihad Aviation Group CEO, James Hogan, said: “airberlin has faced greater challenges and has taken longer than we expected to reach sustainable profitability, but the underlying fundamentals of the business are trending in the right direction." Etihad's investment has been critical to airberlin's survival and the airline has, so far, remained committed to the relationship. However, there is only so much that Etihad can do from the outside. airberlin needs internal solutions.
Wizz Air: city pair overlap with Ryanair on one third of seats. Opportunities for both; CASK crucial
Wizz Air and Ryanair are Europe's two lowest cost airlines, and most profitable airlines by operating margin. Together with Pegasus they form a small group of European ultra-LCCs. Unlike Pegasus, whose business concentrates on Turkey-Europe and domestic Turkey, both Wizz Air and Ryanair have bases in several countries.
However, while Ryanair is Europe's largest airline by seats, with a pan-European network and 84 bases, Wizz Air focuses on the niche between Central/Eastern Europe and Western Europe. All of Wizz Air's 25 bases are in Central/Eastern Europe, where it is the largest airline and Ryanair is number two. This superiority in CEE is based on Wizz Air's greater share of capacity in most of the larger country markets in the region (but not Poland), while in fact Ryanair is bigger in more (mainly smaller) countries.
In Jul-2016 Wizz Air faces Ryanair competition on 14% of its city pairs, covering 30% of its seats. Moreover, Ryanair is expanding rapidly in CEE, with five new bases this winter, increasing this overlap to around one third of Wizz Air's capacity. For Ryanair, the overlap represents a higher proportion of its CEE capacity, but only a very small share of its total seat numbers.
Over 20 years the responses of Europe's big three legacy groups to the short/medium haul LCC revolution have all been through phases of denial, submission, retreat, and counter-attack.
Now all three now have a more clearly defined LCC strategy than in the past. IAG, with Vueling and Iberia Express, has the largest, most pan-European and most profitable LCC, helping the group to grow its short/medium haul traffic. The Lufthansa and Air France-KLM LCCs are more defensive, to preserve market share. Both have only recently started LCC bases outside their original home markets. Lufthansa (after a false start with high cost Germanwings, now transferring to Eurowings) has replaced mainline capacity with LCC capacity, route-for-route. Air France-KLM has grown Transavia while cutting mainline capacity, but without substitutions route-for-route.
Only Lufthansa has taken its LCC onto long haul routes, albeit on a limited scale. Facing the more complex challenges on long haul, all three are developing a growing range of partnerships with other airlines. They have also sought to improve labour productivity in their legacy network airlines, with varying degrees of success, but again led by IAG. A next step may even be to connect with their arch rivals.
The Aegean Airlines group suffered another fall in its operating result in 1Q2016, when winter losses widened. As is the case for almost every other European airline, it suffered a fall in unit revenue. However, whereas many others managed to lower unit costs at a faster rate, Aegean's cost efficiency gains were not enough to offset the RASK decline, in spite of lower fuel prices. This adverse RASK versus CASK trend seems to have established itself and Aegean has now had six successive quarters of contraction in its operating margin.
One of Aegean's biggest structural challenges is the high degree of seasonality in its business. The summer quarters, particularly 3Q, are much more significant than the winter to its capacity and traffic and must generate sufficient profits to offset winter losses. Moreover, the extent to which Aegean depends on a strong summer is growing.
By contrast with Aegean, ultra LCC Ryanair, which is the second largest airline in Greece, is now enjoying year-round profitability and margin expansion. Ryanair is matching Aegean's overall rate of growth in Greece and gaining market share in the domestic market. Aegean is unlikely to see an end to downward unit revenue any time soon.