Ryanair, Europe’s largest low-cost airline, has made an amazing quick start after the end of the corona pandemic and is expanding market share. In the 2023 financial year, which ended on March 31, Ryanair flew with 16 percent more capacity than before the crisis.
The good mood at the low-cost airline is only dampened by the fact that up to ten scheduled aircraft are missing in the main travel months of June and July because the aircraft manufacturer Boeing is having serious production problems. Recently, a large supplier was sloppy when assembling a component, and it has to be reworked. As that takes time, Ryanair will have to improvise in the short term, and the airline will likely just miss its target of flying 185 million passengers this fiscal year.
Ryanair boss Michael O’Leary.
(Photo: Evelyn Hockstein/Reuters)
Ryanair is benefiting from a risky bet from the early phase of the pandemic: CEO Michael O’Leary and his people, above all airline manager Eddie Wilson, speculated that demand would return quickly once travel restrictions were lifted. They kept the fleet and staff with whom they signed a contingency agreement more or less fully operational. Due to high profits in previous years, Ryanair could afford that, at least for a while. The calculation worked: after a loss of 355 million euros in the 2022 financial year, there was now a profit of 1.45 billion euros. Revenue rose from 4.8 to 10.8 billion euros, and the number of passengers rose from 97 to 168 million. Ryanair has now ended the crisis agreement, which included a wage cut, two years ahead of schedule.
With a fleet of 537 aircraft (as of the end of March), Ryanair is by far the largest low-cost airline in Europe. In Italy, where Lufthansa is currently attempting to buy ITA Airways, which is suffering the worst, Ryanair has increased its market share from 29 to 40 percent, in Poland from 26 to 36 percent and in Ireland from 49 to 58 percent.
Ryanair was also right to focus on holiday destinations after the pandemic. Because demand for private travel recovered much faster than that for business customers, which is still well below the level of 2019. Ryanair’s main competitor in the segment is Wizz Air, which has similar low costs but is geographically positioned slightly differently, with the focus of its route network in Central and Eastern Europe. Wizz Air also has a base outside of Europe in Abu Dhabi, a move Ryanair has so far shied away from. Easyjet has focused more on city connections, major airports and business travelers in recent years, so it operates at significantly higher costs and cannot benefit to the same extent from the early boom in leisure flights. This applies even less to classic hub operators such as Lufthansa, which have still not reached the old level.
Difficult market in Germany
Ryanair sees “enormous growth opportunities” for the next few years. The cost benefits would only be greater, the fuel hedging works because the timing was right, and the airline ordered aircraft on favorable terms. Boeing will deliver 110 more in the next three years 737-8200 designed to be part growth and part replacement. From 2025 onwards, Ryanair has planned a delivery break and should make even higher profits in the absence of investment constraints. In 2027, the first of up to 300 more Boeing jets that the airline recently ordered will arrive. Threatening for the competition: The new machines now have 228 seats instead of the old 197 – so Ryanair can bring even more capacity to the market.
However, Germany is one of the few markets in Europe where Ryanair is still struggling. Calculated according to seat kilometers offered, the airline is only number five in this country – it is smaller than Condor and only slightly larger than Sun Express. Lufthansa’s low-cost offshoot Eurowings is a third larger, despite much higher costs and a lack of profits in the German market so far. Lufthansa itself is more than six times larger.
There are several reasons for the weakness: Lufthansa is willing to strategically use Eurowings as a weapon against low-cost airlines, even if this means losses. When Ryanair opened a base at Frankfurt Airport, Lufthansa countered with cheap fares on the same routes until O’Leary got the message. The base no longer exists. But the comparatively high costs of the airports also deter low-cost providers. Not only Ryanair: Easyjet has long since evaporated the base in the capital taken over by Air Berlin, and Wizz Air only flies sporadically to Germany.