European budget carriers: still making money

Amid all the gloom in the European airline sector right now, Ryanair’s increased first half profits published yesterday showed further signs that at least some of the region’s budget carriers are not only surviving, but seeing profit growth.

Ryanair increased first half net profits to €387 million from €225 million at the same stage last year, and while it expects to lose money over the second half of its financial year, is still targeting increased full-year profits net profits at the lower end of its €200 million to €300 million target range. This comes on top of Spanish budget carrier Vueling – recently merged with fellow Barcelona carrier Clickair – which has just announced a trebling of it third quarter operating profits to just under €70 million, while growing Scandinavian budget carrier Norwegian more than doubled its third quarter operating profit to NKr475 million ($85 million).

While Ryanair’s yields have been sharply hit by the recession – average fares down 17% in the first half and the carrier is projecting yields falling by up to 20% over the second half – its unit costs were down 27% in the first half driven by the sharp reduction in fuel costs (down from €422 million in the third quarter last year to €246 million this time around).

O'Leary.jpgA further sign of the carrier’s growth – the long-term future of which O’Leary has raised a question mark over in relation to his attempts to secure a new aircraft deal with Boeing – is shown by his belief it will shortly become the number one carrier in three of Europe’s most important markets. This he says is a result of the carrier’s own growth and the short-haul capacity cuts of major European carriers.

“We really are growing very rapidly in some of the big markets,” he says, in particularly of its position in the UK, Italy and Spain. “We will shortly be the number one airline in the UK, Italy and Spain,” he predicts.

Picture credit: Billypix 

 

 

 

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