Falling Profits Are Forcing Ryanair to Stop Being Such a Cheapskate
What happens to a no-frills airline when it’s forced to add frills? We are about to find out, after Ryanair today announced its second profit warning in as many months.
Since the low-cost airline’s first warning, in September, it has been on something of a charm offensive, softening or reversing many of the sharper practices that earned it a reputation for deficient—if not openly hostile—customer service. Baggage, check-in and ticket-change fees were reduced, weight and size restrictions relaxed, and the airline's website streamlined to make it more user-friendly. Today, Ryanair announced it was adding yet another perk to its service: fee-free assigned seating for all passengers, ending the mad scramble that marks the boarding process on many of its flights.
In September, Ryanair launched a price war in response to the weaker conditions it expected. Continued "fare and yield softness," in the company's words, are behind its latest stumble. Chief executive Michael O’Leary cited "an amalgam of excuses" for the profit warning on a conference call with analysts, from unusually warm weather to exchange rates and general economic weakness.
Ryanair remains Europe's largest airline by passengers, which proves that people are willing to put up with a certain amount of indignity to save money. The airline says that fares will fall by 9 to 10 percent over the next six months, further enticing travelers. But it is telling that the perks Ryanair once considered frivolous are now part of its service, a signal that low fares alone will not fuel its future growth. O’Leary admitted as much on the conference call: "If we’re going to win the next 20 million or 30 million customers away from the easyJets, the BAs, the Lufthansas, we need to eliminate some of this negative chat."
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