What’s next for Ryanair?
Ryanair’s bid for Aer Lingus has been blocked again. Frost & Sullivan’s Lida Mantzavinou thinks it’s time for Michael O’Leary to give up and find other ways to grow.
"Ryanair has been consistently reporting substantial net profits year on year (in exception of 2008) and we estimate that the airline is set to report a 5% increase in profit after tax in its full year results in March 2013, in comparison to last year.
Ryanair finds short term solutions to grow. However, the low cost carrier faces difficulties in growing in the long term. Ryanair’s growth is being constrained primarily by the EU’s denial to approve the Aer Lingus take-over (e.g. in 2006/2007, in 2009 and in 2013) that would allow the carrier to expand its fleet, overcoming the lack of new aircraft deliveries that has been already constraining its growth, and benefit from economies of scale, that would further reduce its unit cost and increase revenues.
As more consolidation is expected to take place in the next two years and once airline groups see benefits from their restructuring programmes, expected in 2014, competition in the short haul market will intensify, pushing average fares downwards. Ryanair in the short term should seek to grow inorganically through other acquisitions benefiting from the fact that European airlines are currently valued below net asset value (NAV).
Aer Lingus, on the other hand, has successfully marketed itself in the market in order to attract other potential buyers. Aer Lingus has managed to generate net profits in the last three years (2010-2012), expanded its code share partnerships, e.g. Jet Blue expected in April, added frequencies to US and expanded network and is still marginally valued below net asset value (NAV). The company is an attractive target for carriers that are eager to have a foothold in the European market and feeding traffic back to Asia through the Middle East, such as Etihad."
Lida Mantzavinou is a consultant for Frost & Sullivan Aerospace, Defence & Security group at Frost & Sullivan, global consultancy.
Bev
Editor in chief Bev Fearis has been a travel journalist for 25 years. She started her career at Travel Weekly, where she became deputy news editor, before joining Business Traveller as deputy editor and launching the magazine’s website. She has also written travel features, news and expert comment for the Guardian, Observer, Times, Telegraph, Boundless and other consumer titles and was named one of the top 50 UK travel journalists by the Press Gazette.
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