Ryanair hammered by European Union
Jan 28th, 2004, 12:28 AM
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Ryanair hammered by European Union
Ryanair's subsidised landing arragement at Charleroi airport in Belgium has been branded illegal by the European Union. They pay only £100 to land a plane there instead of the official rate of £1000. They have also paid for other benefits at the airport such as crew training.
The EU has demanded that Ryaniar repay protions of the Charleroi arrangement which will be millions of Euros.
EasyJet does not rely on subsadies and so are unaffected.
The British press reckon that Ryanair will be forced to cut several routes including Montpellier, Dinard, Perpignan, Pau, Venice-Treviso, Malaga.
This explains why Ryanair are cheaper than the rest and why they are the most profit making airline in the world. It's also a shame as the out-of-the-way airports can actually be more convenient for holiday locations such as Dinard (Brittany), Nimes and La Rochelle.
The EU has demanded that Ryaniar repay protions of the Charleroi arrangement which will be millions of Euros.
EasyJet does not rely on subsadies and so are unaffected.
The British press reckon that Ryanair will be forced to cut several routes including Montpellier, Dinard, Perpignan, Pau, Venice-Treviso, Malaga.
This explains why Ryanair are cheaper than the rest and why they are the most profit making airline in the world. It's also a shame as the out-of-the-way airports can actually be more convenient for holiday locations such as Dinard (Brittany), Nimes and La Rochelle.
Jan 28th, 2004, 02:08 AM
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I'm no fan of Ryanair as the customer service attitude is terrible, they have engaged in some dodgy business practices (for a while, they ran a deceptive ad campaign comparing their lowest fares to Sabena's *business* class fares without any explanation of the class difference--Sabena filed suit and rightly so), and Charleroi is not really "Brussels South" no matter what Ryanair says, but I agree, it would be a great shame if service to many of these smaller, more convenient airports is going to be lost.
Jan 28th, 2004, 07:49 AM
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Ryanair's shares traded on the New York Stock Exchange today are selling off more than $13 a share. I wonder if the bloated national monopoly airlines are getting even with this price-cutting innovator. Hmmmmm.
Jan 28th, 2004, 08:19 AM
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No doubt this is much/most of the reason for the sell-off. Earnings for FY 03 are also out today - - http://www.ryanair.com/press/2004/ja...en-280104.html - - and despite the positive headlines...
"RYANAIR DELIVERS RECORD Q3 PROFITS,
TRAFFIC GROWS BY 54%, PROFITS RISE BY 10%"
...it is clear that their margins are down, and shrinking.
The market doesn't like realizing that a fairy tale cannot continue to become more fantastic forever.
In this lengthy statement, by the Ryanair CEO, I have excetpted a few negatives - - which is all investors are going to be thinking about - - and a positive comment for CONSUMERS...
... but the market cares not about a positive outlook for a company's customers. The market wants to hear about earnings growth, and Ryanair will be the whipping boy du jour because there will be no ACCELERATION in earnings growth for the foreseeeable future.
"Ryanair?s Chief Executive, Michael O?Leary said;
?We are very pleased with the strong growth in traffic.... The yield reduction of 11% - although greater than originally expected...
===============
investors don't care about what the rest of the sentence says...
===============
?Early indications for yields in our fourth quarter suggest a marked further reduction of between 25% to 30% due to...
===============
again, investors won't even read the rest of the sentence...
===============
?There is therefore considerable downward pressure on fares and yields as many of these loss making airlines try to ...
===============
And again...
===============
?Looking forward to the next fiscal year (04/05) it is impossible in the current climate to make accurate forecasts on fares and yields other than to state that Ryanair will always offer the lowest fares in all markets.
===================
Music to customers' ears, but investors tune out...
===================
?Even in the light of this revised profit guidance for the current year, Ryanair will continue...
===================
Doesn't matter what the rest of the sentence is... no more deadly words than "revised profit guidance"...
===================
None of this is anything more than my educated guess. I am not going to buy nor short RYAAY today, and would not suggest that your decision to do either be based on my _opinions_.
Best wishes,
Rex
"RYANAIR DELIVERS RECORD Q3 PROFITS,
TRAFFIC GROWS BY 54%, PROFITS RISE BY 10%"
...it is clear that their margins are down, and shrinking.
The market doesn't like realizing that a fairy tale cannot continue to become more fantastic forever.
In this lengthy statement, by the Ryanair CEO, I have excetpted a few negatives - - which is all investors are going to be thinking about - - and a positive comment for CONSUMERS...
... but the market cares not about a positive outlook for a company's customers. The market wants to hear about earnings growth, and Ryanair will be the whipping boy du jour because there will be no ACCELERATION in earnings growth for the foreseeeable future.
"Ryanair?s Chief Executive, Michael O?Leary said;
?We are very pleased with the strong growth in traffic.... The yield reduction of 11% - although greater than originally expected...
===============
investors don't care about what the rest of the sentence says...
===============
?Early indications for yields in our fourth quarter suggest a marked further reduction of between 25% to 30% due to...
===============
again, investors won't even read the rest of the sentence...
===============
?There is therefore considerable downward pressure on fares and yields as many of these loss making airlines try to ...
===============
And again...
===============
?Looking forward to the next fiscal year (04/05) it is impossible in the current climate to make accurate forecasts on fares and yields other than to state that Ryanair will always offer the lowest fares in all markets.
===================
Music to customers' ears, but investors tune out...
===================
?Even in the light of this revised profit guidance for the current year, Ryanair will continue...
===================
Doesn't matter what the rest of the sentence is... no more deadly words than "revised profit guidance"...
===================
None of this is anything more than my educated guess. I am not going to buy nor short RYAAY today, and would not suggest that your decision to do either be based on my _opinions_.
Best wishes,
Rex
Jan 28th, 2004, 10:17 AM
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I would hate to see Ryanair forced out of business but then again they should trade on a level playing field. If it were not for the budget airlines then I doubt I would have got return flights with British Airways to Marseille from Gatwick next August for £59.
I still prefer EasyJet to Ryanair though!
I still prefer EasyJet to Ryanair though!
Jan 28th, 2004, 10:28 AM
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What does this mean, a level playing field? Are other airlines with similar ability to bring in traffic not allowed to negotiate such low landing fees with these little airports - - when those litle airports had nothing to lose?
Do all airports charge identical landing fees in the US? I always assumed that the landing fees at BWI, Midway, Love Field, Islip, Ft Lauderdale, and many other examples are far less than Reagan/Dulles, O'Hare, DFW, LGA/JFK/EWR or Miami.
There is no government like "no government". The EU will regulate anything they can get their hands on, just like other "Federal" governments. They always do.
Do all airports charge identical landing fees in the US? I always assumed that the landing fees at BWI, Midway, Love Field, Islip, Ft Lauderdale, and many other examples are far less than Reagan/Dulles, O'Hare, DFW, LGA/JFK/EWR or Miami.
There is no government like "no government". The EU will regulate anything they can get their hands on, just like other "Federal" governments. They always do.
Jan 28th, 2004, 01:49 PM
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I agree that this is heavy handed regulation.
I believe the review was initiated after a law suit from the state monopoly Air France. They complained that Ryanair were paying lower fees to land at Strasbourg than Air France. The reason the fees were lower was that Ryanair were bringing in far more passengers than Air France, and so the local tourist board saw fit to subsidise the landing fees in order to bring in more tourists, thus helping all the local restaurants/hotels etc.
So the end result is that Ryanair drop Strasbourg and the tourist numbers drop. The only winner out of this is Air France and the other 'monopolists' who would rather like to hang on to their high fare, high margin regional routes.
As a European this really annoys me - but as the union is not very democratically accountable we do not have the normal option of voting the people responsible out.
For a really good example of bad EU regulation/law look no further than the recent CD-Wow stich up. CD Wow have for the last few years been selling CDs over the internet at around £2 below shop prices (£8.99 instead of £10.99) by air mailing them in from Hong Kong. (Gives you a clue as to how overpriced CDs are in the UK if its cheaper to fly them half way around the world than buy them in a local store). Even though these are genuine product from the major record companies they have taken CDWow to court as it is apparently illegal to import from outside the EU. Why ? What right do the EU have to tell me where I can buy my genuine goods ?
Anyway - Rant over.
Now where is the email address of my representative in the European Parliament ?
I believe the review was initiated after a law suit from the state monopoly Air France. They complained that Ryanair were paying lower fees to land at Strasbourg than Air France. The reason the fees were lower was that Ryanair were bringing in far more passengers than Air France, and so the local tourist board saw fit to subsidise the landing fees in order to bring in more tourists, thus helping all the local restaurants/hotels etc.
So the end result is that Ryanair drop Strasbourg and the tourist numbers drop. The only winner out of this is Air France and the other 'monopolists' who would rather like to hang on to their high fare, high margin regional routes.
As a European this really annoys me - but as the union is not very democratically accountable we do not have the normal option of voting the people responsible out.
For a really good example of bad EU regulation/law look no further than the recent CD-Wow stich up. CD Wow have for the last few years been selling CDs over the internet at around £2 below shop prices (£8.99 instead of £10.99) by air mailing them in from Hong Kong. (Gives you a clue as to how overpriced CDs are in the UK if its cheaper to fly them half way around the world than buy them in a local store). Even though these are genuine product from the major record companies they have taken CDWow to court as it is apparently illegal to import from outside the EU. Why ? What right do the EU have to tell me where I can buy my genuine goods ?
Anyway - Rant over.
Now where is the email address of my representative in the European Parliament ?
Jan 29th, 2004, 12:11 AM
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Sorry Rex. The "level paying field" was what the EU deemed that Ryanair were not abiding by, and I certainly agree with you - if they can negotiate it then do it. I have flown Ryanair several times (even though I still prefer EasyJet). No-one else will fly you straight into Brittany or Perpignan or Pau. I totally agree with StevePWales when he says that it's all about Air France's monopoly. Air France complained when BA were deemed to have had state assistance but it's ok for them.
Another good example of the British way of business is that the state utilities (gas, water and electricity) were privatised but British companies were not allowed to buy other companies. Now we have our utilities from Japanese, American, French and German companies!
If you want to see the difference a budget airline does then look no further than Cardiff-Wales Airport. I have taken the Cardiff Paris BA flight several times for business, with each flight costing in excess of £450 return (never mind the fact that I could fly to NYC twice for this price). When BMI Baby announced a deal with the airport, BA dropped their Paris service. You can now fly to Paris CDG from Cardiff for less than £50.
Another good example of the British way of business is that the state utilities (gas, water and electricity) were privatised but British companies were not allowed to buy other companies. Now we have our utilities from Japanese, American, French and German companies!
If you want to see the difference a budget airline does then look no further than Cardiff-Wales Airport. I have taken the Cardiff Paris BA flight several times for business, with each flight costing in excess of £450 return (never mind the fact that I could fly to NYC twice for this price). When BMI Baby announced a deal with the airport, BA dropped their Paris service. You can now fly to Paris CDG from Cardiff for less than £50.
Jan 29th, 2004, 01:32 AM
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One of the problems for the custumor is the total loss of the notion of a "reasonable price".
How much does a flight cost for the company, what are the landing fees per person costing,..., what is the occupancy factor in this price calculation, what is a justified profit in this branch.
This doesn't mean we had this notion when there were only 'national' companies on the market. 450£ for a return flight Cardiff-Paris is not a reasonable price, just as a Stansted- Venice at 17£ isn't either a reasonable price.
How much does a flight cost for the company, what are the landing fees per person costing,..., what is the occupancy factor in this price calculation, what is a justified profit in this branch.
This doesn't mean we had this notion when there were only 'national' companies on the market. 450£ for a return flight Cardiff-Paris is not a reasonable price, just as a Stansted- Venice at 17£ isn't either a reasonable price.
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