30 May 2017

Ryanair’s Brexit worse-case scenario would hit travel distribution hard

Ryanair’s 2017 results prepare the ground for a post-Brexit headwind which could hit any airline operating between the UK and Europe – and by extension unsettling the entire distribution ecosystem including OTAs, metas, high street agents, TMCs and others.

It believes that if, as part of the Brexit negotiations, the UK does not agree to or is not invited to continue its participation in the current European Open Skies agreement, there is a “distinct possibility” that there will be no flights between the UK and Europe from March 2019, for an undefined period of time.

This would impact all airlines – not just Ryanair – which currently operate between the remaining EU nations and the UK. And with no flights operating between Europe and the UK, that means no flights for OTAs to sell, no flights for metas to compare, no flights to bundle with hotels, no flights to integrate into multi-modal trip planners.

The statement said:

“The UK has indicated that it does not wish to [remain in Open Skies] and until we get clarity over the final terms of the UK’s future trading relationship with the EU, there must be significant uncertainty over flights between the UK and the EU for a period of time from March 2019 onwards.”

In the scripted Q&A, CFO Neil Sorahan added:

“It looks likely that the UK will have to negotiate a bilateral [with the European Union] and the chances of that being in place by March 2019 remain questionable….So there is a chance there could be no flights for a period of days, weeks or months, we don’t actually know.”

Meanwhile, today’s financials show Ryanair carried more than 120 million passengers during the year to end-March17, ending up with a profit after tax of $1.3 billion.

The profit was up 6% on revenues up 2% at $6.6 billion. The 120 million passengers is a 13% increase on the previous year. Load factor was 94%.

Ancillary revenues accounted for $1.8 billion of the revenues, or 27% of the total, “driven by a solid performance in reserved seating, priority boarding, car hire and on-board sales offset by lower travel insurance and hotels penetration.” Ancillary revenue per passenger was up 1%.

The financials talk up the role of Ryanair Labs in the overall performance of the airline. The MyRyanair feature had 20 million members at the year-end, with the business expecting this to rise to 30 million within twelve months. Its app has been downloaded 20 million times.

The “Amazon of travel” initiative, part of the wider Always Getting Better approach, is also progressing. The clearest manifestation of the platform approach is the recent move by Air Europa to sell long-haul flights out of Madrid on the Ryanair website. Ryanair will start offering connecting flights to these routes within a few months.

Ryanair is preparing for the operational and financial uncertainty by pivoting its growth away from the UK during its 2017 and 2018 financial years, while still maintaining a positive guidance for 2018. It expects passenger numbers to reach 130 million and profit after tax to come in at between €1.4-$1.45 billion.

Click here for the results.

Related reading from Tnooz:

Ryanair taps into Madrid’s tech community (May17)
Ryanair firms up marketplace plans (April17)
Ryanair Holidays returns after finding new friendly web partners (Feb17)

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