Ryanair struggles to fill seats
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You're right, the 2 versions are very very similar. So similar in fact that they have near enough identical fuel burn. This means that on an 800 there is 40% more capacity at nearly the same operating cost. Thus, it doesn't make sense to swap to the 700's.
Flying Irishman:
You're absolutely right, of course, that most costs for the -700 and -800 should be be pretty much the same. So the opposite question is why would any LCC (including Southwest) want to bother with the -700 then, which so many do ? There must be some reasoning there.
And why is the -600 such a sales flop when the same-sized -500 did very well and is still popular secondhand, even among LCCs
You're absolutely right, of course, that most costs for the -700 and -800 should be be pretty much the same. So the opposite question is why would any LCC (including Southwest) want to bother with the -700 then, which so many do ? There must be some reasoning there.
And why is the -600 such a sales flop when the same-sized -500 did very well and is still popular secondhand, even among LCCs
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Typical single class -600 132 seats; -700 149 seats; -800 189 seats according to BCAC website.
Both 600 and 700 require 3 cabin crew; 800 requires 4. Manpower costs are one of the most significant factors. No cost advantage for 700-600 from a manpower POV; cost advantage 800-700 - especially if you don't think you are going to actually sell those 40 seats.
Both 600 and 700 require 3 cabin crew; 800 requires 4. Manpower costs are one of the most significant factors. No cost advantage for 700-600 from a manpower POV; cost advantage 800-700 - especially if you don't think you are going to actually sell those 40 seats.
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As regards the -600, the difference with the -500 is that they are used, not new and are a bit cheaper (especially with airlines getting shot of them like EI for buses). New customers are liking the look of EMBs rather than 736s, just as with A318s for that matter.
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Few points.
1. With huge expansion comes maturity. Even allowing for a small (even in loco terms) maturity discount of 10% FR must still be ahead.
2. The wheelchair issue were it to effect them will not impact until March results - allowing for forward bookings. My own opinion is public perception is not that fickle, yesterday's news.
3. I'm surprised that the choice between a 700 and 800 has entered this forum. The difference in operating costs between both is neglible. Add up the daily sectors, multilply by 40 seats multiply by 364. Even if you don't fill them (and they will) at least you have room for expansion through marketing, without additional capital costs.
For what it's worth!
1. With huge expansion comes maturity. Even allowing for a small (even in loco terms) maturity discount of 10% FR must still be ahead.
2. The wheelchair issue were it to effect them will not impact until March results - allowing for forward bookings. My own opinion is public perception is not that fickle, yesterday's news.
3. I'm surprised that the choice between a 700 and 800 has entered this forum. The difference in operating costs between both is neglible. Add up the daily sectors, multilply by 40 seats multiply by 364. Even if you don't fill them (and they will) at least you have room for expansion through marketing, without additional capital costs.
For what it's worth!
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Let's do some math!
runawayedge is perfectly right!
Let's do some math, now:
40 seats, 6 sectors a day, 365 day in a year = over 87.000 additional pax
let's assume that FR is earning 1.50 euro for each booking made with a credit card ( you for sure will not believe that FR is incurring a total cost per transaction higher than 1.00 euro, isn't it?), therefore 87.000 times 1.50 makes over 130.000 euro straight down to the bottom line of their profit and loss account per aircraft!
let'assume now that these 87.000 pax will spend on board on average 0.80 euro, that is an additional 70.000 euro to the bottom line ...
so 200K euro of additional profit without incurring in any significant additional costs, times xx 738 they have in the fleet ...
and it might also be than 10K of these pax are booking a car with Hertz, and Hertz is paying FR - say - a 5.00 euro commission, that is an additional 50K euro to the bottom line, always per aircraft of course, etc., etc., you can spote other sources of income.
I agree, FR is expanding fast, it might be too fast. They must be very careful, other travel opportunities are emerging and the concepts of TTC - Total Travel Cost and TTT - Total Travel Time are becoming pretty well known.
Furthermore customers in the continental Europe are different than those in the UK or Ireland, let's say they are less "tolerant" (e.g. the checked baggage allowance of only 15kg per person is too tight, as well as the fact that only one small piece of hand baggage weighing not more than 7kg and being less than 50cm x 35cm x 23 cm in dimensions is allowed in the cabin, that equals to have no trolleys in the cabin, so a businessman will try to avoid FR!) and more "sensitive" to several other issues.
FR sould be very aware that pricing is not the only important item when a flight is booked, passengers are actually looking value for money.
One final comment on load factor ("LF"). In principle to have a low or a high LF is irrelevant. What is really important is to have the right yield per passenger, which means that a LF of just 1% with a terrific yield can produce exactly the same number for your bottom line as a 90% LF with a very, very small yield. The real problem is to get that number, i.e. to have the right yield.
I hope tha MOL & Co. will be able to manage their growth (yield).
Let's do some math, now:
40 seats, 6 sectors a day, 365 day in a year = over 87.000 additional pax
let's assume that FR is earning 1.50 euro for each booking made with a credit card ( you for sure will not believe that FR is incurring a total cost per transaction higher than 1.00 euro, isn't it?), therefore 87.000 times 1.50 makes over 130.000 euro straight down to the bottom line of their profit and loss account per aircraft!
let'assume now that these 87.000 pax will spend on board on average 0.80 euro, that is an additional 70.000 euro to the bottom line ...
so 200K euro of additional profit without incurring in any significant additional costs, times xx 738 they have in the fleet ...
and it might also be than 10K of these pax are booking a car with Hertz, and Hertz is paying FR - say - a 5.00 euro commission, that is an additional 50K euro to the bottom line, always per aircraft of course, etc., etc., you can spote other sources of income.
I agree, FR is expanding fast, it might be too fast. They must be very careful, other travel opportunities are emerging and the concepts of TTC - Total Travel Cost and TTT - Total Travel Time are becoming pretty well known.
Furthermore customers in the continental Europe are different than those in the UK or Ireland, let's say they are less "tolerant" (e.g. the checked baggage allowance of only 15kg per person is too tight, as well as the fact that only one small piece of hand baggage weighing not more than 7kg and being less than 50cm x 35cm x 23 cm in dimensions is allowed in the cabin, that equals to have no trolleys in the cabin, so a businessman will try to avoid FR!) and more "sensitive" to several other issues.
FR sould be very aware that pricing is not the only important item when a flight is booked, passengers are actually looking value for money.
One final comment on load factor ("LF"). In principle to have a low or a high LF is irrelevant. What is really important is to have the right yield per passenger, which means that a LF of just 1% with a terrific yield can produce exactly the same number for your bottom line as a 90% LF with a very, very small yield. The real problem is to get that number, i.e. to have the right yield.
I hope tha MOL & Co. will be able to manage their growth (yield).
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Your maths is flawed. They may not be able to get 40 extra pax per flight; although the specific fuel burn is right, 40 pax weigh 4 tonnes, which does represent an additional cost overhead (15 kg/hr - perhaps 100 kg/day - plus the extra ZFW - again not much, but the benefits you sketched out were pretty marginal). And having an extra crew member per aircraft (as they would have to on a UK AOC - dunno about Irish) would also cost. Also, aircraft don't do 365 days flying a year (though there is probably only 10 days downtime, at a guess, so not a huge cost). Also, pax don't all use credit cards - and given that supermarkets pay 2.5% costs for credit card transactions, it wouldn't surprise me if £2.50 is closer to an accurate figure for how much FR have to spend on a credit card transaction. Basically, it is too simplistic - that's how bad business plans are made.
Last edited by Young Paul; 11th Mar 2004 at 00:56.
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I know this is very likely to be a crazy, crazy idea - but if FR are receiving so many new 737s this year and if they are caught for not being able to dream up loads of new routes around Europe with them why not try flights from the UK/Ireland to somewhere like Orlando with a fuel stop in either Gander, St Johns or even Bangor, Maine? Or somewhere in the opposite direction to the Orient? Dont shoot me, just a crazy suggestion!
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You are right Tom a crazy idea.
RYR's business model is running as many short sectors per day as possible. People will pay 20 to 50 pounds for a flight of only 300 to 400 miles but they won't pay 200 to 500 for a flight of 3000 miles. Add in all the extra costs of crewing and night stopping and you are in a no win situation.
The win every time they turn round the aircraft in 25 minutes and get an extra rotation in per day by comparison to those airline shwich still schedule 50 - 60 minute turn rounds. An extra return flight with money straight on the bottom line.
RYR's business model is running as many short sectors per day as possible. People will pay 20 to 50 pounds for a flight of only 300 to 400 miles but they won't pay 200 to 500 for a flight of 3000 miles. Add in all the extra costs of crewing and night stopping and you are in a no win situation.
The win every time they turn round the aircraft in 25 minutes and get an extra rotation in per day by comparison to those airline shwich still schedule 50 - 60 minute turn rounds. An extra return flight with money straight on the bottom line.
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Maths
Young Paul
I did'n want anybody to assume that my maths were perfect!
That was only; I believe, a good example of what FR is able to squeeze out of 40 additional pax, not to mention that FR is normally getting - lets' say - a "donation" either by the (small) airport authority or by the local Tourism Authority for EACH arriving passenger, provided that a minimum agreed number of arriving pax is reached over a set period of time.
As far as credit card charges are concerned the so called commission or handling or etc. fee of 2.5% you mentioned is right and true (and even too low) for a small retailer shop only.
But, actually, this is the "window" fee, the published one.
Medium-Large shops have a decreasing fee related to the amount of purchases funneld through the card system, and quite often it goes well below 1%.
Big shops or chains (i.e. Harrods, Boots, Safeway, etc. and of course FR) are able to negotiate a "flat" fee contract, again quite often on a decreasing basis: more you do with the credit cards, less you pay.
Would you imagine, for instance, Safeway to give away 2.5% of their profit to make happy the greedy Visa, Mastercard & Co.?
No, isn't it?
I also remember that last year FR dropped Amexco, the most expensive one, possibly beacuse they refused to move to a flat fee system or even to a decreasing flat fee contrac.
As far as the extra crew member is concerned, I am not to familiar with UK and/or Irish AOC. What I can tell you is that it seems that FR is having 1 cabin crew every 50 pax on board, and operating a point to point system and knowing in advance how many pax are on board of the two legs, they either can drop a crew member or take on board an extra one. And if they take on board an extra one because there are 152 pax, they will try to do their best to take on board 47 more pax, it might be at only 0.01 euro plus taxes, but they will get some extra money rolling in! (I do rember a BGY-NYO flt with only 3 cabin crew last January).
In conclusion, I just wanted to explain, to give an idea on how very small things are so important for a LCC to become successful (and forgiven by the major).
I did'n want anybody to assume that my maths were perfect!
That was only; I believe, a good example of what FR is able to squeeze out of 40 additional pax, not to mention that FR is normally getting - lets' say - a "donation" either by the (small) airport authority or by the local Tourism Authority for EACH arriving passenger, provided that a minimum agreed number of arriving pax is reached over a set period of time.
As far as credit card charges are concerned the so called commission or handling or etc. fee of 2.5% you mentioned is right and true (and even too low) for a small retailer shop only.
But, actually, this is the "window" fee, the published one.
Medium-Large shops have a decreasing fee related to the amount of purchases funneld through the card system, and quite often it goes well below 1%.
Big shops or chains (i.e. Harrods, Boots, Safeway, etc. and of course FR) are able to negotiate a "flat" fee contract, again quite often on a decreasing basis: more you do with the credit cards, less you pay.
Would you imagine, for instance, Safeway to give away 2.5% of their profit to make happy the greedy Visa, Mastercard & Co.?
No, isn't it?
I also remember that last year FR dropped Amexco, the most expensive one, possibly beacuse they refused to move to a flat fee system or even to a decreasing flat fee contrac.
As far as the extra crew member is concerned, I am not to familiar with UK and/or Irish AOC. What I can tell you is that it seems that FR is having 1 cabin crew every 50 pax on board, and operating a point to point system and knowing in advance how many pax are on board of the two legs, they either can drop a crew member or take on board an extra one. And if they take on board an extra one because there are 152 pax, they will try to do their best to take on board 47 more pax, it might be at only 0.01 euro plus taxes, but they will get some extra money rolling in! (I do rember a BGY-NYO flt with only 3 cabin crew last January).
In conclusion, I just wanted to explain, to give an idea on how very small things are so important for a LCC to become successful (and forgiven by the major).
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I thought the 2.5% flat fee was a VAT avoidance mechanism. i.e. customer buys £100 of goods, Tesco, Asda or whoever, bills for £97.50 including VAT and the £2.50 is billed via Supermarket Card Processing Ltd who don't pay VAT as it isn't applicable to such fees.
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The required number of cabin crew is one per 50 SEATS, whether or not these are occupied - therefore a 737-800 with only 150 pax on board still requires 4 Cabin Crew. Imagine what would happen if a 737-800 left, say DUB with only 3 Cabin Crew and ended up with 50 extra pax turning up at, say, BVA at the last minute (cut-out time 40 minutes before STD); FR would have to deny them travel on flight safety grounds even though there would be empty seats onboard...
Cheers
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Can anybody explain why EZY opted for the 700 if the difference between that and the larger aircraft is negligble. how much further is the range typically on the 700 over the 800?.
I would like to add that wether you love or hate Ryanair they have done an excellent job in bringing indirect jobs to all of these out of the way airports creating excellent oppurtunities for people to get into this beloved industry.
Prestwick is a shining example of how an airport can be turned around from having zero passengers in the early nineties to around 2 million now. Although Ryanair is the main airline at the airport it has also brought in other airlines and this has created probally thousands of jobs in a big unemployment blackspot.
It is not alone in the UK of areas that have been bypassed for development because of the near monopoly of certain airport operators.
I would like to add that wether you love or hate Ryanair they have done an excellent job in bringing indirect jobs to all of these out of the way airports creating excellent oppurtunities for people to get into this beloved industry.
Prestwick is a shining example of how an airport can be turned around from having zero passengers in the early nineties to around 2 million now. Although Ryanair is the main airline at the airport it has also brought in other airlines and this has created probally thousands of jobs in a big unemployment blackspot.
It is not alone in the UK of areas that have been bypassed for development because of the near monopoly of certain airport operators.
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Quote:
... by the way, Ryanair is expecting delivery of 30 B737-800's this year. Enevitably load factors in the 80-90% range are going to be difficult to maintain over the next 12-18 months...
Not quite accurate, it was due to be 29, 6 replacing older 200's and 23 net additions, now I believe 5 of the 23 net additions are to be deferred.
Some excellent opinions, I would not be to worried at either of the two main Lo-Co's in question for the immediate future, May the 1st is a breath away and both will be blitzkrieg-ing their way into the new markets generated by the introduction of our new EU cousins in eastern europe.
Both are still going all out for capacity growth, but saturation and consolodation will occur at some point, if one of them doesn't go pop.
As stated by the wise and the learned the load factor really is a red herring when compared to aircraft sizes operated and break even costs. FR is has the lowest cost base of any Airline in Europe and is currently the richest Airline in the world by all important profit margin so I wouldn't be overly concerned at the original article on load factor.
I have a friend who was a high ranking former member of Air Europe (international leisure group) who continully sites the apparent similarities of them with the Orange team, popular public perception, moving to swanky offices, premuim airports/charges, veering away a bit at a time from their original business model, two aircraft types. He says everything looked rosy for the future at Air Europe........ the day before the shock announcement that they were no more...
One thing that does seem apparent to me is that both Ezy and FR rely heavily on UK-Irish bookings, since the Lo-Co boom in the 90's the economic climate in UK-Ireland has been reasonably bouyant, low interest rates and the like, neither have known a recession. If that occured and John Leisure traveller is skint then surely, as with BA post 9-11, the cost base becomes all important and break even load factor even more so. Ryan seem to be a step ahead in the current favourable market, my guess is they would be more so in a depressed market?
Only time will tell
... by the way, Ryanair is expecting delivery of 30 B737-800's this year. Enevitably load factors in the 80-90% range are going to be difficult to maintain over the next 12-18 months...
Not quite accurate, it was due to be 29, 6 replacing older 200's and 23 net additions, now I believe 5 of the 23 net additions are to be deferred.
Some excellent opinions, I would not be to worried at either of the two main Lo-Co's in question for the immediate future, May the 1st is a breath away and both will be blitzkrieg-ing their way into the new markets generated by the introduction of our new EU cousins in eastern europe.
Both are still going all out for capacity growth, but saturation and consolodation will occur at some point, if one of them doesn't go pop.
As stated by the wise and the learned the load factor really is a red herring when compared to aircraft sizes operated and break even costs. FR is has the lowest cost base of any Airline in Europe and is currently the richest Airline in the world by all important profit margin so I wouldn't be overly concerned at the original article on load factor.
I have a friend who was a high ranking former member of Air Europe (international leisure group) who continully sites the apparent similarities of them with the Orange team, popular public perception, moving to swanky offices, premuim airports/charges, veering away a bit at a time from their original business model, two aircraft types. He says everything looked rosy for the future at Air Europe........ the day before the shock announcement that they were no more...
One thing that does seem apparent to me is that both Ezy and FR rely heavily on UK-Irish bookings, since the Lo-Co boom in the 90's the economic climate in UK-Ireland has been reasonably bouyant, low interest rates and the like, neither have known a recession. If that occured and John Leisure traveller is skint then surely, as with BA post 9-11, the cost base becomes all important and break even load factor even more so. Ryan seem to be a step ahead in the current favourable market, my guess is they would be more so in a depressed market?
Only time will tell
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Ryanair are not defering any aircraft for the coming year. In RYR terms, a year starts on 1 April and ends on 31 March. Various people quote different numbers, but if you include the aircraft that have arrived since January then the number 35 will be reached. The 200s are back flying again, and they will be flying until they need a C or D check, or when they become to expensive to keep flying. RYR has been rethinking its market strategy and its route structure, and it is my understanding that they will be concentrating more towards the south and definetely more bases in the UK. Cost wise they are the cheapest in Europe but competition is rising and in many ways we are becoming a victim of our own success. We used to be the small guy attacking the big guys, well now we are one of the big guys and the small guys are eating into our markets.
JP
By the way, all 800s fly with four cabin crew and not three as some people have indicated. With the variable weight schedule boeing offers on the NG one can keep costs down regarding landing, parking, and overflying fees
JP
By the way, all 800s fly with four cabin crew and not three as some people have indicated. With the variable weight schedule boeing offers on the NG one can keep costs down regarding landing, parking, and overflying fees
