As it cuts its profit forecast, has the success of Ryanair’s “no frills” business model peaked?

YES

Ryanair looks set to record its fifth consecutive month of share price declines, and has seen a fall of over 28 per cent since July. The concept of low-cost flights, of which Ryanair was one of the first adopters, has to a degree been cannibalised by other airlines, making competition fiercer than ever. When you have the likes of Aer Lingus and easyJet all vying for the same business, it’s not difficult to see where the profit is flowing. The notion of allowing passengers to bring more than one bag on board, along with allocated seating, indicates that Ryanair is no longer the pioneer of the discount airline rules – rather it is backtracking in an effort to be more like its rivals. Mild attempts have been made to address the poor image and reputation garnered by the airline in recent years. But regaining lost customers is a difficult task, and the uphill battle the airline will face is likely to be reflected in the share price in the near term. We won’t be hearing fanfares anytime soon. Brenda Kelly is senior market analyst at IG.


No

Since Ryanair was founded in 1985, the budget airline’s operations have mushroomed and it now provides flights to 830 routes in Europe and North Africa. Its growth and development have been masterminded by the ebullient and arrogantly innovative Michael O’Leary. But Ryanair’s share price has long been based on expectations, with losses being posted with monotonous regularity. Yesterday’s figures reduced the profit forecast for the year to £500m and triggered a significant drop in its share price. However, despite introducing gargantuan passenger charges, O’Leary has built a plausible business model. Already, Ryanair is on the charm offensive – listening to customers and introducing allocated seating. He may have failed in his attempt to buy Aer Lingus to boost his embryonic trans-Atlantic operation, but today’s profits warning is no more than a spot of temporary turbulence. David Buik is a market commentator at Panmure Gordon.