Luggage charge bags record profit for Ryanair

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Record profits thanks to baggage charges

The controversial Ryanair baggage charges - which can add up to 25 per cent to its average fare - are helping Europe's biggest budget airline to post record profits, it has emerged.

Ryanair admitted it is this winter ringing up profits far higher than it dared believe possible, helped by passengers' unwillingness to be restricted to baggage weighing 10kg or less.

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Those better-than-expected earnings are seeing Ryanair profits top £660,000 a day for the first time.

The airline said its yields - the amount of money it makes per passenger - were up seven per cent in the Christmas trading quarter, a traditionally tough time for airlines when they have had to cut fares to sustain demand.

That in turn has led to a 30 per cent increase in profits in the three months to the end of December, and has led to chief executive Michael O'Leary ripping up his previous profit guidance for the full trading year to the end of March.

Of the Christmas trading quarter, he said Ryanair had been able to lift its prices because of rising prices at other airlines, which have been imposing fuel surcharges on passengers.

"Scheduled revenues rose by 28 per cent thanks to 19 per cent growth in traffic and a better than forecast seven per cent rise in average yields," he said.

"The rise in yields largely reflects the impact of competitors' excessive and unjustified fuel surcharges as well as revenues from checked baggage charges, which were introduced in March 2006."

Mr O'Leary's deputy, Michael Cawley, denied the baggage charges were catching out passengers.

"People are very much aware of our charges after our huge campaign to get people to reduce the amount of baggage they are taking," he said.

"People are not being caught out. The evidence is that people are paying ahead of time online. This is not the same as the fuel surcharges at other airlines.

"This is an optional charge as part of our campaign to persuade people that they do not need to take the kitchen sink with them."

O'Leary shrugged off the effect of Chancellor Gordon's Brown's doubling of airline passenger duty to £10, which Ryanair has campaigned against on the basis that it puts another 35 per cent on its average fare of £28 one way.

He said current forward bookings, just as the new tax is implemented, indicate passenger growth of 25 per cent this year.

"This exceptional 30 per cent growth in third-quarter profits during a period of higher oil prices and intense competition demonstrates the robustness of Ryanair's lowest fare model," he added.

 

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