on July 20 | in All, Opinion | by Guilherme Neto | with 1 Comment

As many people already know by now, Ryanair is a low-cost business model airline that operates mainly in Europe. The company is based on Ireland and currently connects over than 30 countries in both Europe and the North Africa. In times where traveling through the so called “normal” airlines continues being very expensive, budget fares are seen by many as the only opportunity to finally go after those much deserved vacations far away from home that have been popping into dreams for so long, or to simply visit a country miles distant from their starting point.

Ryanair has been making those dreams possible for quite a few people over the past years and over the last 12-months, reports indicate that they have already carried 81.5 million people. The company even reviewed their targets in the beginning of 2013 and announced that they expect to “give a ride” to an average of roughly 110 million per year, until 2018. The previous target had been set at 100 million people, which clearly suggests that the Irish airline is committed at expanding their reach in the near future.

In order to connect Europe with the United States, Ryanair‘s CEO Michael O’Leary has stated that the company firstly needs to invest and buy a reasonable big fleet of airplanes, as well as to guarantee access to several key cities in Europe and in the US. In a talk to Reuters last June, O’Leary admitted that without at least nearly 30 twin-aisle aircraft, it won’t be possible to follow through with these plans. He also remarked that this project of linking Europe to America would necessarily result into being a different business model, completely independent from the one that is already established in Europe. However, that doesn’t appear to mean that ticket prices would be much different from the ones we see being charged in the “Old Continent”, at least not by judging the promise made by Ryanair‘s CEO, consisting of selling trans-Atlantic flight tickets as cheap as €10. That’s basically the sort of price range you can find these days on a Ryanair flight that connects Porto to Madrid (on a distance of around 425km).

Looking at the Irish company’s performance on the stock markets, everything seems to be working out smoothly for those who have decided to put their money and bets on them a long time ago. Ryanair‘s shares have gone up on a steady rate for the past 12 months, resulting in an impressive 85.75% appreciation over those months. If we narrow the period under analysis to a YTD (Year-To-Date) scope, we get to see a 55.37% stocks rise, which is definitely very encouraging for any investor still interested in making a move, especially after Michael O’Leary having stated that the company is planning to return close to 1.3 billion USD over the next two years, through a mix of share buybacks and special dividends payments.

The most skeptical ones will never believe in the sustainability of a low-cost business model that plans to European cities to North America or Brazil, at least not until they see the plans in action. The reasons behind such skepticism start off by being based in history, as there were already a couple of airlines attempting to offer low price fares for flights between London and New York city for example. It happened in the late 1970’s and the company’s name was “Laker Airways“. Maybe not surprinsingly, that company went bankrupt in 1982… Therefore, the question emerging from all this resides on the doubts about Ryanair being capable of offering these long-haul low cost flights in an economically viable manner. How is O’Leary going to be able to keep the prices in those low range parameters, at the same time that the costs with fuel for example will go sky high? Only time will tell…

 

 

 

Sources: wikipedia.com / yahoo.finance.com / telegraph.co.uk / ibtimes.com / reuters.com

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