Ryanair credits marketing investment for boost to passenger numbers

Ryanair blamed lower fares and increased competition for its first Q3 loss since 2010 but says forward bookings for the fourth quarter and full year are running “significantly” ahead of last year after recent increases in marketing spend.

Video: Ryanair’s ‘We are Changing’ Irish TV ad

https://www.youtube.com/watch?v=QjfmjznXksU

The airline made a loss after tax of €35.2m for the three months to the end of December, compared to a profit of €18.1m in the same period a year ago. Revenues were flat at €964m.

Ryanair said passenger numbers were up 6 per cent year on year but seat promotions caused average fares to drop 9 per cent compared to a year ago. “Ancillary” revenues, which includes bag fees, priority boarding and credit card fees, were up 13 per cent.

Ryanair CEO Michael O’Leary says: “We responded to this weaker pricing environment last September with seat promotion and lower fares which stimulated traffic across all markets.”

Ryanair actually cut marketing spend in the quarter, with “marketing, distribution and other” expenses down to €147.4m, from €160.6m a year ago. Ryanair put this down to reduced marketing spend per passenger, although does say that it has increased advertising and marketing spend “recently”.

This includes a campaign launched in January with the strapline “We’re changing”, which has appeared in print and outdoor, as well as in a TV ad campaign in Ireland. Ryanair has also recently appointed its first marketing director in Kenny Jacobs, who joined the airline from MoneySupermarket.

Ryanair says this increased investment in marketing has helped to boost forward bookings for the fourth quarter and full-year, which are now running “significantly” ahead of last year.

Ryanair is facing growing competition from low cost rivals including easyJet, which it has previously admitted “wiped the floor with us” by introducing customer service improvements earlier. The airline launched a series of initiatives in the quarter aimed at improving customer experience, including a 24-hour grace period to correct minor booking errors, reduced airport and bag fees, a free small second carry-on bag and new service to cater for group and business bookings.

It also now offers allocated seating on all flights for free, although passengers can pay €5 to pick their preferred seat. Ryanair says sales of reserved seats have “grown significantly” and it now expects revenues from this to exceed the losses from cutting fees elsewhere.

Ryanair says it plans to continue rolling out improvements including a new website, mobile app, mobile boarding passes and a new business travel product. It is also focusing on increased distribution having signed up to Google’s Flight Search tool and is looking to ink similar deals with other services.

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