Ryanair issues second profit warning as it continues customer service overhaul

Ryanair has warned that its profit is set to fall for the first time in five years as it continues to overhaul its customer service in a bid to improve the brand’s image.

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The airline says that increased competition in the European market will push average fares down by around 10 per cent over the winter. That has caused Ryanair to cut its profit forecast for the second time in two months for the year to March from €570m to €510m, below the €569m it made last year.

The figures come as the airline aims to improve its reputation for poor customer service. It has announced a number of updates including a cut in baggage fees, a redesigned website aimed at making it easier to book tickets and a “My Ryanair” member service.

The latest change will see Ryanair shift to fully allocated seating on its flights. Customers that want to reserve “popular” seats, such as those in the front row, will be able to pay €5 to do so, as long as they check-in more than 24 hours before departure.

Ryanair says: “Our decision to launch fully allocated seating is part of the airline’s commitment to listen to its customers and improve its industry leading customer service.”

Ryanair faced growing criticism from both customers and shareholders over its poor customer service. While previously this did not worry the firm due to its strong growth, increased competition, the two profit warnings and a prediction that there will be a “pause” in traffic growth over the next 12 months means it now needs to improve brand perceptions.

Ryanair currently languishes at the bottom of almost every metric on YouGov’s BrandIndex, from reputation and satisfaction through to impression and quality. It also came in last in Which?’s customer service survey, performing the worst out of the UK’s 100 biggest brands.

The customer service changes are likely to have an impact on Ryanair’s bottom line as ancillary revenues from baggage fees and boarding pass re-issue penalties are significant for Ryanair. However, the firm says these will not have a significant impact on its current fiscal year.

For the first half of the year, Ryanair’s profit hit a record €602m as a 2 per cent fall in average fare price was offset by a 22 per cent rise in extra charges. Traffic was up 2 per cent to 49 million passengers.

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