Ryanair profits drop sparks ad cutbacks

Low-cost airline Ryanair is cutting its marketing budget after announcing a 27% drop in profits for the last quarter of 2007.

The move is likely to reinforce the company’s policy of using controversial one-off press ads, which are frequently banned by the Advertising Standards Authority, to promote its fares.

Announcing its third quarter results, the Irish carrier warned that its yearly profits could be halved because of rising oil costs and a weakening pound. Net profits dropped more than a quarter to €35m (£26m) between October and December.

Chief executive Michael O’Leary has warned of a tough market ahead. He said: “We need to tighten the belt and focus on reducing costs.”

A Ryanair source says marketing budgets have consistently been cut over the years and the latest financial results are likely to lead to a further reduction. According to its yearly figures, the airline spent €23.8m (£17.7m) on marketing and distribution in the year to March 2007.

The airline has its own in-house creative and media teams and has followed a policy of running provocative ads in a bid to get “more bang for its buck”. An execution poking fun at French president Nicolas Sarkozy cost the airline €60,000 (£45,000) in damages this week.

The budget cuts are not expected to lead to any staff cuts in the marketing team.

Michael O’Leary spoke of the possibility of the industry being hit by a “perfect storm” caused by high oil prices, a weak pound and falling demand.

But he added: “There can be only one competitive response to any consumer uncertainty, and that is for Ryanair to slash fares and yields, stimulate traffic, encourage price sensitive consumers, and promote new routes.”