Tuesday, 31 May 2011

Ryanair's cautious. Are oil prices or Facebook to blame?

By - Tim Gunstone

Ryanair is cautious about future growth…it blames oil prices, I would like to know if customer mobile browsing habits or Facebook is also an issue?

The Irish Times on Wednesday last week told us “Despite plans to cut its winter capacity, and the hedging the airline has put in place, it expects its fuel bill will rise by €350 million in its 2012 financial year. As a result, net profit is expected to remain flat at about €400 million, a level that falls considerably below previous market expectations of €490 million.” 

For the full story go to http://www.irishtimes.com/newspaper/finance/2011/0524/1224297637594.html

Whilst I would be an idiot to say fuel prices don’t have a massive impact on airline profits, I would also argue that Ryanair is not just an airline, it’s also an advertising channel. After all, if you go through the company reports, Ryanair either loses or just covers costs from moving people around on a plane. Ryanair makes money by exploiting booking patterns in the online travel buying cycle. These patterns allows it to charge very high advertising rates to other suppliers looking to target it's passengers as they are planning their trip. Insurance companies, car hire and hotels use Ryanair as a place to advertise…and it is not cheap!

The findings from our social media, distribution and online marketing conferences is pretty clear. Facebook, Twitter (and niche social sites like runners world) offer a cost effective way to inspire and target travelling customers. Is this also a reason why the famously bullish Ryanair is feeling more cautious? In addition, buying a Ryanair flight on a smart phone is nigh on impossible, I have tried it. 

At our Travel Distribution Summit in London earlier this month, Google’s Daniel Robb  told us mobile searches for flights is growing at an incredible 141% year on year.  None of this is benefiting Ryanair or it's vital advertisers. Will they adapt to the new consumer landscape that is increasingly social and mobile? Only time will tell.