Ryanair, Europe's biggest, brashest airline, lowered its profit prediction for the year Monday, as it struggles under the weight of a sluggish economy, a price war, and an entrenched reputation for offering the worst customer service in the industry.
The company's after tax profit for the year will be between 500 million euros and 520 million euros, the airline predicted, a 12 percent decrease from last year.
It's the first predicted profit drop in five years for the airline, which since 1985 has grown into Europe's largest carrier by number of passengers — hauling 79 million fliers in 2012. Analysts have credited Ryanair's success to a cheap-ticket-at-all-costs business philosophy which makes Delta look like a four-star airline.
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After years of peeling back "perks," and charging for everything from baggage to assigned seating, Ryanair now flies aircrafts with non-reclining seats, no seat-back pockets, one bathroom (to add six extra seats), and standing room seats — all of which makes for a reportedly miserable flying experience, but at a uniquely low cost.
It's a magnified approach to a decade-long trend in air travel that has impacted carriers in Europe and the U.S. alike. The baggage charges, shrinking legroom, and other cut-backs that alienate U.S. customers also keep ticket prices down.
But Ryanair may have taken the philosophy too far. "Ryanair currently languishes at the bottom of almost every metric on YouGov’s BrandIndex, from reputation and satisfaction through to impression and quality," saysMarketing Week, a fact that is not lost on the outspoken CEO, Michael O'Leary.
Since the airline announced its first profit warning last month, O'Leary has unrolled a set of changes aimed at customer satisfaction, like lower baggage fees and a 24 hour grace period after booking online. And today, the airline announced it will soon adopt assigned seating for passengers, which should mitigate the mad dash for seats during boarding.
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So will a personality check be enough to put Ryanair back on track?
At the very least it should bring the airline's practices more inline with those of EasyJet, one of Ryanair's biggest rivals. Quartz's Jason Karaian:
It is not lost on analysts that low-cost rival EasyJet is flying high, thanks to the perks it offers business travellers and, in part, its friendlier image among flyers. Ryanair is thus introducing many of the frills that it once rejected in its single-minded focus on low costs. But turning around a company’s reputation takes time, particularly one as deeply ingrained as Ryanair’s. [Quartz]
The consumer publication Conversation says the airline is going in the right direction:
Brand loyalty matters, and eight out of 10 in our survey said customer service was an important deciding factor. Analysts believe Ryanair can afford to increase its spending on customer service and still compete on price – so perhaps we will see more concrete changes to come. But it could take a long time to win over the sceptics, and Ryanair isn’t going to be handing out free champagne any time soon. [Conversation]
But Marketing Week says that caring for customers will certainly come at a price. "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," it says.
