Ryanair 2004 Annual Report Download - page 5

Dear Shareholders,
The past year has been one of enormous expansion and challenge. We reinforced our
position as the lowest cost airline in Europe; we grew rapidly, launching 73 new
routes to a total network of 150 and launched two new bases, bringing our total to
11. As we have predicted, there is an intense price war going on all over Europe
involving ourselves, many loss making new entrants and high fare flag carriers. We
have responded to this competition in every market by opening more routes,
lowering our fares, carrying more passengers and building a substantial presence in
most European countries.
Chief Executive’s Report 5
A N N U A L R E P O RT & F I N A N C I A L S T A T E M E N T S 2 0 0 4
It was disappointing that this fare war has caused our first
downturn in profitability. Since it is our objective to grow profits
each year as we grow our traffic, we clearly failed to meet this
standard last year. But if there is ever a good reason for a fall
in profitability I believe that reason should be because prices to
customers have fallen by more than originally forecasted. Our
reducedprofitability in the fourthquarter was not a by-product
of higher costs or lack of cost control,unit costs actually fell by
6% last year, even though fuel prices were at record highs. The
principal reason for our 5% decline in adjustedprofitability was
the fact that average fares fell by 14% during the year as we
embarked on a strategic programme of quantum expansion. Our
customers enjoyed our lowest ever fares last year and by
i n c reasing the price lea d e rship of Ryanair over all ot h e r
European airline competitors, we are convinced that we are
building an industry “price leadership” position.
Lowest Cost Wins
Many other industries have previously experienced periods of
intense price competition. In almost all cases the lowest cost
provider won out in the end. Since Ryanair began the low fare
revolution in Europe in 1985, it has been our policy to be the
lowest cost, lowest fare airline in every market. Our average air
fa re is now over 50% cheaper than that of our nea rest
competitors in Europe.
We will not use this price leadership to sit on our laurels. Our
objective is to grow traffic by 20% annually, lower average fares
by 5% annually and lower unit costs by a similar percentage,
thereby sustaining long term after tax margins of 20%. Our
adjustedafter tax margin for the past year was21%, despite the
fall in profitability. We continue to pursue greater efficiencies
and lower costs by acquiring new Boeing 737-800 “ n ex t
generation” aircraft. We fly them to regional and secondary
airports who share our passion for low cost, low fare, high
growth operations. Ancillary revenues continue to grow faster
than passenger volumes. While most of our competitor airlines
spend their time trying to increa se fa res and yields, the
difference at Ryanair is that we spend our time reducing costs
and passing on these savings to our customers.
Customer Service
Clearly no airline can survive on low fares alone. The past year
has seen Ryanair make further improvement on what is the
European industry’s best customer service record. Over the
past 12 months, Ryanair has retained the “grand slam” for
customer service in the European airline industry.
•We are No.1 for lowest fares.
•We are No.1 for on-time flights.
•We are No.1 for least cancellations.
•We are No.1 for fewest lost bags
We are all immensely proud of the fact that over 93% of the
180,000 flights operated by Ryanair last year arrived at their
destination either on, or ahead of, schedule. No major airline
in Europe can match Ryanair’s punctuality and no airline can
match our low prices either.*
Ryanair 93.0%
SAS 89.8%
Air France 88.3%
easyJet 88.0%
Lufthansa 87.1%
Alitalia 86.6%
BritishAirways 82.6%
Iberia 82.5%
Austrian 80.6%
AerLingus not published
* flights arriving within 15 minutes of scheduled time of arrival
Ryanair monthly stats compared to Association of European Airlines: May 04
RYANAIR NO. 1 for punctuality
% on time*