How Ryanair justifies cheap seats

Hi All,

I once had a conversation with an Australian travelling in Europe. He told me that he flew from Poland to Dublin in November 07 with Ryanair, the flight costing in total €35 (all taxes, charges, baggage included). He was quite confused and was wondering how exactly Ryanair makes money.

I have followed Ryanair in the media for years, I have read the Ryanair book (2004) and the Michael O’Leary Biography (2007) and also saw the BBCs Money Show Ryanair episode. From all this, I conclude the below explanation. If anyone with greater knowledge in the area disagrees or knows something that I don’t, I’m all ears.

Thanks in Advance for all responses

My Explanation

Costs: Ryanair bulk buy planes when they are cheap and use cheap back end of nowhere airports where they turn the planes around quickly. This minimises the capital cost of the plane per passenger.

Ancillary Revenues: Ryanair have stripped airline travel to its very basic form ie a passenger sitting on a seat. They then turn cost items (eg food and drink, baggage) into revenue streams.

Off peak season: At off peak season, only a percentage of an airplanes seat capacity are made up of people who actually want to fly somewhere and hence are willing to pay for a seat. Ryanair have found a way to justify flying the plane in these conditions by giving the remaining seats away. Giving seats away may have the following benefits:

• It can generate more of the above ancillary revenues (baggage, food/drink, hotel/car hire bookings, travel insurance).
• Reduced advertising costs: Everyone knows the airline that gives away free seats. The requirement to advertise is significantly reduced. (My Australian friend will tell everyone in Australia).
• Revenues from Ryanair’s “Billboard” advertising service (either on the plane itself or on the baggage cabins) will be higher as more people see them.
• Other companies, usually Financial Services, are willing to pay to use Ryanair’s brand name because of its reputation for free seats (eg Credit Cards, Insurance).
• Some regional governments love all year round tourism and are willing to subsidise Ryanair to deliver eg through cheap/free landing charges, paying for all route marketing costs and even direct subsidising (eg giving cash per passenger). This direct subsidising is probably illegal under EU law but I believe some have got around this problem by paying Ryanair over the top to advertise on their website.

If all the above revenues/savings just about meet the cost of flying the plane out in off peak season, then free seats in off peak can later generate huge demand for Ryanair flights during peak season (eg people take out jobs between cities, will buy holiday homes in other countries, companies will expand to other countries between two Ryanair airports) and a lot of people will find themselves in a position where they are willing to pay a lot more for a Ryanair flight. This results in Large Revenues – Low Costs = Huge Profits.

The above is inspired by the Michael O’Leary quote “In the airline business, any idiot can make money during the summer, the trick is not to lose money during the winter”.

Hi the other point to remember is that it is the average fare which matters - for everyone who pays €35 per return flight there are others who pay much more than that for their flight. Everyone talks about the fares of €10 etc but few talk much about some much more expensive fares on Ruinair.

Excellent post frcrilly.

Plus people buy "cheap seats" that they then do not use. Ryanair keeps the revenue.

There's a bit of psychology at play with this. Ryanair offer cheap seats on off peak flights that they knew full well they do not have a prayer of filling, at say an average total revenue of €20/seat. People will book these seats in case they 'might' be travelling, and maybe a seat on another flight, but they certainly would not pay say €50/seat on the off chance they might take that flight.

If Ryanair sell 40 of those seats that are never used at an average €20/seat revenue that is €800 per flight.

Note that Ryanair publish monthly 'seats sold' rather than actual 'bums on seats' figures which are the industry standard because this is without doubt a significant area of revenue.


Also, from the current affairs programmes in Ireland it is clear that the cabin crew are paid really badly with the figures that Ryanair put out not at all reflective of reality where there are a lot of deductions for uniforms, training etc etc. Also Ryanair staff have to pay for anything they consume from the trolley service at the same price as passengers.

gijoe wrote:Plus people buy "cheap seats" that they then do not use. Ryanair keeps the revenue.

There's a bit of psychology at play with this. Ryanair offer cheap seats on off peak flights that they knew full well they do not have a prayer of filling of say an average total revenue of €20/seat. People will book these seats in case they 'might' be travelling, and maybe a seat on another flight, but they certainly would not paysay €50/seat on the off chance they might take that flight.

If Ryanair sell 40 of those seats that are never used at an average €20/seat revenue that is €800 per flight.

This is so true. I have booked many €2/€5/€10 seats on a whim and for whatever reason decided at the last minute not to travel. or if I'm not sure when I want to come home from a trip and the return flights are a giveaway I'd book two, one on a Tuesday, one on a Wednesday for example. Very clever marketing ploy. I could be wrong, and someone correct me if so, but if a passenger doesn't turn up for a flight then ryanair keeps every penny and doesn't have to pay a penny in APD to the Government.

Rich00cap wrote: I could be wrong, and someone correct me if so, but if a passenger doesn't turn up for a flight then ryanair keeps every penny and doesn't have to pay a penny in APD to the Government.

Thats correct. As everyone knows Ryanair keeps all the revenue from booked seats where passengers fail to turn up. That's fair enough as everyone knows that that is the deal with Ryanair. APD is only collected from travelling passengers i.e. bums on seats. So even if it is itemised as a separate charge in the overall cost it is not paid to the government by Ryanair unless you travel.

Government taxes are refundable (subject to a refund administration fee) :

General Terms & Conditions of Carriage
4.2.1 Government taxes (including but not limited to United Kingdom Air Passenger Duty), airport passenger service charges, security levies and any fees levied by ourselves for a specific service in respect of a flight to be operated by us and undertaken by you shall be payable by you at the levels prevailing at the time you make your reservation. If you do not travel, you may apply in writing within one month for a full refund of any such government taxes subject only to a refund administration fee at the level set out in our Table of Fees. Other than government taxes, all other monies paid are non-refundable.

[In relation to no-shows]

To the best of my knowledge, Ryanair claim on their website that they do not overbook flights. (unable to find wording).

As a company with a reputation for pushing all resources to achieve lower fares and higher profits, I sincerely doubt this. I’d imagine that as Ryanair evolved, they observed that the lower fares are, the higher the rate of no-shows and the more they can overbook the flight with people paying much higher fares. I’d imagine that, using previous statistics, they could confidently overbook a flight to a pre defined level with little or no fear of being caught out. I’d also imagine the lower the level of fares on the flight, the greater the expected no show rate would be and the more they could overbook it.

So in summary, if you pay 1c/1p for a Ryanair flight, you are more likely to not show up and be replaced by someone who has paid a much higher fare. This may be a further explanation as to how they can make unviable fares viable.

Again, just my opinion. Feel free to disagree.

Ryanair don't, and never have (apart from the Volcanic Ash disruption period) overbooked flights. If a passenger doesn't show up, they don't show up, end of. Once a seat has been sold, it cannot be re-sold to someone else.

Given that Ryanair is criticized for every reason (and even without a reason) at the smallest opportunity, I am sure that an overbooking occurence would have been given the largest publicity on the aviation forums.
But until now, I have never heard of somebody being refused boarding because of overbooking.

I once heard about a sizable school group who were told that two of the group would have to wait for a later plane due to "a change of airplane that had 2 less seats". (Source: letter from leader of school group sent to "Letters to the Editor" section of Irish Times newspaper).

I smell two things fishy about this.
1. Why 2 seats when seats are grouped in 3's or 6's?
2. The fact that it's a large school group in which everyone may have showed up could be an area in which statistics that tell you how much you can confidently overbook your plane by may get caught out. (ie statistics could assume everyone has an equal chance of not showing up when this may not be the case within a large school group).

As always, just an opinion. Feel free to disagree.

Well fact is better than opinion. And the fact here is that Ryanair don't overbook flights.

Airlines that do overbook are airlines who allow passengers not to take the flight they have a reservation on, and transfer on a later flight - without any penalty.
On Ryanair, if you don't board your flight, you lose your ticket and your money ... No refund !

frcrilly wrote:I once heard about a sizable school group who were told that two of the group would have to wait for a later plane due to "a change of airplane that had 2 less seats". (Source: letter from leader of school group sent to "Letters to the Editor" section of Irish Times newspaper).

I smell two things fishy about this.
1. Why 2 seats when seats are grouped in 3's or 6's?
2. The fact that it's a large school group in which everyone may have showed up could be an area in which statistics that tell you how much you can confidently overbook your plane by may get caught out. (ie statistics could assume everyone has an equal chance of not showing up when this may not be the case within a large school group).

As always, just an opinion. Feel free to disagree.

Easy to explain the 2 seats story, I think ... If one of the of the tray table on a middle seat is broken and can't be fixed before takeoff, you'd have to block the windows seat as well. Asking 2 passengers of a group not to travel... strange, cause I'm sure Ryanair knows they were together (same credit card, same email address)... but maybe they came forward...