Ryanair to Offer Incentives as Profit Falls

Ryanair Holdings PLC said Monday it will introduce discounts for frequently flying families this year and offer business passengers fast-track airport services as the budget airline's boss Michael O'Leary further adapts his bare-bones business model. The Irish airline reported an 8% drop in net profit in the year to end-March.

From this fall, business passengers will be able to buy premium-priced tickets that allow some changes in flights, provide allocated seating and, where available, have access to fast-track services at airports, Ryanair Chief Financial Officer Howard Millar said.

Starting in June, families traveling with at least two children will get discounts with families who clock up lots of miles flying Ryanair also entitled to discounts on future tickets.

The product changes are the latest in a series of actions Ryanair has taken to shift its once single-minded focus on low fares to a more flexible approach after warning last year that profit would fall short of expectations.

To help win bookings in the face of stiff competition from rivals such as easyJet PLC, Ryanair has eased some baggage charges that particularly irked passengers. It also started to accept American Express credit card payments to attract business customers and updated its website to make it more easy to use. The carrier also began an advertising push in key markets.

Ryanair said net profit fell to EUR522.8 million ($716 million) in the year to March 31 from EUR569.3 million a year earlier.

Europe's largest discount carrier had warned last November profit would come in short of earlier plans at EUR500 million to EUR520 million as it cut prices to compete more aggressively with rival discount carriers and the short-haul operations of airlines such as Deutsche Lufthansa and International Consolidated Airlines Group, a move that surprised investors.

Mr. O'Leary called the drop in profit "disappointing," though actions taken since September were underpinning growth in Ryanair's passenger traffic.

Profit should rebound this year to EUR580 million to EUR620 million, though the airline said it is hard to predict the outlook for this winter a period in which it typically it incurs losses. Fares are expected to rise 4% in the current year.

"Forward bookings for [this summer] are significantly ahead of last year, " Mr. O'Leary said. Still, the airline will spend EUR35 million on advertising this year, EUR25 million more than last year.

Ryanair said traffic, which rose to 81.7 million passengers last year, should rise to 84.6 million as the airline expects to park fewer airlines this winter.

The airline is idling fewer jets to "invest in the network" ahead of the busier spring season, Mr. Millar said.

Ryanair faces intense competition this summer, a period that is crucial for low-cost carriers' profits as Europeans head off on holidays, with rivals including easyJet adding capacity in key markets.

EasyJet said Tuesday it would increase its capacity significantly in the summer. The U.K. airline's chief executive Carolyn McCall said she would be willing to let yields fall to win business.

"We always love a good old fare war," Ryanair's Mr. Millar said.

Write to Robert Wall at [e-mail]

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