Ryanair may struggle to attract business travellers, say analysts

Ryanair may struggle to attract more business travellers despite the dramatic change in strategy on which the airline embarked over six months ago, market analysts at Barclays argued yesterday.

In a research note, analysts with the British bank, Oliver Sleath, Rishika Savjani and Susanna Invernizzi, predicted that the Irish airline's numbers will "positively surprise" investors in 2015 financial year, which began last week.

They say that prices will improve as the airline will not increase its capacity this summer, while load factors, that is the number of seats sold relative to its overall stock, will improve on 2014.

Recommendation upgrade
The analysts point out that Ryanair recently leased seven craft for the peak season, implying that the company believes these can be deployed profitably.

The three upgraded the stock to “overweight” – that is, buy – from hold and have a set a new target price of €8.60, about 13 per cent higher than its €7.60 closing price last night.

However, they argue that it is likely to have a lot of difficulty in convincing more business travellers to fly with it, despite the fact that this is one of the constituencies that Ryanair is trying to court with the change in image and strategy that it introduced last year.

Ticket price drift
The analysts point out that the airline wants to remain as "the lowest-fare provider" in the industry. They believe that it will allow ticket prices to drift up with inflation while remaining firmly below those charged by rivals such as Easyjet.

In light of this, they maintain that it is “odd” that Ryanair has started chasing business travellers, unless it believes it needs to do so to get the most expensive “walk-up fares” needed to support margins in the more expensive primary airports into which it is increasingly moving.