Today's business and finance round up 1st February 2022
✈Losses keep piling as Ryanair discounts tickets
1st February 2022
Bite-sized business news from the UK and beyond
Good morning After what felt like the longest January, today we finally enter the shortest month of the year and the first day of the Lunar new year – the year of the tiger.
Losses keep piling as Ryanair discounts tickets
Tesco shuts down discount rival to Aldi and Lidl
AIRLINELosses keep piling as Ryanair discounts tickets
What’s going on?The “hysteria” surrounding Omicron and emergence of new travel restrictions derailed the last three months of 2021 for Ryanair as it reported a loss of €96m. Europe’s biggest low-cost airline said it would have to carry on discounting fares to attract customers amid a “hugely uncertain outlook”.
Why is this important?
The last quarter of the year is usually a quieter period for travel compared to the summer and even more so during a pandemic. But despite already discounting prices, Ryanair missed its modest target to fly 11m people instead hitting 9.5m. The airline blamed the Omicron wave for deterring would-be travellers and warned that it was still too early to say Covid was behind us.On the brighter side the €96m loss was better than the same period in 2020 when it was €321m in the red. For the full year to March 2022 the company expects to transport 100m passengers at a loss of €250m-€450m.Even though fears of Omicron are fading and travel restrictions are easing, the company says it will still need to cut ticket prices to help fill planes this spring. Looking ahead to the summer, Ryanair expects to reach 114% of 2019 capacity this year and return to profit after two years of losses.The airline is betting on the travel sector rebounding strongly. It plans to carry 225m people by 2026, compared to 149m a year pre-Covid. But the company flagged that these grand ambitions are dependent on no new Covid variants or restrictions.
The airline industry is banking on us all returning to the skies in earnest this summer and Ryanair has sent a clear message that its’s ready to start a price war. This is great news for consumers looking to travel internationally after two spend at home. But not great for airline profits and consequently their shareholders with Ryanair's share price falling on the back of the news.
RETAILTesco shuts down discount rival to Aldi and Lidl
After a little over three years, Tesco has announced it will close all 13 stores of its discount chain Jack’s.Launched in 2018, Jack’s was supposed to be Tesco’s solution to winning back customers lost to low-cost grocery chains Aldi and Lidl.Since entering the UK in the 1990s the German discounters have taken market share from the biggest supermarkets and now sit fifth and sixth behind Tesco, Sainsbury’s, Asda and Morrisons. While Jack’s replicated tactics used to keep costs down such as products stacked on pallets on the floor rather than on shelves and narrower product ranges, it couldn’t quite replicate the success of Aldi and Lidl. Analysts said that with just 13 stores, Jack’s lacked the economies of scale to challenge its bigger rivals.Despite the failed experiment Tesco remained positive saying it learnt a huge amount from Jack's and this has helped Tesco become more competitive and efficient.It said that it would continue to deliver value to customers through its ‘Aldi Price Match’ promise.
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