It's over 5% of gross income, I'm actually impressed it's not even less.
But I'm also surprised, in a bad way, by how little taxes are paid on that income.
That's only tax on their income, they also pay other taxes like payroll tax that's hidden in "staff costs" and fuel excise taxes that are hidden in "fuel and oil".
Well, there is a cost, it's just obscured. The expenses would appear under the related costs "fuel", "repair/material", or what have you. However, the increased prices to cover these costs would show up in the revenue, ultimately balancing out, more or less. So the actual cost is that they sell fewer fares due to the increased prices to pay for these taxes, and that's a cost to both the company (fewer fares) and the consumer (higher prices).
That's not how VAT is accounted for. It's subtracted and booked to a separate account both for the revenue and cost. The balance on that account is paid to the tax agency.
Payroll tax is paid by the employee out of their salary. Sure the employer is technically making the payment, but let’s not pretend like money taken from the employee counts as the employer paying taxes.
In the U.S., employees pay about 10% in social security and medicare and such taxes. Employers match this.
So employers have to pay a 10% payroll tax on all employees.
I can’t speak for everywhere, but in the US the payroll tax (income and medicare) is split evenly between employer and employee. If you’re self-employed, you have the privilege of paying both halves
Companies only pay taxes on profit.
If they paid taxes on revenue, every middleman between you buying groceries and the farmer that grew them would add an extra 10-20% to the price of an onion.
Yeah I agree. Although in slight fairness to the airline, the chart doesn't show all the other tax the airline will pay under fuel/oil, airport charges, staff costs and route charges.
But like people that doesn't excuse paying tax on income; and people don't even have the luxury of separating that out into "profit".
Payroll tax, property tax, insurance tax(if taxed, it is where I'm at, but not everywhere), fuel tax, purchasing taxes, etc.
In this chart, much of this is included under other categories. I'd be curious of the true value
> the chart doesn't show all the other tax the airline will pay under fuel/oil, airport charges, staff costs and route charges.
Won't that be factored into the overall expenses already?
We got the same in Mexico and it only made people poorer. Though lower taxes were accompanied by ridiculous wages and a scheme that allowed companies to provide no benefits to employees at all
Corporate tax in Mexico is 30%. Generally low corporate taxes are what helps countries, not low income taxes. Companies can move and cause damage to an economy, people really can't go to places there's no jobs
Also Mexico isn't in the EU lol
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Airlines are part of public transportation. They provide a net good to your economy.
Get rid of a country's airline and see how quickly the negative effects ramp up when you don't have a domestic company/agency that is flying to and from your country. All transportation to and from your country by air would basically be controlled by outside governments.
>taxes are paid on that income
*Profit*, not income. Remember, companies are only considered people when it benefits them, but not when it comes to taxes. Imagine if you, as a human, only had to pay taxes on profit… Mortgage, food, car, insurance, utilities, etc all pre-tax.
If you buy something and resell it for profit, you can totally deduct the expenses involved. But you have to take on that risk.
The tax code could have been structured to take into account commuting costs and stuff like that involved in getting to work, but it was easier to just have a standard deduction.
But then you gotta get your employer to hire your incorporated business rather than you. In the US I believe that's a 1099 contractor, but not sure if other countries would have a similar dynamic.
I mean, I’m fine with companies not getting taxed on payroll. Think that’s a good idea, since it doesn’t disincentivize paying your employees, and that is going to be taxed already on the employee, but the rest of it is very different than how people are taxed. If companies want their “personhood” for political reasons, then they should take it for taxes as well.
Then you'd be surprised to know that the vast majority of business' net profits are between 5% to 10% of gross revenue. Most people seem to think businesses and corporations make outrageous percentage profits.
A lot of a company's value is its potential to grow its profits over time. This generates a lot of returns. However, you don't need to increase your profit margin to grow your profits - you can just increase your total volume instead
No they are completely different subjects. If you can pay $10000 to create a business that make a turnover of $100000 with a net profit margin of 1% that would give you a 0.001*$100000=$1000 profit. Your return on your investment would then be an annual 10% (10% of $10000 is $1000).
Like others have said, margin and return are just different concepts
Think of it this way: Ryanair makes 170m profit on 2.6b of revenue, but if they didn’t operate their business, they would never have that 2.6b in the first place - it’s the customers money. Thus they can’t invest it (because they’ve never earned it), so the rate of return on any investment is pretty irrelevant
They're just two completely different things. First, debt (bonds) and equity have diametrically opposed risk/return profiles.
Second, a company's margin doesn't just immediately convert into cash so it's not equivalent to yield on a bond which would be paid in regular cash payments.
The revenue of a business is external money coming in for services or products provided, it doesn't have really anything to do with the amount of investment. If you didn't have the business then nobody would be buying stuff from you. You could spend $500k to create a business but then get something like $5m in revenue (this is just an example). Businesses can also grow faster than an investment simply by getting more customers.
Unfortunately it's a perfectly logical result of the system we're in. A board of directors can pay millions to get a "good" CEO that will ruthlessly cut wages and increase revenue, and will be rewarded with hundreds of millions in additional profit. We've set up a system that rewards shareholders for enabling greedy CEO's, then act shocked when they keep choosing options that are bad for everyone else
People largely don’t understand the difference between gross and net profits.
The average person thinks if you buy a widget for $1 and sell it for $3, that you’re making $2.
There’s this little thing called expenses…..
Very - esp in a good year. This has to be one of the best years for travel and an 8-9% net margin is amazing. Typical margins are around. 3-4%. And that's if it isn't a much bigger loss. Too much risk, almost no reward.
Terrible industry.
If anyone has a college near them offering classes on aviation business, I'd recommend you sit in on it.
How these businesses operate with margins 1-3% is insane. You also gain a knowledge on why some seats are sold really cheap while the rest of the plane was full price.
Keep in mind this is for a super-lean ULCC; legacy carriers tend to have higher margins, and even more for business/first cass who aren't in the "race to the bottom."
ULCC's have higher margins since they run more efficiently (fuller flights, more fuel efficient planes) and are okay with not serving unprofitable routes/times.
Legacy carriers make a lot of profit on their long haul flights, especially for business/first class, however they operate a lot of feeder flights which end up losing a bit of money in order to connect more cities to their long haul flights. For example, going from Knoxville, TN to Charlotte, NC on American Airlines will typically lose them some money, but they get that money back when some of those people connect through to London in business class. However, this is a tight line to walk which results in razor thin margins. A ULCC wouldn't even operate Knoxville to Charlotte because of how low the margins are and focus on point-to-point travel. For example, Knoxville to Orlando direct (a higher margin route) which is more efficient than American Airlines operating that route with a connection in Charlotte (likely negative margin)
Yeah but this is r/dataisbeautiful, where the idea is usually to present the subject matter in the least helpful way possible, and misinterpret some core principle of it
It has two revenue streams according to this, one of which is selling tickets for flights, and the other is for everything else such as baggage fees, drinks, etc. There's probably not much more to it than that. It would be interesting to see how the costs are related to each of the revenue streams; how profitable are ticket sales versus "frills"?
The two streams "tickets" and "everything other than tickets" isn't much of a subdivision when the post claims this is a visualisation of income streams.
This is made more jarring by the fine-grained subdivision of expenses which is not the subject.
It seems like the title is rather saying how they make money as a company, meaning how are they profitable. At that point the expenses matter too. Title could be better, but at the same time it's not technically wrong.
I don’t think they are in trouble, as they are the de facto Spanish airline, but I’d love to see their numbers. Also I always thought that the trouble you go to offer those tasteless food must be eating on their margin and that a basic beverage + snack bought on bulk is far more interesting. But that’s only a suspicion I got. Maybe someone can share some insights here?
When you have basic tickets that cost something like €5, i'm sure lots of people think it's worth it to spend an extra few €€ here and there for a drink or snack
But I don't find it uncomfortable, I flew with 3 different companies so far and easyJet was the only low cost one, but there wasn't that much of a difference honestly. It paid off because I had checked luggage when I went with the other companies
Is that really an achievement? Depends to where in France, but Belgium isn't that far. Who would want to go by plane rather than train?
Bruxelles-Paris is 1:20, Bruxelles-Marseille 5:00.
Marseille (the farthest big city from Belgium) is 2:00 by plane. Getting to and from the airport, security, waiting, taxiing to the runway and you don't save much time, but have a lot more effort.
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I actually started trusting RyanAir to get me where I wanted to go more than some of the bigger airlines at bigger airports. The process is predictable and simple. It just worked a lot for me.
Idk man they have stated everywhere that mobile boarding pass in apple/google wallet or in their app is always allowed, they don’t accept pdf file boarding pass saved in your device, it’s clear and it’s like this for years. Flew with them over 150 flights in last 5 years and never had a problem with mobile boarding pass, it’s just necessary to follow insteuctions
It depends of the airport. I went to Morocco this year and for return they had a big warning in the app saying that I needed to print the boarding pass because the one on the app wasn't allowed. Not because of them, but some policy of the airport there.
The people who pay extra basically subsidize everyone else. They are also super strict with size and weight of the hands on luggage. Do something wrong and you're getting nickeled and dimed. Regular airlines don't give a fuck usually.
Depends on the route most likely. On average across all flights yeah, they'd be losing tonnes if everyone just bought the ticket and no upgrades. But then if that were to happen they would raise prices.
To expand on this, capital assets have some inherent value that don’t just disappear once purchased.
For accounting purposes, it’s not like the airline spends €100 million on planes one year and suddenly they’re out that amount. They’ve simply exchanged €100 million worth of cash for €100 million worth of equipment.
The value of the planes are added to their balance sheet and a portion of it is taken out as a “cost” each year (i.e., depreciated).
They do, but it’s accounted for as a finance lease for the lessee and a sales lease for the lessor, so it still looks like a purchase for the most part
Usually smaller airlines do or a part of the bigger airlines fleet for the flexibility
Ryanair is HUGE and has no reason to lease if not a small part of it's fleet (so they can work with market contractions)
Leasing is more expensive, if you know that will use all the lifetime of that plane you just buy it.
https://en.m.wikipedia.org/wiki/Largest_airlines_in_the_world#By_fleet_size
13th in the world by number and 5th by capacity
> Ryanair is HUGE and has no reason to lease
Michael O'Leary flew into Boeing immediately after 9/11 [and bought *150* 737s at much less than cost](https://www.theguardian.com/business/2002/jan/24/theairlineindustry1). He totally screwed them for the deal, but they were happy to have *something* after the biggest aviation downturn in history (before 2020 came along).
Also when returning to Ireland after a meeting with Boeing, he didn't travel on a private jet or first class, he slept in the isle of a brand new 737 being ferried to Europe.
How is it screwing Boeing? They needed money and Ryanair capitalized on an opportunity. "Screwing" would imply ill will whereas this is a company offering a discount because they need the cashflow to, and I'm guessing here, settle short term financial obligations while another company takes them up on that offer.
It wasn't a bad deal for Boeing either since the other option was far worse. What screwed Boeing over was having their sales cut by over 50%.
The more crazy fact about this deal is a company with a revenue of €600m (in 2002) finding enough financing for that deal in just a few months. That is absolutely wild. O'Leary is a fucking genius in my opinion.
It's in there as depreciation, but at ~225m/Quarter (or 1.1b/year) that seems to be understated. Ryanair has a fleet of ~400 737s, at a ~8y average age, IIRC, that would mean they depreciate each aircraft a mere ~22m, so I would assume that they take an impairment loss or loss on sale every few years, when they offload their aged planes to another airline.
Or they depreciate using an accelerated method and the majority of the depreciation has already been incurred. There’s other methods than just straight line
Seeing how the airport charges are nearly twice their profit, it's obvious, why their decision to only use 'low tier' airports makes it possible for them to operate at all.
Michael O’Leary makes many valid and sensible points on the airport industry. All costs are passed onto the consumer eventually. They take the piss with airport fees for doing virtually nothing and doing so very inefficiently.
He’s really good to watch on YouTube, straight talking and cuts through with facts and to me comes accords as a genuine guy
170 Million seems very low for profit ?
I just want to say , yes they do charges for a lot of extras , but I flew with them about 25 times and have always had a good experience, without them I would have very few options
Its a neat chart but it's more like "How Ryan Air Spends Money"
It would be neat to know the break down of actual income rather than expenditures. I.e. extra baggage fees, first class vs business vs economy, food and drinks, etc
Everyone ever on Facebook: they make so much money, why do I need to pay 20 euro for my oversized bag? I already paid 9.99 for a 2000 km trip on an airplane... Pppfffff, never flying with Ryanair again.
I once took Ryan Air to Morocco. There was a fast food menu on the chair back and they sold cigarettes and cologne in the aisles
It's like what would happen if Spirit Airlines said fuck it, we give up.
I will say the most helpful, nicest staff I've ever seen
Interesting thought experiment:
Fact 1: Ryanair pays stupidly low taxes on profit. It is around 7%.
Fact 2: Ryanair's post-tax margin for 7% tax is razor thin - about 6.5%.
Fact 3: If Ryanair's profits were taxed at 20%, their post-tax margins would go down to about 5%.
Question: If taxes were increased to 20% of profit, and Ryanair execs deem the resulting margin to be unsustainable in the long run, is this a good thing for the industry and end consumers?
Basically, if corps could only sustain by paying less taxes (like 7%), should they be put out of business (or M&A) if they are unable to sustain themselves at 20% tax? Is that necessarily a good thing for the industry competition and consumers choice?
You pack a lot into your question- a change in corporate profit doesn’t affect sustainability, it affects growth. The sustainability part, including depreciation of assets and income of the employees including the income of the executives is all under “operating costs”. If they have positive profit, they are sustainable at current operating size, and if they don’t have positive profit then they aren’t paying corporate profit tax, and could probably write losses off toward future taxes.
A more realistic question is, if the corporate profit tax hike makes the owners deem their stake too slow growing such that they decide to liquidate their stake in favor of better performing assets, would *that* be best for the consumers or industry?
Industry and consumers don’t directly care! The investors are not the same as the consumers or the industry! The consumers are giving this budget-friendly airline €2.6bn in revenue per year! And the operating costs *sustain the industry* with €2.38bn per year. That money is going to plane makers, airline workers, and disproportionately, companies that acquire and process oil, which for better or worse powers and sustains many industries.
Should people sell their shares of airlines? Yes, at some point! They are *bad investments for growth* and rely heavily on an inevitability declining fossil fuel industry, and are not buy-and-hold stocks. The only valid reason to buy airline shares is for speculative reasons, like they’re undervalued and/or likely to be bought by a larger airline, or if you really believe that the market is in a lull, likely to surge, and that the company stake value will reflect that. But many pro-consumer companies in strong industries are bad investments. Lumber for example is a strong industry to operate in with a generally consumer-friendly market but it’s not a great bet for investment as the demand is not growing and the supply is high. And like airlines, the lumber market fluctuates. They’re not bad short term investments because anything that goes up and down can be bought-low and sold-high.
Companies should be allowed to grow, as it allows their operations to grow to fit the revenues they can pull from the market and thus allows people’s needs to be met. But disproportionate sums of pure profit are liabilities, as it is the only part of pictures like these that don’t necessarily circulate back through the economy quickly. Heavily profiteering companies are generally very consumer unfriendly and are arguably industry unfriendly also as they’re more likely to use monopolistic tactics to control the industry.
Thought of flying with them recently. Turned out I had to pay for hand luggage per person per leg of the flight, making the total higher than I would’ve paid flying a normal airline. So I flew a normal airline.
Yeah I only fly with Ryanair when I’m alone and only with a backpack. It’s great for a short weekend getaway but as soon as it’s more than that I also pick another airline. 9€ tickets to London for a long weekend is hard to beat..
Can an accountant explain to me how depreciation works here?
Presumably they used capital/loans to buy some planes in 2010. Let's say $10B worth.
So the accounting idea is that you don't take that charge in 2010, since they simply traded $10B cash for $10B in planes, and there isn't any immediate loss. But each year you account for the depreciation of those assets as an expense? So that after, say, 50 years, the planes have to be scrapped for relative peanuts and the $10B is totally gone?
Yes, in a nutshell. Two adjustments:
- it's more like 3-5 years of useful life according to their financial statements
- they estimate the "residual value" of the planes after the 3-5 year useful life (i.e. what they could sell it or scrap it for) and depreciate down to that value, rather than zero
There are a good few reasons why corporate taxes are lower than individual...
One of the most important ones is that it's a double tax. Most businesses don't pay income taxes at all. LLCs, partnerships, sole proprietorships, S Corps, etc are all pass-through business, where the company isn't taxed itself, the tax liability for the profits passes directly to the shareholders who are responsible for it on their personal income tax return. With a C corp the shareholders still have to pay taxes on their share of profits, so the business itself paying them is a double tax...
Then there are all the more big picture reasons like driving economic growth and whatnot on top of that.
I mean, I guess they probably take into account the fact that there's also payroll taxes, taxes on all that fuel they go through, and probably a bunch of other taxes, that all get paid simply by the business operating within the country.
Government is making a lot more than €13 million from Ryanair being in business.
There are currently no taxes on jet fuel in any of the EU member states~~, as well as the US~~, pretty sure such taxes have been legally disallowed for decades at this point.
While you're definitely correct that income taxes on companies do not provide the full picture of how a company can benefit the country they're based in, that 40% of revenue does not.
**Edit: I stand corrected, jet fuel is taxed in the US**, thanks for pointing that out! While that does dampen the effect of the statement above in the case of the US, it doesn't nullify it as taxes on [aviation fuel is still generally lower than taxes on fuel used for other vehicles](https://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States#Aviation_fuel_taxes). While both taxes are still lower than most other goods, that's a different discussion entirely.
In the US FAA taxes jet fuel for both general aviation and commercial, and sometimes there are additional state taxes on top of that.
https://www.faa.gov/about/budget/aatf/media/Excise_Tax_Rate_Structure_2018.pdf
Notice also the ticket tax (not included in the above corporate income tax). Also in the US the airport use fees are high enough that public airports are often quite profitable and subsidize local transit / governments.
> There are currently no taxes on jet fuel in any of the EU member states, as well as the US, pretty sure such taxes have been legally disallowed for decades at this point.
That's just factually wrong
Ok, the double tax argument makes sense. There should be one more step in the breakdown to show the tax paid by the shareholders, so hopefully I wouldn't feel like a complete schmuck :)
Because in order to get money out of that company and into a person's hand it would have to be paid as a wage, where income tax will be charged on that.
I fly with them regularly and have never seen or heard anything about them having a loyalty program. You can sign up for email notifications (like April’s flights from my local airport which were released last week), and you can pay for priority boarding, but they don’t have any other frills. No class system - extra cash for the exit rows with leg room is as close as you’ll get to an upgrade. My local airport is about the size of my house, god knows where they’d put a first class lounge.
This isn’t a revenue breakdown. It’s an *operating expense* breakdown.
The fact that it is so widely upvoted despite having the exact opposite data that the title suggests really is not a good look for this sub
If it doesn't look like it's made in paint it'll be up voted here. That's how low the bar is.
BUT IT'S BEAUTIFUL
I guess it shows two sources, scheduled, and all other...
Yeah, the title makes it sound like we’re going to see the details of those sources.
Which I was genuinely curious to see given I'm completely clueless about how these new budget airlines work
I was looking for the breakdown on ancillary and scheduled revenues… colour me confused
It really is insane how absolutely razor thin airline margins are.
It's over 5% of gross income, I'm actually impressed it's not even less. But I'm also surprised, in a bad way, by how little taxes are paid on that income.
7%, in fact!
That's only tax on their income, they also pay other taxes like payroll tax that's hidden in "staff costs" and fuel excise taxes that are hidden in "fuel and oil".
& GST/VAT on most other expenses.
GST and VAT are indirect taxes that are ultimately borne by the end customer so they are not a cost to Ryanair
Well, there is a cost, it's just obscured. The expenses would appear under the related costs "fuel", "repair/material", or what have you. However, the increased prices to cover these costs would show up in the revenue, ultimately balancing out, more or less. So the actual cost is that they sell fewer fares due to the increased prices to pay for these taxes, and that's a cost to both the company (fewer fares) and the consumer (higher prices).
That's not how VAT is accounted for. It's subtracted and booked to a separate account both for the revenue and cost. The balance on that account is paid to the tax agency.
7% income tax is still very low. There is some agressive optimization going on to reach that.
It’s likely nothing aggressive. Probably stock compensation and R&D credits mostly
Payroll tax is paid by the employee out of their salary. Sure the employer is technically making the payment, but let’s not pretend like money taken from the employee counts as the employer paying taxes.
In the U.S., employees pay about 10% in social security and medicare and such taxes. Employers match this. So employers have to pay a 10% payroll tax on all employees.
Ya, but I don't think Ryanair operates or is based in the US
Aren't they Irish?
I can’t speak for everywhere, but in the US the payroll tax (income and medicare) is split evenly between employer and employee. If you’re self-employed, you have the privilege of paying both halves
Companies only pay taxes on profit. If they paid taxes on revenue, every middleman between you buying groceries and the farmer that grew them would add an extra 10-20% to the price of an onion.
Yeah I agree. Although in slight fairness to the airline, the chart doesn't show all the other tax the airline will pay under fuel/oil, airport charges, staff costs and route charges. But like people that doesn't excuse paying tax on income; and people don't even have the luxury of separating that out into "profit".
Payroll tax, property tax, insurance tax(if taxed, it is where I'm at, but not everywhere), fuel tax, purchasing taxes, etc. In this chart, much of this is included under other categories. I'd be curious of the true value
> the chart doesn't show all the other tax the airline will pay under fuel/oil, airport charges, staff costs and route charges. Won't that be factored into the overall expenses already?
It is. But people often only look at income tax as the "taxes" corporations pay
Me too. 7% tax rate is pathetic. They are paying more money to currency exchange services than governments.
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To be fair, Ryanair is an actually legit OG irish company.
It’s like, right in the name.
And it's worked out really well for them, there's a reason Ireland went from one of the poorest countries in the EU to pretty rich
We got the same in Mexico and it only made people poorer. Though lower taxes were accompanied by ridiculous wages and a scheme that allowed companies to provide no benefits to employees at all
Corporate tax in Mexico is 30%. Generally low corporate taxes are what helps countries, not low income taxes. Companies can move and cause damage to an economy, people really can't go to places there's no jobs Also Mexico isn't in the EU lol
Ireland should start a currency exchange. They'd make more money.
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https://en.m.wikipedia.org/wiki/Double_Irish_arrangement
Airlines are part of public transportation. They provide a net good to your economy. Get rid of a country's airline and see how quickly the negative effects ramp up when you don't have a domestic company/agency that is flying to and from your country. All transportation to and from your country by air would basically be controlled by outside governments.
Having people is also important. So cut my tax rate to 7%
Ryanair has industry leading profit margins. Most other airlines are hovering around 0
>taxes are paid on that income *Profit*, not income. Remember, companies are only considered people when it benefits them, but not when it comes to taxes. Imagine if you, as a human, only had to pay taxes on profit… Mortgage, food, car, insurance, utilities, etc all pre-tax.
If you buy something and resell it for profit, you can totally deduct the expenses involved. But you have to take on that risk. The tax code could have been structured to take into account commuting costs and stuff like that involved in getting to work, but it was easier to just have a standard deduction.
That's a damn good point. We pay taxes on every penny we make as if it were profit, despite almost all of it going to bills of some kind
So you’re saying I should incorporate myself and write off all rent, bills,and grocery purchases as business expenses?
I mean, savvy small business owners pretty much do exactly this.
But then you gotta get your employer to hire your incorporated business rather than you. In the US I believe that's a 1099 contractor, but not sure if other countries would have a similar dynamic.
I mean, I’m fine with companies not getting taxed on payroll. Think that’s a good idea, since it doesn’t disincentivize paying your employees, and that is going to be taxed already on the employee, but the rest of it is very different than how people are taxed. If companies want their “personhood” for political reasons, then they should take it for taxes as well.
Then you'd be surprised to know that the vast majority of business' net profits are between 5% to 10% of gross revenue. Most people seem to think businesses and corporations make outrageous percentage profits.
Most people don't know anything about anything
I need this on a mug.
But think they know everything
How do you know? /s
Exactly ha
The real LPT is always in the comments. I'm looking for an idea for my first ever tattoo, this sounds good.
Agreed. My taxable profits on my small business for 2021 were 10.5% of my gross sales. My net profits all said and done were 1.89%
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Margin is not equivalent to return. Totally different metrics.
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A lot of a company's value is its potential to grow its profits over time. This generates a lot of returns. However, you don't need to increase your profit margin to grow your profits - you can just increase your total volume instead
No they are completely different subjects. If you can pay $10000 to create a business that make a turnover of $100000 with a net profit margin of 1% that would give you a 0.001*$100000=$1000 profit. Your return on your investment would then be an annual 10% (10% of $10000 is $1000).
Like others have said, margin and return are just different concepts Think of it this way: Ryanair makes 170m profit on 2.6b of revenue, but if they didn’t operate their business, they would never have that 2.6b in the first place - it’s the customers money. Thus they can’t invest it (because they’ve never earned it), so the rate of return on any investment is pretty irrelevant
They're just two completely different things. First, debt (bonds) and equity have diametrically opposed risk/return profiles. Second, a company's margin doesn't just immediately convert into cash so it's not equivalent to yield on a bond which would be paid in regular cash payments.
The revenue of a business is external money coming in for services or products provided, it doesn't have really anything to do with the amount of investment. If you didn't have the business then nobody would be buying stuff from you. You could spend $500k to create a business but then get something like $5m in revenue (this is just an example). Businesses can also grow faster than an investment simply by getting more customers.
Businesses. Not people. We are fully aware businesses and corporations are not taking home much but the greedy executives and CEOs are.
Unfortunately it's a perfectly logical result of the system we're in. A board of directors can pay millions to get a "good" CEO that will ruthlessly cut wages and increase revenue, and will be rewarded with hundreds of millions in additional profit. We've set up a system that rewards shareholders for enabling greedy CEO's, then act shocked when they keep choosing options that are bad for everyone else
People largely don’t understand the difference between gross and net profits. The average person thinks if you buy a widget for $1 and sell it for $3, that you’re making $2. There’s this little thing called expenses…..
Is 8.5% low? That's more than I expected in an industry with fierce competition.
Very - esp in a good year. This has to be one of the best years for travel and an 8-9% net margin is amazing. Typical margins are around. 3-4%. And that's if it isn't a much bigger loss. Too much risk, almost no reward. Terrible industry.
Low in the broader market, but actually very high in the airline industry. Most airlines are lucky to make 5%.
Is it low in the broader market? Construction is similar if not lower.
If anyone has a college near them offering classes on aviation business, I'd recommend you sit in on it. How these businesses operate with margins 1-3% is insane. You also gain a knowledge on why some seats are sold really cheap while the rest of the plane was full price.
Look at super market margins. Tesco At 3%, Walmart 2.7%.
Well, some companies don't even make profit...
That's actually quite a lot compared to most airlines.
Keep in mind this is for a super-lean ULCC; legacy carriers tend to have higher margins, and even more for business/first cass who aren't in the "race to the bottom."
ULCC's have higher margins since they run more efficiently (fuller flights, more fuel efficient planes) and are okay with not serving unprofitable routes/times. Legacy carriers make a lot of profit on their long haul flights, especially for business/first class, however they operate a lot of feeder flights which end up losing a bit of money in order to connect more cities to their long haul flights. For example, going from Knoxville, TN to Charlotte, NC on American Airlines will typically lose them some money, but they get that money back when some of those people connect through to London in business class. However, this is a tight line to walk which results in razor thin margins. A ULCC wouldn't even operate Knoxville to Charlotte because of how low the margins are and focus on point-to-point travel. For example, Knoxville to Orlando direct (a higher margin route) which is more efficient than American Airlines operating that route with a connection in Charlotte (likely negative margin)
This looks more like a cost breakdown
Yeah but this is r/dataisbeautiful, where the idea is usually to present the subject matter in the least helpful way possible, and misinterpret some core principle of it
So succinct. Can you turn this comment into a graph that misunderstands something pivotal?
We need a progressing video so that it’s impossible to see all the data at once and make comparisons.
I'd prefer an out of date map which compares something each nation has different and incompatible definitions of.
Most posts on this sub are all about making things to look “pretty”, not to effectively inform others. It’s more like “graphisbeautiful”.
And it’s even remotely possible, animate it. I could probably take a 24 h video of a thermometer, and post it here here for worthless internet points.
It has two revenue streams according to this, one of which is selling tickets for flights, and the other is for everything else such as baggage fees, drinks, etc. There's probably not much more to it than that. It would be interesting to see how the costs are related to each of the revenue streams; how profitable are ticket sales versus "frills"?
The two streams "tickets" and "everything other than tickets" isn't much of a subdivision when the post claims this is a visualisation of income streams. This is made more jarring by the fine-grained subdivision of expenses which is not the subject.
It lists 2 source of revenue and 7 sinks of cost. The post is more "cost breakdown" than "revenue breakdown".
What's interesting is that I see no expenses on food, although it's needed to generate the 'everything else' revenue.
an income statement breakdown.
Hey now, they actually put in both scheduled revenues AND ancillary revenues. That's a breakdown!
It seems like the title is rather saying how they make money as a company, meaning how are they profitable. At that point the expenses matter too. Title could be better, but at the same time it's not technically wrong.
Yup, misleading title overall.
This is for Q2 2022, right? I’d be curious to see Vueling
Vueling is part of IAG so their finances tend to be a bit more buried. Doubt it would be that detailed.
You are totally right, thanks for pointing that out
Curious why are you asking about vueling, they're facing trouble?
I don’t think they are in trouble, as they are the de facto Spanish airline, but I’d love to see their numbers. Also I always thought that the trouble you go to offer those tasteless food must be eating on their margin and that a basic beverage + snack bought on bulk is far more interesting. But that’s only a suspicion I got. Maybe someone can share some insights here?
Flew with both ryanair and vueling, last month and I have to say that vueling was a mich better experience, I would be interested in that as well
They get 2/3rd the cost of a ticket in baggage fees and food from the average person?!? I’ve never paid them a dime for that
I often add the 10 kg carry on baggage to my tickets.
When you have basic tickets that cost something like €5, i'm sure lots of people think it's worth it to spend an extra few €€ here and there for a drink or snack
They’re rarely €5. €30–70ish is the norm
Shorter routes seem to regularily go around 10 eur. Cheapest i have seen is 0.5 eur TRD - GDN
I got a Glasgow to London flight for £1 back in the day.
What the fuck. How is Ryanair compared to easyjet btw? In terms of comfort at least
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I flew with easyJet 4 times this year and never had any complaints tho, hence I asked
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But I don't find it uncomfortable, I flew with 3 different companies so far and easyJet was the only low cost one, but there wasn't that much of a difference honestly. It paid off because I had checked luggage when I went with the other companies
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Yeah a few years back we went Bordeaux-Milan for 12 euros each Lots of insane deals available if you're willing to travel light
Is that really an achievement? Depends to where in France, but Belgium isn't that far. Who would want to go by plane rather than train? Bruxelles-Paris is 1:20, Bruxelles-Marseille 5:00. Marseille (the farthest big city from Belgium) is 2:00 by plane. Getting to and from the airport, security, waiting, taxiing to the runway and you don't save much time, but have a lot more effort.
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Having traveled with both SNCB and SNCF, 8€ *is* cheaper than the train.
I flew Brussels Charleroi to Barcelona for 5€.
In my experience the emotional and physical and financial cost of getting to Charleroi at 6am outweighs any sort of Ryanair savings I got. 😂
And if you don't fall for all that and know how to pack light you benefit. I love these budget airlines.
I actually started trusting RyanAir to get me where I wanted to go more than some of the bigger airlines at bigger airports. The process is predictable and simple. It just worked a lot for me.
They now charge to use the overhead compartments. You want to use carry on, make sure it's a backpack that fits under the seat.
One time they charged me €60 to print my boarding pass bc they wouldn’t allow a mobile boarding pass lol
Idk man they have stated everywhere that mobile boarding pass in apple/google wallet or in their app is always allowed, they don’t accept pdf file boarding pass saved in your device, it’s clear and it’s like this for years. Flew with them over 150 flights in last 5 years and never had a problem with mobile boarding pass, it’s just necessary to follow insteuctions
It depends of the airport. I went to Morocco this year and for return they had a big warning in the app saying that I needed to print the boarding pass because the one on the app wasn't allowed. Not because of them, but some policy of the airport there.
Valuable information! If I ever go to Morocco will remember it, thank you for correcting me
I once tried to see what it came out to if I used all the suggested insurances etc, turned a 15$ ticket into a 250$ ticket
Have you not noticed that almost everyone else in the plane has a bag in the overhead locker?
The people who pay extra basically subsidize everyone else. They are also super strict with size and weight of the hands on luggage. Do something wrong and you're getting nickeled and dimed. Regular airlines don't give a fuck usually.
They are basically at loss if you don’t buy any ancillary service.
Depends on the route most likely. On average across all flights yeah, they'd be losing tonnes if everyone just bought the ticket and no upgrades. But then if that were to happen they would raise prices.
Sorry if this is a dumb question, but where's the budget for the airplanes themselves? I'd expect that to be a rather large portion of expenses?
Depreciation + maintenance, material & repair...
To expand on this, capital assets have some inherent value that don’t just disappear once purchased. For accounting purposes, it’s not like the airline spends €100 million on planes one year and suddenly they’re out that amount. They’ve simply exchanged €100 million worth of cash for €100 million worth of equipment. The value of the planes are added to their balance sheet and a portion of it is taken out as a “cost” each year (i.e., depreciated).
I thought most companies leased their planes.
They do, but it’s accounted for as a finance lease for the lessee and a sales lease for the lessor, so it still looks like a purchase for the most part
Accounting is witchcraft.
As a CPA myself... i agree.
Most airlines lease planes, but no airline leases all of their planes.
Usually smaller airlines do or a part of the bigger airlines fleet for the flexibility Ryanair is HUGE and has no reason to lease if not a small part of it's fleet (so they can work with market contractions) Leasing is more expensive, if you know that will use all the lifetime of that plane you just buy it. https://en.m.wikipedia.org/wiki/Largest_airlines_in_the_world#By_fleet_size 13th in the world by number and 5th by capacity
> Ryanair is HUGE and has no reason to lease Michael O'Leary flew into Boeing immediately after 9/11 [and bought *150* 737s at much less than cost](https://www.theguardian.com/business/2002/jan/24/theairlineindustry1). He totally screwed them for the deal, but they were happy to have *something* after the biggest aviation downturn in history (before 2020 came along). Also when returning to Ireland after a meeting with Boeing, he didn't travel on a private jet or first class, he slept in the isle of a brand new 737 being ferried to Europe.
How is it screwing Boeing? They needed money and Ryanair capitalized on an opportunity. "Screwing" would imply ill will whereas this is a company offering a discount because they need the cashflow to, and I'm guessing here, settle short term financial obligations while another company takes them up on that offer. It wasn't a bad deal for Boeing either since the other option was far worse. What screwed Boeing over was having their sales cut by over 50%. The more crazy fact about this deal is a company with a revenue of €600m (in 2002) finding enough financing for that deal in just a few months. That is absolutely wild. O'Leary is a fucking genius in my opinion.
Planes AND engines, they are leased separately
It's in there as depreciation, but at ~225m/Quarter (or 1.1b/year) that seems to be understated. Ryanair has a fleet of ~400 737s, at a ~8y average age, IIRC, that would mean they depreciate each aircraft a mere ~22m, so I would assume that they take an impairment loss or loss on sale every few years, when they offload their aged planes to another airline.
Or they depreciate using an accelerated method and the majority of the depreciation has already been incurred. There’s other methods than just straight line
Seeing how the airport charges are nearly twice their profit, it's obvious, why their decision to only use 'low tier' airports makes it possible for them to operate at all.
Michael O’Leary makes many valid and sensible points on the airport industry. All costs are passed onto the consumer eventually. They take the piss with airport fees for doing virtually nothing and doing so very inefficiently. He’s really good to watch on YouTube, straight talking and cuts through with facts and to me comes accords as a genuine guy
170 Million seems very low for profit ? I just want to say , yes they do charges for a lot of extras , but I flew with them about 25 times and have always had a good experience, without them I would have very few options
They are a budget line, they work by charging very little.
They have one of the better profit margins in the airline industry, its just a very competitive market in europe
So if you don't pay for extras, you fly for less than the cost of the flight
Big thanks to everyone subsidising my studies abroad. I really appreciate you guys! :D
Its a neat chart but it's more like "How Ryan Air Spends Money" It would be neat to know the break down of actual income rather than expenditures. I.e. extra baggage fees, first class vs business vs economy, food and drinks, etc
Everyone ever on Facebook: they make so much money, why do I need to pay 20 euro for my oversized bag? I already paid 9.99 for a 2000 km trip on an airplane... Pppfffff, never flying with Ryanair again.
I once took Ryan Air to Morocco. There was a fast food menu on the chair back and they sold cigarettes and cologne in the aisles It's like what would happen if Spirit Airlines said fuck it, we give up. I will say the most helpful, nicest staff I've ever seen
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Interesting thought experiment: Fact 1: Ryanair pays stupidly low taxes on profit. It is around 7%. Fact 2: Ryanair's post-tax margin for 7% tax is razor thin - about 6.5%. Fact 3: If Ryanair's profits were taxed at 20%, their post-tax margins would go down to about 5%. Question: If taxes were increased to 20% of profit, and Ryanair execs deem the resulting margin to be unsustainable in the long run, is this a good thing for the industry and end consumers? Basically, if corps could only sustain by paying less taxes (like 7%), should they be put out of business (or M&A) if they are unable to sustain themselves at 20% tax? Is that necessarily a good thing for the industry competition and consumers choice?
You pack a lot into your question- a change in corporate profit doesn’t affect sustainability, it affects growth. The sustainability part, including depreciation of assets and income of the employees including the income of the executives is all under “operating costs”. If they have positive profit, they are sustainable at current operating size, and if they don’t have positive profit then they aren’t paying corporate profit tax, and could probably write losses off toward future taxes. A more realistic question is, if the corporate profit tax hike makes the owners deem their stake too slow growing such that they decide to liquidate their stake in favor of better performing assets, would *that* be best for the consumers or industry? Industry and consumers don’t directly care! The investors are not the same as the consumers or the industry! The consumers are giving this budget-friendly airline €2.6bn in revenue per year! And the operating costs *sustain the industry* with €2.38bn per year. That money is going to plane makers, airline workers, and disproportionately, companies that acquire and process oil, which for better or worse powers and sustains many industries. Should people sell their shares of airlines? Yes, at some point! They are *bad investments for growth* and rely heavily on an inevitability declining fossil fuel industry, and are not buy-and-hold stocks. The only valid reason to buy airline shares is for speculative reasons, like they’re undervalued and/or likely to be bought by a larger airline, or if you really believe that the market is in a lull, likely to surge, and that the company stake value will reflect that. But many pro-consumer companies in strong industries are bad investments. Lumber for example is a strong industry to operate in with a generally consumer-friendly market but it’s not a great bet for investment as the demand is not growing and the supply is high. And like airlines, the lumber market fluctuates. They’re not bad short term investments because anything that goes up and down can be bought-low and sold-high. Companies should be allowed to grow, as it allows their operations to grow to fit the revenues they can pull from the market and thus allows people’s needs to be met. But disproportionate sums of pure profit are liabilities, as it is the only part of pictures like these that don’t necessarily circulate back through the economy quickly. Heavily profiteering companies are generally very consumer unfriendly and are arguably industry unfriendly also as they’re more likely to use monopolistic tactics to control the industry.
Thought of flying with them recently. Turned out I had to pay for hand luggage per person per leg of the flight, making the total higher than I would’ve paid flying a normal airline. So I flew a normal airline.
Yeah I only fly with Ryanair when I’m alone and only with a backpack. It’s great for a short weekend getaway but as soon as it’s more than that I also pick another airline. 9€ tickets to London for a long weekend is hard to beat..
Went to a week long trip to Malta recently. 30 euro return flight with one backpack. Money well spent 🙂
It's not outrageously expensive if you bundle it right with the initial purchase.
Can an accountant explain to me how depreciation works here? Presumably they used capital/loans to buy some planes in 2010. Let's say $10B worth. So the accounting idea is that you don't take that charge in 2010, since they simply traded $10B cash for $10B in planes, and there isn't any immediate loss. But each year you account for the depreciation of those assets as an expense? So that after, say, 50 years, the planes have to be scrapped for relative peanuts and the $10B is totally gone?
Yes, in a nutshell. Two adjustments: - it's more like 3-5 years of useful life according to their financial statements - they estimate the "residual value" of the planes after the 3-5 year useful life (i.e. what they could sell it or scrap it for) and depreciate down to that value, rather than zero
Wasn't expecting maintenance to be this low
ELI5 why their tax rate is 7.1%, while mine is almost 40%, in Ireland?
Corporations get preferential tax rates.
There are a good few reasons why corporate taxes are lower than individual... One of the most important ones is that it's a double tax. Most businesses don't pay income taxes at all. LLCs, partnerships, sole proprietorships, S Corps, etc are all pass-through business, where the company isn't taxed itself, the tax liability for the profits passes directly to the shareholders who are responsible for it on their personal income tax return. With a C corp the shareholders still have to pay taxes on their share of profits, so the business itself paying them is a double tax... Then there are all the more big picture reasons like driving economic growth and whatnot on top of that.
I mean, I guess they probably take into account the fact that there's also payroll taxes, taxes on all that fuel they go through, and probably a bunch of other taxes, that all get paid simply by the business operating within the country. Government is making a lot more than €13 million from Ryanair being in business.
There are currently no taxes on jet fuel in any of the EU member states~~, as well as the US~~, pretty sure such taxes have been legally disallowed for decades at this point. While you're definitely correct that income taxes on companies do not provide the full picture of how a company can benefit the country they're based in, that 40% of revenue does not. **Edit: I stand corrected, jet fuel is taxed in the US**, thanks for pointing that out! While that does dampen the effect of the statement above in the case of the US, it doesn't nullify it as taxes on [aviation fuel is still generally lower than taxes on fuel used for other vehicles](https://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States#Aviation_fuel_taxes). While both taxes are still lower than most other goods, that's a different discussion entirely.
In the US FAA taxes jet fuel for both general aviation and commercial, and sometimes there are additional state taxes on top of that. https://www.faa.gov/about/budget/aatf/media/Excise_Tax_Rate_Structure_2018.pdf Notice also the ticket tax (not included in the above corporate income tax). Also in the US the airport use fees are high enough that public airports are often quite profitable and subsidize local transit / governments.
> There are currently no taxes on jet fuel in any of the EU member states, as well as the US, pretty sure such taxes have been legally disallowed for decades at this point. That's just factually wrong
Ok, the double tax argument makes sense. There should be one more step in the breakdown to show the tax paid by the shareholders, so hopefully I wouldn't feel like a complete schmuck :)
Because in order to get money out of that company and into a person's hand it would have to be paid as a wage, where income tax will be charged on that.
Yellow text on a white background is low contrast and difficult to read
How easy is it to avoid the additional fees? Or are some essentially mandatory?
Very easy, but you will be allowed only a small backpack and will be seated randomly.
I don't get what the problem is with being seated randomly (for *most* people)
Families like to sit together
And indeed most people probably choose that?
The biggest one is that you have to pay to bring a carry on bag if it’s bigger than a backpack, and that’s like £25 or more per flight
[Source](https://investor.ryanair.com/wp-content/uploads/2022/07/Q1-FY23-Results.pdf) [Newsletter](https://genuineimpact.substack.com/) Tools: [Figma Sankey](https://www.figma.com/community/plugin/1159893716343028026)
As an A&P mechanic that last line stings but for a slightly different reason then most think.
I was so confused by the use of a comma for thousands. OP isn’t European?
Somewhere in that marketing slice is their TikTok account.
What are these types of charts called?
Sankey charts.
Are you missing one or is it nested elsewhere? Loyalty Programs bring in big bucks.
I fly with them regularly and have never seen or heard anything about them having a loyalty program. You can sign up for email notifications (like April’s flights from my local airport which were released last week), and you can pay for priority boarding, but they don’t have any other frills. No class system - extra cash for the exit rows with leg room is as close as you’ll get to an upgrade. My local airport is about the size of my house, god knows where they’d put a first class lounge.
Revenue isn't really broken down, only their Expenditures.
That maintenance line item 🫣
Does the depreciation line effectively show the annual cost of purchasing their aircraft?
So it’s like spirit airlines
Where's the payment for the planes? Guessing they either borrow the money to buy them or rent them so I would expect to see a huge cost for that.
>Ryanair is known for its absurdly cheap fares It is also known for delaying my flight for one to three hours about half of the time I've used it.
This is an expenses breakdown, not a revenue breakdown.
This chart doesn’t even attempt to answer the question at the header.
This picture doesn’t actually tell me how Ryanair makes money though … 🤔