Markets lap up the airline's low-cost model

Analysis: Even the most cynical analyst cannot argue with the numbers.It is hard for even the most committed cynic to argue with the numbers presented by Ryanair yesterday.

Everything was up, apart from costs, which were, as might be expected, well down. The now-familiar model continues to perform and the markets continue to lap it up, with the company's share price yesterday reflecting the general open-armed welcome.

The enthusiasm is well-founded, with the context surrounding Ryanair's numbers telling as much of a story as the financials themselves.

The global economy, despite glimmers of growth here and there, remains listless, with growth forecasts uncertain and most stock markets down more than 20 per cent in the year to date.

For an airline to post after-tax profits of €151 million for the first half, up a massive 71 per cent on the same period a year earlier, is undoubtedly worthy of admiration. Analysts were certainly impressed. Mr Liam Igoe of Goodbody spoke of "great numbers", while Mr John Mattimoe of Merrion Stockbrokers upgraded his full-year forecasts by 15.5 per cent on the back of "a super set of results".

Mr Mattimoe says that beyond freak acts of God or internal stupidity (or both), nothing looks like upsetting Ryanair's continued growth. EasyJet, even when the integration of Go has been completed, will always find it hard to mimic Ryanair's low-cost growth when it continues to fly into mainstream airports, Mr Mattimoe says.

Mr Igoe also expects Ryanair to remain unchallenged in the short term but says that a "more difficult operating environment" is likely to develop in three or four years.

It is not hard to see why this might be the case, as even the most traditional of airlines tries to take on a value spin. Witness Aer Lingus and its fare offers, or Continental and its withdrawal of free alcohol, for example.

There is also the chance that new low-cost airlines could enter the market for the first time, as Ryanair once did. Even with such a development however, the chances of Ryanair suffering too much look slim, such is the proven success of its low-cost model.

"All across Europe, you have an airline industry which doesn't yet meet market demand for supplying customers with low-cost fares," said Mr Igoe yesterday, pointing to the endless route permutations that remain untapped. Ryanair's foray into an airport 90km from Barcelona is just the most recent example of this.

From expected total passenger numbers of 15 million this year, the company expects to rise to 40 million in 2008.