In a move that has left market watchers raising an eyebrow, Ryanair has abruptly reversed its controversial policy of charging for adjacent seating for children. The British aviation regulator, the Civil Aviation Authority (CAA), has been quick to claim credit, citing 'consumer pressure'. But let us not be naive.
This is a company that built its empire on ancillary revenue. The true cost of this U-turn will be buried elsewhere, perhaps in higher base fares or tighter baggage allowances. The CAA's posturing is a classic case of regulatory theatre.
Meanwhile, shareholders should brace for an impact on the bottom line. Ryanair's model relies on squeezing every penny from passengers. This concession, however small, signals a shift in the regulatory wind.
The question is: what next? Will the CAA now train its sights on other fees? The market does not like uncertainty.
Expect the shares to trade cautiously until the full implications are clear.
