Cutting prices is usually bad for corporate profit. Not so at Ryanair, Europe's largest airline by passengers carried. It answered falling demand for air travel after the attacks on Paris in November with a fresh round of discounts, attracting a fifth more passengers than a year earlier and more than doubling its earnings in the quarter ending in December.
The carrier's formula isn't really magic. It has lower costs than its peers, which allows Ryanair to cut ticket prices to boost demand while still remaining profitable. Non-fuel costs stand at 29 euros per passenger - a quarter below the next-best rival, Hungary's Wizz Air. With an average ticket price of 40 euros, the more seats the company can fill per flight, the higher its profit.
Only seven per cent of seats on the average Ryanair flight remained empty in the last three months of 2015, compared to 12 per cent in the previous year; and earnings in the quarter more than doubled to 103 million euros, or eight per cent of sales, from a year before.
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Higher-cost rivals cannot keep up. But Ryanair's lead may narrow anyway. It uses smaller and less busy airports which charge significantly lower landing fees than the big ones. To woo more business travellers, Ryanair is launching more routes to primary airports like Rome Fiumicino and Amsterdam Schiphol, which are more popular yet also more expensive.
For now it is still making the numbers work. Non-fuel costs per passenger fell one per cent in the October-to-December quarter compared with a year earlier, and the airline expects them to fall two per cent over the full year. Low oil prices give further room for price cuts.
Ryanair's stock has been airborne too. Having gained 52 per cent in a year, it is trading at 12.5 times the next 12 months' forecast earnings, compared to easyJet's 9.9 times and Lufthansa's 4.8 times, Eikon data shows. The seats come cheap, but the shares no longer do.
