WILL RYANAIR LONG-HAUL
AFFAIR TAKE OFF?
Last month, during an interview Michael O’Leary
said that within the next ten years, the company would provide connecting
flights for the flag carriers.
Irish Ryanair CEO Michael O’Leary never backs down in the face of any provocation. He is well known for his relentless provocations such as toilet fees, standing up passengers, in flight sexual services. But none of these announcements were ever carried out.
Ryanair
has long hoped to offer long-distance flights
Ryanair's
will to go transatlantic is not recent - its CEO announced many times that he
wanted to offer low fares for long-haul destinations. The company obtained a
strong position in Europe by reducing every possible cost and expects the same
achievement for transatlantic set ups. Regarding the market high fares, Michael O’Leary
believes Ryanair has a significant competitive advantage. Furthermore, flights
between Europe and the US are very lucrative and giving that only a few low-cost
companies are on the market, it would be very profitable for Ryanair to enter.
Although Michael
O'Leary declared that he would introduce €14 flights, which makes us wonder about
the sustainability of the project.
Long-haul
flights' low fares are risky
Many
companies went bust trying to offer low fares before and Ryanair may be
taking a risk. Even though O'Leary announced that only a few seats would actually
cost €14, the average cost would more likely be between 80 and 100 euros. The
CEO wants to copy the short-haul model, proposing low fares for economic
class and high fares for business class. It may, however, be problematic to
maintain the cost savings necessary for cost-effective long-haul routes, even with
an expensive business class. Although the short-haul model works thanks to a quick turnover and because passengers are allowed to have and carry
the bare minimum on board, it will not be possible for long-haul flights.
Furthermore,
in 2013, another low-cost airline called Norwegian Air Shuttle, launched a long-haul
service offering a return ticket from London’s Gatwick airport to New York
starting at £389. But the expenses of
expanding into the US pushed the company into the red.
Long-established
airlines are coming back from the crisis and are healthier thanks to the low oil prices,
which makes them more competitive. Ryanair would also have to purchase a new
fleet of airplanes.
Ryanair
could profit from favourable economic conditions
In the
meantime, the development of more fuel-efficient aircraft and the low oil
rates should give Ryanair some good conditions for expanding and yield higher
profits. The company would also have a good positioning compared to the premium
and low-cost companies by offering a 65% discount.
Recently Ryanair
has also seen a rise in profit hopes after customer service improvements,
such as the increase of carry-on luggage and the reduction of punitive
charges. The firm has also improved its website and set up a service for
business customers.
Ryanair
eyes feeding flag carriers
"The board of Ryanair (...) approved
development projects for future growth, including a transatlantic project" said the Irish low-cost company. While
the Irish low-cost carrier does not have its own long-haul network, Michael
O'Leary said that discussions had been initiated to feed intercontinental flights
for traditional companies. Air France-KLM and Lufthansa are for example in his
sights. “The low-fare airlines will be
doing most of the feed for the flag carriers", Ryanair chief executive
Michael O’Leary said in an interview.
The
long-established airlines will keep on supplying their main hubs but they will count
on low-cost companies to deliver passengers to secondary airports across Europe.
Mr O'Leary added "It’s not going to
happen tomorrow, but in five or 10 years time (...) Lufthansa will continue to
serve their main Frankfurt and Munich hubs from the 10 or 20 most important
European Union cities (...) But they will say: look, we’re losing money serving
the next 20 or 30 European cities - why don’t we do a deal with one of the
low-cost carriers?”
A major strategic shift
In order to
seduce the long-haul airlines, Ryanair is now looking to appeal to a broader
customer base. It represents a major shift for the company since it will have
to change its model, improve its service, add frequencies and target primary
airports. It also puts at risks the company because this significant change will perhaps not find the success expected and damage the company. Yet, Michael
O’Leary is ready to seize the opportunity and believes that the company's turn
will be very profitable in the future, and moreover that the company would
benefit from a possible oil crisis. In this event, the long-haul airlines
would suffer a lot while Ryanair would gain more customers.
Lucile R.
Hello Lucile,
ReplyDeleteyour article is very interesting. I have never taken a low-cost air-plane for a long-haul destination. Do you know if, i.e. Norwegian Air Shuttle is really comfortable for travelers? I mean, for instance, do people have enough place? Or there are seat-back TVs? Meals are included ? Because, for me, if you take an 8-hour flight it is quite cool to have some comfort.
Kristina C.
Hello Kristina,
ReplyDeleteThank you for your comment! I am not a specialist of long-haul low-cost companies but I once used one airline named XL airways. Maybe you know it, it is a French firm, which goes to the Caribbean, the United States and other long-haul destinations. Their characteristics are between short-haul low-cost airlines such as Ryanair and long-haul airlines such as Air France. I mean you have to pay to choose your seat, also they give you one meal in the middle of the 9 hours flight and some water but you have to buy anything else you need. And for instance, when I flew with XL airways, many seat-back TVs were broken and the staff only had a few tablets to lend.
To put it simple, conditions are better than in Ryanair's flights but it is never as good as in traditional airlines. You will always miss or need something that is not included, since the core of the low-cost model is to charge you every extra service.
Lucile R.
Hello Lucile
ReplyDeleteI think that your article is very interesting, and I would like to give you my point of view on this subject.
I do believe that lowcost airliners are mean to be regional airliners. When we talk about a longhaul flight, the lowcost business model is not compatible. Lowcost companies in order to reduce operational costs need to cut amenities and operate differently from traditional flag carriers. Operating widebody aircrafts its much more costly than narrowbody ones, flying transcontinentaly means carrying extra fuel and offering a catering service wich implies more costs to companies. I am sure that clients don't care of not having a "nice" service when taking a plane for a short flight, but when it comes to a long-haul flight,clients prefer companies that provide a better service, and that's the reason why Emirates or Etihad are so sucessful on this model.
Thank you....
Alonso B.
Hello Alonso,
ReplyDeleteThank you for sharing your thoughts! I think your comment is very interesting but I do not entirely agree. It's true that many customers will prefer companies that offer better services but I think that Ryanair's offer could answer a need. An exemple I could think of would be expatriates who still have family in their home country and for whom the travel is purely functional.
Lucile R.