Ryanair - 6
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Right, at some stage this business model has probably been absolutely perfect, but in order to address the changing business environment every model requires constant changes either. And haven't you noticed how much the situation has changed in recent years? No matter how successful any model initially might be, if it is not flexible enough and unable to adjust to the different situation - it should simply be trashed or significantly reshaped.
If you say that it's perfect to give away flights for nothing still having to keep a significant share of planes grounded, I'll tell you it's a b
t, nothing else, not a reasonable policy anyway. We know the business environment is extremely challenging at present, but the Ryanair's attitude didn't change at all, we hear the same old answer how to improve the strategy. Keep reducing costs, sell flights for nothing, earn on everything else. In a short-term perspective this policy can still be half-successful, keeping the carrier afloat and without any dramatic consequences, but in a long term it's just unsustainable. You want more passengers, you must serve them better, in a more friendly and more versatile way. That's why the customer relations should be improved, the flights diversity achieved.Now selling "FREE" flights, how are they going to impress their passengers next year? Paying them to fly?
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Last edited by eu01; 7th Oct 2008 at 17:47.
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Free Flights
The facts on Ryanair revenues and costs are in the public domain. Check out their investor relations material.
http://www.ryanair.com/site/about/in...rter1_2009.pdf
Here you will see that actually the average revenue per passenger is low, but nevertheless and very importantly revenue is significantly higher than their costs per passenger. Ancillary revenue is also very important.
Certainly some flights are given away, but some too are sold at (very) high prices. The undeniable net result is still a very profitable airline. So the free flight debate is moot, what really matters is the total revenue and the total cost. If individual routes don't work they get chopped.
Yes the data in the pdf is several months old, but you will only have to wait until the first week of November to see the Summer figures (to Sep 30)
I for one will bet that the November report will show the airline is still in the black, and that the company will say that things were not quite as bad as expected because of the heroic measures that were taken through the summer.... but that the winter will be very tough... so no time to be complacent (and cancel unpaid leave for example).
And as for the winter, the airline is now several aircraft light of plan because of the Boeing strike, hence improved utilisation (than plan) and hence lower unit costs for the fleet that is in service.. I wonder too what compensation Boeing will pay...(more heroics)
In the end the Ryanair model works, although I'd be the first to agree that I dont understand why on some routes...
The industry needs successful business - RYR consistently demonstrates its credentials in that regard - free flights included.
FF
http://www.ryanair.com/site/about/in...rter1_2009.pdf
Here you will see that actually the average revenue per passenger is low, but nevertheless and very importantly revenue is significantly higher than their costs per passenger. Ancillary revenue is also very important.
Certainly some flights are given away, but some too are sold at (very) high prices. The undeniable net result is still a very profitable airline. So the free flight debate is moot, what really matters is the total revenue and the total cost. If individual routes don't work they get chopped.
Yes the data in the pdf is several months old, but you will only have to wait until the first week of November to see the Summer figures (to Sep 30)
I for one will bet that the November report will show the airline is still in the black, and that the company will say that things were not quite as bad as expected because of the heroic measures that were taken through the summer.... but that the winter will be very tough... so no time to be complacent (and cancel unpaid leave for example).
And as for the winter, the airline is now several aircraft light of plan because of the Boeing strike, hence improved utilisation (than plan) and hence lower unit costs for the fleet that is in service.. I wonder too what compensation Boeing will pay...(more heroics)
In the end the Ryanair model works, although I'd be the first to agree that I dont understand why on some routes...
The industry needs successful business - RYR consistently demonstrates its credentials in that regard - free flights included.
FF
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Flitefone, FR still is one of the most profitable airlines in the business, no doubt about it. The free flights are a great marketing inducement and as such are necessary as well. Indeed, FR is not losing money so far.
What I can see, it's their unwillingness to use other marketing tools than just low price and the important limitation resulting from the unsatisfactory (too one-sided) offer at minor airports. Some of these routes are getting chopped - but with a bit different approach these could be very prosperous too (if a point-to-point majority of flights were carefully complemented by some connecting flights). I know, MOL doesn't want to bother with any frills, but the market is pretty saturated nowadays and a "softer" approach might help. It's not a costly solution.
What I can see, it's their unwillingness to use other marketing tools than just low price and the important limitation resulting from the unsatisfactory (too one-sided) offer at minor airports. Some of these routes are getting chopped - but with a bit different approach these could be very prosperous too (if a point-to-point majority of flights were carefully complemented by some connecting flights). I know, MOL doesn't want to bother with any frills, but the market is pretty saturated nowadays and a "softer" approach might help. It's not a costly solution.
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eu01 I have to say I agree with you whole heartedly when you say:
Ryanair need to build a brand, one that people actually want to use rather than one that is so cheap that they choose it, a brand that is perceived as fun and innovative. MOL is truly missing a trick here. Free flights are a great marketing tool, but people dont usually place too high a value on something that they get for nothing, and consequently the perception of the brand.
Southwest through their people make flying fun, and people would in the USA see the airline as a carrier of choice and it is not seen as Ryanair is here, ie cheap and nasty.
Just my thoughts on the subject... One or 2 big brand building initiatives could turn this around. But they need to employ someone with expertise in this area, not simply rely on sales managers to create spin around something going on to gain publicity.
I believe that easyjet is seen as a good brand, it has moved up the ladder in terms of brand positioning. It's use of key airports and suitability to business travellers have also helped.
EI-BUD
their unwillingness to use other marketing tools than just low price
Southwest through their people make flying fun, and people would in the USA see the airline as a carrier of choice and it is not seen as Ryanair is here, ie cheap and nasty.
Just my thoughts on the subject... One or 2 big brand building initiatives could turn this around. But they need to employ someone with expertise in this area, not simply rely on sales managers to create spin around something going on to gain publicity.
I believe that easyjet is seen as a good brand, it has moved up the ladder in terms of brand positioning. It's use of key airports and suitability to business travellers have also helped.
EI-BUD
Ryanair routes
I know there's all the stuff about middle-of-nowhere airports being so desperate for passengers that they'll charge minimal fees to airlines. Further because the airports are largely deserted there's no congestion to worry about - so aircraft turnaround time can be very quick.
But...
I think MOL has realised that he needs to start flying to real places. Madrid is now a chunky base - albeit because there aren't any other suitable airports for miles around. Almost all the other bases are near big urban centres. He's now flying to places like Prague and Budapest.
Even SouthWest are flying to big cities - and land for airports in the US is at less of a premium than in much of Europe.
All the airports in Europe are now wise to Ryanair's penny-pinching tactics - giving him a fantastic deal for 2 years in the hope of significantly raising charges afterwards doesn't work. Further, Ryanair have got a load more 738s to deploy - the only real option IMHO is to increase flying to airports not too far from big cities. The Stansted-Balaton route doesn't seem great over the winter !
But...
I think MOL has realised that he needs to start flying to real places. Madrid is now a chunky base - albeit because there aren't any other suitable airports for miles around. Almost all the other bases are near big urban centres. He's now flying to places like Prague and Budapest.
Even SouthWest are flying to big cities - and land for airports in the US is at less of a premium than in much of Europe.
All the airports in Europe are now wise to Ryanair's penny-pinching tactics - giving him a fantastic deal for 2 years in the hope of significantly raising charges afterwards doesn't work. Further, Ryanair have got a load more 738s to deploy - the only real option IMHO is to increase flying to airports not too far from big cities. The Stansted-Balaton route doesn't seem great over the winter !
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I think MOL has realised that he needs to start flying to real places.
I'm not sure if big airports are always an option to consider. Sometimes it's a must, when there is no alternative solution (like SXF; for FR it is a good destination, why not a future base, where the carrier has been able to make some money apparently). Sometimes a good deal decides (like in MAD, whereas the new big Don Quichote/Madrid South in Ciudad Real seems to have lost the battle). Sometimes flying to big ones it is not really necessary (would it make sense to fly to LHR having the other three viable airports?). Serving smaller centers does have some advantages too - less competition at least. How to give these pax more places to fly? That's a bit more difficult. If these connecting flights are not considered, what else?
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I've been away and have only just seen the posts about new routes from Madrid.
I am familiar with the Madrid-Alicante route and have used it a fair number of times over the years. I have noticed, however, that Iberia has raised its fares on this route quite a lot in the last year or so with the lowest option ("Web fare") becoming relatively expensive. Spanair fares when I last looked were similar except for a few flights at unpopular times.
The fast Renfe line will be completed to Valencia before Alicante and this will obviously have some impact on the airlines.
P.S. Does anyone know when the check-in machines at STN are coming into use? A good move by Ryanair, I think.
I am familiar with the Madrid-Alicante route and have used it a fair number of times over the years. I have noticed, however, that Iberia has raised its fares on this route quite a lot in the last year or so with the lowest option ("Web fare") becoming relatively expensive. Spanair fares when I last looked were similar except for a few flights at unpopular times.
The fast Renfe line will be completed to Valencia before Alicante and this will obviously have some impact on the airlines.
P.S. Does anyone know when the check-in machines at STN are coming into use? A good move by Ryanair, I think.
A few examples of why: Banks/economies in melt down, less money available for loans to buy/refurbish that second some abroad, people perhaps less willing to part with cash to pay for weekends away in Carcassonokgraditz.... all adds up to uncertainty about future passenger numbers all adds up uncertainty about how much Ryanair will make in profit in the future, means uncertainty about the future share, means uncertainty about any dividends all leading to a weak share price, etc etc etc.....
... or Herc708 more neatly put it "the market"
... or Herc708 more neatly put it "the market"
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I agree 'the market' is the reason - in that stock markets are not operating in any sort of rational manner at the moment. If you were to aquire Ryanair today at it's closing share value of €2.00, ignore any potential future income, shut it down, pay all outstanding liabilities it has and then sell all it's current owned aircraft at approx. €28/29million each you would make a slight profit! That's not taking any other sources of income from it's sale into account.
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Ryanair and big airports
We've just discussed if Ryanair is more prone to fly to "real places" nowadays. Well indeed, some moves are taken.
Jydske Vestkysten (Denmark) citing Borsen writes today (here a rough translation of mine):
"Ryanair is planning flights from Copenhagen Airport in Kastrup within the next year".
The Danish aviation market will soon be challenged by another player in Kastrup. Europe's largest low-cost carrier Ryanair is planning flights from Copenhagen Airport within six to 12 months, thus intensifying the competition.
The opening of the facilities at the new low-cost terminal, Swift, makes the Danish capital an attracttive destination for the company, and although the terminal will not open before 2010, Ryanair want to introduce flights from Copenhagen already in 2009.
- We are very interested in the Danish market, and Copenhagen is a good and attractive market for Ryanair. We will grow by 10 million passengers within the next 12 months, and I hope that between 500,000 and one million of that passenger growth will come from Scandinavia, says Michael Cawley, vice Adm. Director and Operations Manager of Ryanair.
So yes, it's the next "real" airport closely monitored by FR.
What is the Swift terminal? Here some more information concerning this new low-cost terminal (or directly from the CPH site).
Jydske Vestkysten (Denmark) citing Borsen writes today (here a rough translation of mine):
"Ryanair is planning flights from Copenhagen Airport in Kastrup within the next year".
The Danish aviation market will soon be challenged by another player in Kastrup. Europe's largest low-cost carrier Ryanair is planning flights from Copenhagen Airport within six to 12 months, thus intensifying the competition.
The opening of the facilities at the new low-cost terminal, Swift, makes the Danish capital an attracttive destination for the company, and although the terminal will not open before 2010, Ryanair want to introduce flights from Copenhagen already in 2009.
- We are very interested in the Danish market, and Copenhagen is a good and attractive market for Ryanair. We will grow by 10 million passengers within the next 12 months, and I hope that between 500,000 and one million of that passenger growth will come from Scandinavia, says Michael Cawley, vice Adm. Director and Operations Manager of Ryanair.
So yes, it's the next "real" airport closely monitored by FR.
What is the Swift terminal? Here some more information concerning this new low-cost terminal (or directly from the CPH site).
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£10 Flights As Ryanair Aims To Cash In.
From Daily Mail either Wed or Thursday.
Ryanair is planing to launch a discount transatlantic airline offering fares as low as £10 a trip.
Boss Michael O Leary disclosed his plan yesterday as he said the credit crunch and passengers trading down was good for business.
He delivered an upbeat forecast for his company at the London Chamber of Commerce.
He said he may create sister company to launch longhaul, low-cost airline,
if a wave of bankruptcies mean more cheap aircraft become available next year.
The budget airlines chief executive said "The only time to set up an airline is when they are parking planes in the desert. We are not very far from that at the moment.
The new carrier is expected to fly from Stansted and Prestwick to a number of U.S. airports and could be operating within 2 and a half years.
Tickets may cost as little as £10 , but passengers will face additional costs such as for inflight meals.
He said the economic outlook was "great" as the general public "will never stop" flying. End quote.
Good for you Michael and wish you every success.
Ryanair is planing to launch a discount transatlantic airline offering fares as low as £10 a trip.
Boss Michael O Leary disclosed his plan yesterday as he said the credit crunch and passengers trading down was good for business.
He delivered an upbeat forecast for his company at the London Chamber of Commerce.
He said he may create sister company to launch longhaul, low-cost airline,
if a wave of bankruptcies mean more cheap aircraft become available next year.
The budget airlines chief executive said "The only time to set up an airline is when they are parking planes in the desert. We are not very far from that at the moment.
The new carrier is expected to fly from Stansted and Prestwick to a number of U.S. airports and could be operating within 2 and a half years.
Tickets may cost as little as £10 , but passengers will face additional costs such as for inflight meals.
He said the economic outlook was "great" as the general public "will never stop" flying. End quote.
Good for you Michael and wish you every success.