Ryanair - 7
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The Observer quotes MOL saying: "Ryanair must move away from low fares". In the article we can read among else:
"It becomes more about the brand game". Oh indeed? I'll quote my own post from 2008:
And of course, the recent "pee-fee-style" propaganda didn't help the brand either.
Let's wait a year or two and we'll hear about the connecting flights (the issue of such necessity in selected hubs I've been rising for years). For all skeptics: it must happen to improve the demand, the aircraft usage (LF's) and yields. If that conception does not fit the FR business model, this model has to change, other options are scarce. Moving away from low fares can be achieved only partially. FR has educated people to associate "Ryanair means flying cheap", hence the fare level can be risen just in a very limited way. One of the solutions: giving pax flying from smallish end-destination more choices. Not only, say, Hahn, CRL and Barcelona for these guys, but also a few more connections via one of these bases.
MOL is smart to reduce the aircraft usage in winter in order to reduce possible losses. Even smarter, he could have tried a few indirect routes. Just to test them in practice.
O'Leary indicated that an average fare of €40 (£33) is unsustainable. The airline is facing pressure on costs as it moves into major airports closer to city centres in a quest for more passengers and will also be under pressure to improve levels of service. "We have to move away over the next number of years from being obsessed with having the lowest fares in the market," O'Leary said.He added that Ryanair will have to become a more sophisticated operation as the business reaches maturity: "Growth rates start to slow down significantly and it becomes more about the brand game, telling all the lies that you need to tell to get the fares up."
In a departure from his usual business philosophy, O'Leary said Ryanair would need to trumpet attributes other than cheap fares – such as its young aircraft fleet and "terrific" in-flight service. Comparing Ryanair with retail giants Tesco and Lidl, O'Leary said the Dublin-based carrier would have to move beyond the "cheap and naff" labels that were attached to Tesco before it overtook Sainsbury's in the 1990s. "At the moment we just pile it high and sell it cheap. Lidl started off cheap and cheerful but now it is very sophisticated – it is no longer perceived to be cheap and cheerful."
In a departure from his usual business philosophy, O'Leary said Ryanair would need to trumpet attributes other than cheap fares – such as its young aircraft fleet and "terrific" in-flight service. Comparing Ryanair with retail giants Tesco and Lidl, O'Leary said the Dublin-based carrier would have to move beyond the "cheap and naff" labels that were attached to Tesco before it overtook Sainsbury's in the 1990s. "At the moment we just pile it high and sell it cheap. Lidl started off cheap and cheerful but now it is very sophisticated – it is no longer perceived to be cheap and cheerful."
Ryanair will HAVE TO improve the profitability, e.g. by rising the load factors (what will be difficult in winter) AND by rising prices (even more difficult). Obviously they should have taken care of how people associate Ryanair brand name a little bit earlier...
Let's wait a year or two and we'll hear about the connecting flights (the issue of such necessity in selected hubs I've been rising for years). For all skeptics: it must happen to improve the demand, the aircraft usage (LF's) and yields. If that conception does not fit the FR business model, this model has to change, other options are scarce. Moving away from low fares can be achieved only partially. FR has educated people to associate "Ryanair means flying cheap", hence the fare level can be risen just in a very limited way. One of the solutions: giving pax flying from smallish end-destination more choices. Not only, say, Hahn, CRL and Barcelona for these guys, but also a few more connections via one of these bases.
MOL is smart to reduce the aircraft usage in winter in order to reduce possible losses. Even smarter, he could have tried a few indirect routes. Just to test them in practice.
Last edited by eu01; 12th Sep 2010 at 06:05.
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Sorry for the late reply, I would say the STN-IBZ is going due to it not creating strong enough yields in the winter. It will be done on a year-on-year comparison with 2009/2010 winter, and then taking into account this years economic climate.
Remember for all airlines, especially Ryanair - the winter is not about what profit you can make, but how you can minimise loses, so the profit from the summer months is not hit too hard. In Ryanair's case the airline is going more and more seasonal as traffic is generated from two main sources, VFR and leisure. Business traffic helps sustain airlines such as easyJet and flyBE in the winter, and Ryanair dont pretend to chase after those customers. As in MOLs interview though expect a big change in the RYR business model in a few years, Ryanair has the lowest cost base now its time to adapt the business model, raise yields and increase profits. I would expect to see a lot of the nowhere - nowhere routes to slowly get phased out in the next 5 years, as more airports like BCN and MAD beg for the "ryanair effect" to regenerate declining traffic numbers at airports with major overcapacity. Ryanair are one of 2 airlines in the industry best placed to do this. Easyjet missed the opportunity at BCN, but with Stelios still ranting on about expansion I feel they have been slightly more cautious with new bases this year.
Remember for all airlines, especially Ryanair - the winter is not about what profit you can make, but how you can minimise loses, so the profit from the summer months is not hit too hard. In Ryanair's case the airline is going more and more seasonal as traffic is generated from two main sources, VFR and leisure. Business traffic helps sustain airlines such as easyJet and flyBE in the winter, and Ryanair dont pretend to chase after those customers. As in MOLs interview though expect a big change in the RYR business model in a few years, Ryanair has the lowest cost base now its time to adapt the business model, raise yields and increase profits. I would expect to see a lot of the nowhere - nowhere routes to slowly get phased out in the next 5 years, as more airports like BCN and MAD beg for the "ryanair effect" to regenerate declining traffic numbers at airports with major overcapacity. Ryanair are one of 2 airlines in the industry best placed to do this. Easyjet missed the opportunity at BCN, but with Stelios still ranting on about expansion I feel they have been slightly more cautious with new bases this year.
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The 'Ryanair effect' for major airports is next to worthless. It may increase passenger numbers in the short-term, but will not bring in worthwhile income and profit as Ryanair won't pay landing fees at a reasonable rate and cheepskates who want to travel for £10 are not going to spend much in the terminal either. If they've any sense they will show Ryanair the door like Manchester did rather than lose money and upsetting other airlines by pandering to O'Leary.
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The €10 Irish Travel tax may be scrapped in the December budget. It will be reviewed between now and December. It will examine if airlines closed routes from Ireland and the fall in tourism has been because of the tax. It will be interesting to see how Ryanair will react. They have said they will add more aircraft and routes from DUB if it is scrapped. They may be some hope for Shannon if it is scrapped.
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Scrapping the tax will not just benefit Ryanair but Aer Lingus, Aer Arann, all the airlines flying into Ireland, all the airports and, of course, the passengers and prospective passengers
Ryanair must move away from low fares, says O'Leary
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Actually, a good idea for MOL, provided he can pull it off.
It is generally called....revenue enhancement, IE: offer a slightly premimum product for those that are willing to pay the price.
On a much larger scale of course, there is one quite noteable airline in SE Asia that has made this idea work for many years...SQ.
The SQ chairman at the time, JYM Pillay, started the ball rolling, and it paid off big time.
It is generally called....revenue enhancement, IE: offer a slightly premimum product for those that are willing to pay the price.
On a much larger scale of course, there is one quite noteable airline in SE Asia that has made this idea work for many years...SQ.
The SQ chairman at the time, JYM Pillay, started the ball rolling, and it paid off big time.
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Low Cost ! Who is he kidding?
The cost of the ticket may be low but by the time you have put a bag in the hold, had a Tea and a bite to eat, got the bus to the city you realy wanted to go to you will have paid as much as with one of the majors.
What MOL is telling you is that he is being forced out of the "low service" sector because he can't get enough money out of the rif-raf!
What MOL is telling you is that he is being forced out of the "low service" sector because he can't get enough money out of the rif-raf!
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And pilots must move away from low paying jobs
Low fares, low salaries initially, but smartly moved up scale, once the premium passengers started to appear (with senior 707 Commanders on the old high salaries..,training new young First Officers...the bucks flowed in, alright, big time.
I watched it all happen, from my SQ B707 LHS perch.
Make no mistake, MOL is headed in the right direction alright, however, IMO he has outlived his usefullness, in hos position....already.
JYM Pillay (already mentioned, chairman SQ) positively knew when the time was proper for him to step aside, and let others...carry the weight.
We shall see if MOL is as well, informed.
50-50...up 'til now.
My bet...he'll **** it up.
Last edited by 411A; 12th Sep 2010 at 19:35.
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This is an interesting interview from Michael O' Leary.
However, it's absolutely no surprise that FR fares will have to rise - because the business model is flawed. How is it flawed? - It is a short term model that aims for immediate Revenue and Profit maximisation and requires sustained annualised growth in order to be successful. It relies upon volume revenue generation rather than true yield maximisation.
FR have very limited scope for any further product unbundling. The model is simply unsustainable in the longer term without an increase in fares.
Low fares is their ONE and ONLY true point of differentiation. When that is gone - what airline would you choose?
One with now higher fares and total disregard for it's customers or others with relatively low fares which cares a great deal more about customer service and has several other key points of differentiation? The answer is quite clear and predictable.
That is exactly why FR's recent statement regarding the potential for 300 aircraft is nothing more than a publicity stunt in order to inflate the share price to the maximum possible value before Michael O' Leary eventually departs with FR revenues having reached their peak.
FR has revolutionised aviation without a doubt and is a real commercial success story - but the current exceptionally low fare base cannot be sustained in the long run as growth becomes more limited.
Regards,
EI Premier
However, it's absolutely no surprise that FR fares will have to rise - because the business model is flawed. How is it flawed? - It is a short term model that aims for immediate Revenue and Profit maximisation and requires sustained annualised growth in order to be successful. It relies upon volume revenue generation rather than true yield maximisation.
FR have very limited scope for any further product unbundling. The model is simply unsustainable in the longer term without an increase in fares.
Low fares is their ONE and ONLY true point of differentiation. When that is gone - what airline would you choose?
One with now higher fares and total disregard for it's customers or others with relatively low fares which cares a great deal more about customer service and has several other key points of differentiation? The answer is quite clear and predictable.
That is exactly why FR's recent statement regarding the potential for 300 aircraft is nothing more than a publicity stunt in order to inflate the share price to the maximum possible value before Michael O' Leary eventually departs with FR revenues having reached their peak.
FR has revolutionised aviation without a doubt and is a real commercial success story - but the current exceptionally low fare base cannot be sustained in the long run as growth becomes more limited.
Regards,
EI Premier
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Low fares is their ONE and ONLY true point of differentiation. When that is gone - what airline would you choose?
And I like free seating, I usually manage to get a seat that I like (with a good window position related to a seat).
One cannot polish a turd.....
The turd in question (lion?) had much more substance to it than O'Leary ......
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MOL has said often that the future of aviation in Europe will include a few carriers, including LOCOs Ryanair and Easyjet. What is relevant is that while Ryanair may be significantly more profitable than Easyjet, you will find that Easyjet has higher sales and higher average fare. Easyjet operate alot less routes than Ryanair and in many markets have focused on adding frequency rather than routes.
The difference is that Easyjet can be the airline for the business man, on many markets they offer primary airports with frequency. It is probably true that Ryanair offer good frequency on many routes but in the last number of years many new routes coming along were 3/4 per week, suitable mostly for price conscious leisure travellers.
What MOL may be hinting at there is that they will look at big primary airports to operate from where good passenger supply is available.
Anyone who thinks that there is a flaw in MOL strategy would be quite naive. They have cash to burn and can use it to clear out competition.
I have always said that the brand needs to be elevated. Ryanair can be cheap and nasty but it is punctual, good aircraft, strong financials and an extremely flexible business model.
MOL has recognised in the past that building the brand of Ryanair on something other than low fares would have to be done by his successor. Maybe he will embrace this himself. Maybe they will rebrand the airline as a new and caring company!
Many of the locos have moved away from their price orientated slogans
Easyjet moved to Come On Lets fly and Aer Lingus (ok debatable if LOCO) from Low Fares way better to Enjoy your flight. So what would Ryanair's new slogan be?
The World's Favourite Airline!!! Or is that belonging to BA??
The difference is that Easyjet can be the airline for the business man, on many markets they offer primary airports with frequency. It is probably true that Ryanair offer good frequency on many routes but in the last number of years many new routes coming along were 3/4 per week, suitable mostly for price conscious leisure travellers.
What MOL may be hinting at there is that they will look at big primary airports to operate from where good passenger supply is available.
Anyone who thinks that there is a flaw in MOL strategy would be quite naive. They have cash to burn and can use it to clear out competition.
I have always said that the brand needs to be elevated. Ryanair can be cheap and nasty but it is punctual, good aircraft, strong financials and an extremely flexible business model.
MOL has recognised in the past that building the brand of Ryanair on something other than low fares would have to be done by his successor. Maybe he will embrace this himself. Maybe they will rebrand the airline as a new and caring company!
Many of the locos have moved away from their price orientated slogans
Easyjet moved to Come On Lets fly and Aer Lingus (ok debatable if LOCO) from Low Fares way better to Enjoy your flight. So what would Ryanair's new slogan be?
The World's Favourite Airline!!! Or is that belonging to BA??