Ryanair to Triple Marketing Spend to Tame Budget Airline Image

Ryanair Holdings Plc (RYA), Europe’s largest discount carrier, will triple its marketing budget this year in a push to refine the no-frills image the company acknowledges has alienated customers looking for more service.

Ryanair will spend about 35 million euros ($48 million) in 2014 on advertising, website improvements and other travel products targeting groups and business travelers, Chief Executive Officer Michael O’Leary said in an interview at the airline’s Dublin headquarters yesterday.

The ramp up in marketing signals a shift for O’Leary, who has in the past prided himself on using press coverage and outlandish stunts to grab the attention of passengers. Ryanair announced refinements last year including the introduction of allocated seating starting next month, a decluttered website and an agreement with American Express Co. to allow the airline to accept bookings using its credit cards.

“It will be a significant up-weighting in our marketing spend to target across Europe,” Chief Financial Officer Howard Millar said in a Jan. 22 interview in Dublin. “What you want to get is a funnel that gets people coming to the website.”

As part of Ryanair’s improved online experience, the company entered an agreement with Google Inc. (GOOG) that allows passengers in some European countries and the U.S. and Canada to use the company’s flight search engine to compare airfares. Once a customer has chosen a flight, they are redirected to the Ryanair website with all information pre-selected so they can go straight to booking a ticket.

Playing Catch-Up

The changes should enable Ryanair to make up ground on biggest competitor EasyJet Plc (EZJ), which is 18 months to two years ahead in terms of its online presence, according to Millar. Ryanair gets about 30 million unique visitors to its website each month, he said.

“It will take a period of time before the general consumer and passengers get to see all that and actually see it, touch it and experience it, so it won’t be an overnight success, but it will come very, very quickly,” the CFO said.

Competition among European discount carriers is set to intensify, with EasyJet adding planes and second-tier players such as Vueling and Monarch Airlines Ltd. growing in relevance, HSBC analysts Andrew Lobbenberg and Joseph Thomas said in a note today. Both EasyJet and Ryanair will probably face challenges to their duopoly of the short-haul, low-cost market in the coming years, they said.

“The low fares industry has evolved,” Millar said. “I think it has evolved more in the last year or two, where it’s just not good enough anymore to offer low fares, you must offer other customer service features.”

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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