Ryanair Pushing Customer Focus Lets O’Leary Confront IAG
Ryanair Holdings Plc (RYA) aims to become more user-friendly with a simpler website and cooperation with travel agents, in a cultural revolution for the airline that pioneered low-cost travel with minimal customer service.
Ryanair, Europe’s No. 1 discount carrier, plans to announce a website revamp at its annual shareholder meeting on Sept. 20, said Chief Executive Officer Michael O’Leary. The company may also add a handful of longer-distance routes including Israel and is open to cooperation with long-haul carriers, he said.
O’Leary is reviewing a purist approach to flying that’s delivered Europe’s lowest air fares at the expense of only rudimentary perks. While efforts to end European losses at Deutsche Lufthansa AG (LHA) and Air France-KLM (AF) Group will likely fail, British Airways parent IAG SA (IAG) poses a greater challenge with its Vueling Airlines SA unit, provided CEO Willie Walsh resists merging it with mainline operations, O’Leary said.
“Vueling has a real prospect of success because Willie gets it, and it has its own culture.” O’Leary said at the World Low Cost Airlines Congress yesterday at London Heathrow Airport.
Walsh, who shared a podium with O’Leary at the three-day event, said there’ll be no intervention in the strategy of Vueling CEO Alex Cruz following this year’s acquisition of a majority stake in the Barcelona-based company by IAG, as International Consolidated Airlines Group SA is known.
“We’re not going to do anything to change the business model,” Walsh said. “If BA or Iberia can learn smart things from Vueling then great, but we’re not going to interfere.”
O’Leary is under pressure to review prices and operations after saying Sept. 4 that annual profit may miss targets. On Ryanair’s web portal, a drive to block so-called screen scrapers that scan pricing data to lure clients, has produced a booking process that fails to lock in ticket sales early enough in the procedure and compares poorly to EasyJet Plc (EZJ), O’Leary said.
“They have been much better on their website,” the CEO said in an interview Sept. 16 after announcing growth plans for London Stansted airport. “They make the booking first. We have to make it easier. We have got to stop making it so difficult.”
O’Leary said he’s also prepared to sell tickets via travel agents rather than solely through Dublin-based Ryanair’s own mechanisms, targeting another area where EasyJet has made the running by linking with corporate buyers to add business fliers.
The Irish carrier has agreed to support Stansted owner Manchester Airports Group’s drive to win long-haul operators to the London airport. While O’Leary said he’s willing to connect long-haul passengers onto his own European network, he doesn’t plan to reciprocate the service and feed his own flights into other carrier’s long-distance routes.
“As long as there is something we can do to encourage it that doesn’t compromise our handling costs at Stansted we’d be very open,” said the CEO, who has previously actively discouraged people from making transfer bookings, even between two Ryanair service. “So we are approaching it from a very positive point of view, but are we looking for alliances with some long-haul airline - no.”
In a possible departure from high-frequency short-haul flights, O’Leary said Ryanair, which also competes with Norwegian Air Shuttle (NAS) ASA and Budapest-based Wizz Air Ltd., also may fly to Israel, Egypt and North Africa even if growth in the next five years will largely focus on western Europe.
Ryanair also remains interested in flying to the U.S. under a new brand once new wide-body planes are more affordable, O’Leary said. The executive outlined a plan to take seven aircraft annually to build a fleet of 40 to 50 planes.
While O’Leary expressed optimism that IAG will succeed in blending long-haul and discount operations, he dismissed Lufthansa’s efforts with its Germanwings subsidiary. Cologne-based Lufthansa is switching flights that don’t feed its Frankfurt or Munich hubs to Germanwings in a push to grow operating profit to 2.3 billion euros ($3 billion) by 2015.
CEO Thomas Winkelmann said Sept. 16 at the conference that his focus is on keeping costs down, while offering customers the choice between no-frills flying and upgrades with more leg room or lounge access.
“The customer doesn’t book a trip thinking shall I fly low-cost, charter, legacy, hub-and-spoke or point to point,” he said. “The customer decides I want to go safely from A to B and then chooses the airline.”
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