Ryanair's O'Leary Plans Shift to Major Airports as Growth Slows
Ryanair Holdings Plc is looking at opening routes to all major European airports bar the top three as slowing growth prompts the region’s top discount carrier to modify a strategy based on flying only to less-costly terminals.
Flying to larger airports, while raising costs, would boost average ticket prices by luring more business travelers. Big-city airports are also keener to talk to Ryanair after the recession, Chief Executive Officer Michael O’Leary said.
“Almost any airport that we don’t fly to is talking to us across Europe,” the CEO said in an interview in Dublin, where Ryanair is based. “Increasingly in the future there’s going to be a spread of bigger airports, as well as secondary ones.”
Ryanair has avoided some of Europe’s top airports, often routing passengers to terminals 25 miles or more from the cities they serve, such as Brussels Charleroi, Glasgow Prestwick and Milan Bergamo. O’Leary’s plan, which heightens competition with British Airways Plc and EasyJet Plc, rules out only London Heathrow, Paris Charles de Gaulle and Frankfurt am Main as targets because of the need to turn planes around in 25 minutes.
Ryanair last year boosted passenger numbers 11 percent to 73.5 million. Even if the Irish carrier were to revive a deal to buy as many as 200 aircraft from Boeing Co., the growth rate is likely slow to 5 percent or lower, in part because it would be expanding from a much bigger base, the executive said in the interview yesterday after Ryanair’s annual shareholders meeting.
As expansion slackens at Ryanair, whose flight to Hamburg- Luebeck lands 43 miles from the German city, the company will switch focus from slashing fares to a “value and service proposition” which will take more account of quality and customer satisfaction, O’Leary said.
“At the moment it’s all about price, price, price, but as you slow down the growth rate you’re doing less discounting to fill seats,” he said. “Your focus is more on ‘most-on-time airline in Europe,’ the fewest bags lost, brand-new aircraft, all-leather seating -- the carey-sharey stuff.”
Flights to more central airports such as Barcelona El Prat, located six miles from the city, where Ryanair began flying this month, should also help boost ticket receipts as the company exhausts options for raising “ancillary revenue” by charging for everything from snacks and drinks to checking baggage.
Costlier airports are also becoming viable as Ryanair reduces its use of facilities such as check-in desks and baggage-handling machines in response to customers registering for flights electronically and carrying hand luggage, O’Leary said. That has cut entry expenses and kept ticket prices lower.
“It’ll be an evolutionary process,” he said. “When fares aren’t being reduced every year in 2013, 2014, 2015 there’ll be more of a focus on quality, service, customer satisfaction and all that, because the prices will be rising. But are we suddenly going to go from an average fare of 34 euros to 100 euros? No!”
Among Ryanair’s closest competitors, EasyJet, Europe’s second-biggest discount carrier, already operates to primary airports including Charles de Gaulle, Brussels International and the most centrally located terminals in Hamburg and Milan, while Air Berlin Plc, the No. 3, has established a discount model that’s been successful in attracting business passengers.
Still, O’Leary says he isn’t concerned about Ryanair’s ability to win customers from carriers already well-established at the terminals it’s targeting.
“Bigger airports are now realizing that EasyJet isn’t growing and none of the flag carriers are growing, so they’re now doing deals with us,” the CEO said. “And we have such a price advantage over anyone else that we can move in on anyone’s route and blow them out of it.”
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