Cheap fares, low frills revolutionize industry in Europe
By Glenn Frankel, The Washington Post, 3/21/2004
DUBLIN -- Ryanair was a small airline on the verge of collapse when its then-deputy chief executive made a pilgrimage to Dallas in 1991. Michael O'Leary came back to Dublin after visiting with Herbert Kelleher, the guru of Southwest Airlines, with a new vision for how to make money by lowering air fares and filling up his flights.
''It was one of these road-to-Damascus things," O'Leary said. ''We saw Kelleher and his crew do it -- and we said, 'Why can't we do this in Europe?' "
Using the Southwest blueprint, O'Leary and his staff have turned Ryanair into the most profitable airline company in the world. The upstart Irish carrier operating out of a squat building on the edge of Dublin International Airport is flying circles around the most revered names in European aviation: British Airways, Air France, Alitalia, Germany's Lufthansa. By the end of the decade, Ryanair hopes to carry 50 million passengers annually, which would make it Europe's largest.
O'Leary has helped revolutionize European aviation, making cheap flights a habit for millions of people, giving birth to a host of low-budget rivals while driving state-subsidized air carriers into bankruptcy, and transforming the economies of formerly obscure regions whose airports have become Ryanair destinations.
The company also has come to epitomize the swashbuckling vitality of new entrepreneurs from an economically revitalized, opportunistic Ireland. ''This could only have been an Irish story," boasted O'Leary, now Ryanair's chief executive, who once drove a tank up to a London airport terminal building to challenge a competitor's claim of lower fares. ''The Irish built the rails, we built the roads, and now we're building the airways as well."
Some analysts believe the party may be ending. A few weeks ago, Ryanair said its profit in the quarter ended Dec. 31 rose 10 percent but warned that it expected a 10 percent drop in earnings in the next fiscal year because of intense price competition and costs related to its growth. The company's stock price tumbled 31 percent in a day; it has since recovered part of the loss.
Then the European Commission ordered Ryanair to repay nearly $6 million of the financial incentives it has received from a Belgian regional government for using an obscure public airport called Charleroi for its lucrative London-to-Brussels route, ruling that the payments amounted to an illegal state subsidy. In response, Ryanair announced last week that it will cut its Charleroi-to-London route.
O'Leary and his crew believe the days of ever-shrinking air fares are far from over -- and many observers agree. ''Sometimes O'Leary talks utter nonsense," said Simon Calder, author of ''No Frills," a history of low-cost air travel. ''But any other airline executive would love to have his problems. Aviation is a complete basket-case industry, and he's shown you can make serious money at it by freeing up consumers."
O'Leary, 44, came to Ryanair, a small family-owned airline, in the late 1980s with a mandate to make it profitable. At first, he said, he doubted he could succeed.
Air travel in Europe in those days was dominated by state-subsidized flag carriers like British Airways, Air France, Alitalia, Lufthansa, and Belgium's Sabena. Their staffs were bloated, their prices high, but they wielded a virtual monopoly in their host countries over prime flight times and airport slots.
To carve a piece of the business, Ryanair adopted key parts of the Southwest formula: It slimmed down the number of routes it flew and operated only Boeing 737s to cut repair costs. Rather than pay high fees to fly into London's Heathrow or Gatwick, Ryanair settled on Stansted, a new, gleaming but virtually empty airport northeast of London. Not only were landing fees lower, but because the runways were virtually deserted, Ryanair could fly in and turn around quickly, cramming in extra flights each day. The London-to-Dublin route, which takes just under an hour, quickly became the lucrative base for a series of other short-hop routes.
The Sept. 11, 2001, attacks only accelerated Ryanair's ascendancy. While the major airlines bemoaned the loss of passengers and increased expenses for security, O'Leary further expanded. ''We called Boeing and Airbus and ordered 200 new aircraft. We got a great deal. We slashed the fares, carried more passengers, and locked away more airport deals, while some of the big boys are sitting there on their hands, which is what they normally do, waiting for the world to change again."
Ryanair is not every consumer's cup of tea. While airline officials boast of its on-time record and efficiency, the company has a reputation for handling customer complaints in a manner that ranges from brusque to downright rude. ''Cheap but definitely not cheerful," was the verdict of one passenger in an e-mail to the Skytrax website of passenger opinions.
Still, for those willing to put up with the inconveniences of no-frills service, the price is undeniably right. Colm O'Gorman, an Irish psychologist, recalled flying to Bologna, Italy, for the weekend for about $5 round trip. ''It was fantastic," he said. Thousands of Britons have bought holiday homes in remote parts of France, Spain, and Italy, thanks to the prospect of cheap flights.
Regards,
USA320Pilot
By Glenn Frankel, The Washington Post, 3/21/2004
DUBLIN -- Ryanair was a small airline on the verge of collapse when its then-deputy chief executive made a pilgrimage to Dallas in 1991. Michael O'Leary came back to Dublin after visiting with Herbert Kelleher, the guru of Southwest Airlines, with a new vision for how to make money by lowering air fares and filling up his flights.
''It was one of these road-to-Damascus things," O'Leary said. ''We saw Kelleher and his crew do it -- and we said, 'Why can't we do this in Europe?' "
Using the Southwest blueprint, O'Leary and his staff have turned Ryanair into the most profitable airline company in the world. The upstart Irish carrier operating out of a squat building on the edge of Dublin International Airport is flying circles around the most revered names in European aviation: British Airways, Air France, Alitalia, Germany's Lufthansa. By the end of the decade, Ryanair hopes to carry 50 million passengers annually, which would make it Europe's largest.
O'Leary has helped revolutionize European aviation, making cheap flights a habit for millions of people, giving birth to a host of low-budget rivals while driving state-subsidized air carriers into bankruptcy, and transforming the economies of formerly obscure regions whose airports have become Ryanair destinations.
The company also has come to epitomize the swashbuckling vitality of new entrepreneurs from an economically revitalized, opportunistic Ireland. ''This could only have been an Irish story," boasted O'Leary, now Ryanair's chief executive, who once drove a tank up to a London airport terminal building to challenge a competitor's claim of lower fares. ''The Irish built the rails, we built the roads, and now we're building the airways as well."
Some analysts believe the party may be ending. A few weeks ago, Ryanair said its profit in the quarter ended Dec. 31 rose 10 percent but warned that it expected a 10 percent drop in earnings in the next fiscal year because of intense price competition and costs related to its growth. The company's stock price tumbled 31 percent in a day; it has since recovered part of the loss.
Then the European Commission ordered Ryanair to repay nearly $6 million of the financial incentives it has received from a Belgian regional government for using an obscure public airport called Charleroi for its lucrative London-to-Brussels route, ruling that the payments amounted to an illegal state subsidy. In response, Ryanair announced last week that it will cut its Charleroi-to-London route.
O'Leary and his crew believe the days of ever-shrinking air fares are far from over -- and many observers agree. ''Sometimes O'Leary talks utter nonsense," said Simon Calder, author of ''No Frills," a history of low-cost air travel. ''But any other airline executive would love to have his problems. Aviation is a complete basket-case industry, and he's shown you can make serious money at it by freeing up consumers."
O'Leary, 44, came to Ryanair, a small family-owned airline, in the late 1980s with a mandate to make it profitable. At first, he said, he doubted he could succeed.
Air travel in Europe in those days was dominated by state-subsidized flag carriers like British Airways, Air France, Alitalia, Lufthansa, and Belgium's Sabena. Their staffs were bloated, their prices high, but they wielded a virtual monopoly in their host countries over prime flight times and airport slots.
To carve a piece of the business, Ryanair adopted key parts of the Southwest formula: It slimmed down the number of routes it flew and operated only Boeing 737s to cut repair costs. Rather than pay high fees to fly into London's Heathrow or Gatwick, Ryanair settled on Stansted, a new, gleaming but virtually empty airport northeast of London. Not only were landing fees lower, but because the runways were virtually deserted, Ryanair could fly in and turn around quickly, cramming in extra flights each day. The London-to-Dublin route, which takes just under an hour, quickly became the lucrative base for a series of other short-hop routes.
The Sept. 11, 2001, attacks only accelerated Ryanair's ascendancy. While the major airlines bemoaned the loss of passengers and increased expenses for security, O'Leary further expanded. ''We called Boeing and Airbus and ordered 200 new aircraft. We got a great deal. We slashed the fares, carried more passengers, and locked away more airport deals, while some of the big boys are sitting there on their hands, which is what they normally do, waiting for the world to change again."
Ryanair is not every consumer's cup of tea. While airline officials boast of its on-time record and efficiency, the company has a reputation for handling customer complaints in a manner that ranges from brusque to downright rude. ''Cheap but definitely not cheerful," was the verdict of one passenger in an e-mail to the Skytrax website of passenger opinions.
Still, for those willing to put up with the inconveniences of no-frills service, the price is undeniably right. Colm O'Gorman, an Irish psychologist, recalled flying to Bologna, Italy, for the weekend for about $5 round trip. ''It was fantastic," he said. Thousands of Britons have bought holiday homes in remote parts of France, Spain, and Italy, thanks to the prospect of cheap flights.
Regards,
USA320Pilot
