Ryanair wants to disrupt the transatlantic market. It won't happen anytime soon
By B.R.
RYANAIR’s business model has come a long way in the past year or so. It started when the Irish carrier decided it was time to jettison its deliberately spiky image, in which it offered customers a Faustian bargain of abysmal customer service in return for low prices. In a change of strategy, summed up by Michael O’Leary (pictured), Ryanair’s sweary boss, as “not unnecessarily pissing people off”, it started doing the kind of things that were once anathema—being more lenient about carry-on bags, selling flexible tickets and allocating seats. Now, it appears that the board of Ryanair, which is the world’s biggest airline by international passengers, has given the go ahead for an even more radical new plan: an assault on transatlantic routes.
For those who remember how effectively Ryanair shook up the sleepy, cartelish world of European aviation, this is exciting news. In fact, Mr O’Leary has been planning the move for some time. He has long talked of his desire to offer €10 ($11) flights from Europe to North America to shake up the old guard, although regular prices are likely to be in the region of €200-300 return. Transatlantic routes can be hugely profitable, and despite an open-skies deal signed between the European Union and America in 2007, traffic is still dominated by legacy airlines and European flag-carriers. As yet, budget carriers have not unearthed a model that allows them to compete.
The main reason for this has been the high cost of fueling a plane for a long-haul flight. This means that the other savings that low-cost carriers typically bring to bear on shorter routes have less impact over longer distances. However, as planes have become more fuel efficient, the equation is changing. Modern planes, such as the Boeing Dreamliner and Airbus A350, have brought the realistic prospect of some disruption on the transatlantic route in the future. One budget airline, Norwegian Air Shuttle, began offering cheap flights last year. But it has been beset by strikes at home and has been the victim of intense lobbying against it by trade unions in America, which fear competition.
However, it is not only about fuel. Low-cost long-haul suffers from other problems. As we reported last year:
[T]here are some things that budget airlines find harder in long-haul than on short routes. The combination of long routes, time differences and airports’ night curfews can make it harder to turn planes around quickly. Overnight layovers mean paying for crews’ bed and board.
To make it pay, Ryanair, an apostle of the cramped, single-class cabin, will have to include a business-class section, which is the most profitable part of the transatlantic business. As these high-worth passengers demand flexibility, it will also need a fleet of as many as 50 planes to make a serious assault.
All of which means that the airline that flies across the pond is likely to be very different to that which currently traverses the English Channel. Indeed, it may not even be called Ryanair; Mr O’Leary is worried that a brand that is both divisive in Europe and little-known in America will be a drag on success. But it is clear that it does have the scale to disrupt the legacy carriers. It flew 89.1m passengers in the 12 months to February 2015. In 2014 it reported a profit of €522m on revenue of €5 billion. It has the clout to build the fleet that it requires.
Despite that, the assault will not come anytime soon. Ryanair’s big advantage in scale would appear also to be its biggest obstacle for a swift attack on the market. Unless it can muster a deal, buying a fleet of 50 brand new aircraft may take five years, given that the plane manufacturers’ order books are already bursting. If there is a delay to Mr O'Leary's plans, it is likely to be caused by a problem with incoming aircraft.
