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News analysis

Transatlantic trip up
Ryanair recently backpedalled on plans to introduce transatlantic low-fare operations
to North America, but following on the heels of WOW and Norwegian, do the numbers
really add up for future mass transatlantic low-cost travel? Martin Rivers finds out

ichael OLeary, Chief Executive of


Ryanair, Europes largest low-cost
carrier, has always been economical
with the truth when it comes to headlinegrabbing antics.
Though by no means shy about dishing out
facts and figures on the airlines phenomenal
success, OLearys best performances have
tended to encroach on the realm of fiction.
His purported product innovations are the
stuff of legend: a fat-tax for plump passengers;
a standing-only section for the moneystrapped; even a toilet charge for those
caught short. Something as inconvenient as
the truth, he discovered long ago, will rarely
stop journalists from writing up a good story.

12 / Low Cost & Regional Airline Business

So when Ryanair announced the launch


of a much-mooted transatlantic subsidiary
in mid-March, only to backpedal on the
venture three days later, shouts of publicity
stunt immediately echoed around aviation
circles. For OLeary, whose tarnished persona
lies somewhere between that of a pantomime
villain and the boy who cried wolf, such
accusations are hard to brush off.
But all may not be as it seems. While Ryanairs
72-hour foray into low-cost, longhaul flying
undoubtedly earned column inches, it did
not fit the mould of prior shenanigans.
For one thing, the transatlantic proclamation
was neither an irritant nor a rib-tickler. It didnt
annoy anyone (legacy carriers notwithstanding),

and it certainly didnt seem very funny. To the


contrary, the Board, not the man, announced
the project in a drab press release picked
up mainly by the broadsheets. It described
transatlantic flights as a logical development
of Ryanairs network, adding that negotiations
with aircraft manufacturers are confidential.
Whats more, Ryanair is two years into
a public relations makeover to soften its
abrasive image. OLeary has promised to
stop unnecessarily pissing off his customers
(presumably reserving the right to do so when
justified), and the airline has rolled back many
of its most objectionable policies.
Norwegian Boeing 787s offer the closest thing to low-cost
transatlantic flights (photo: David Charles Peacock)

www.lowcostandregional.com / July 2015

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The companys website no longer forces


people to jump through hoops to avoid
unwanted add-ons its ancillary charges have
been brought down to less punitive levels.
Furthermore, a social media team now stands
guard over Facebook and Twitter formerly
dumping grounds for gripes about the
airline to inform and assist passengers. For a
company that used to charge its customers to
complain, that is nothing short of a revolution.
But if Ryanair is now treating everyone
with respect, and OLeary is no longer
clowning around for publicity, why the
transatlantic kerfuffle? Perhaps the man
himself should explain.
Ive got to be very careful here, as we have
had a bit of a PR boo-boo this week, the redfaced chief executive told The Economists
Future of Travel conference in Madrid, shortly
after the Board retracted its own announcement.
We do have a business plan it wont be
Ryanair, but a sister company that becomes
a longhaul, transatlantic, low-fare airline.
We have a strategy that would operate from
10 or 15 of the big European cities to 10 or 12 of
the big US cities. However, we have consistently
said that: (a) it will be a separate company;
and (b) it cant happen until we can find a fleet
of low-cost, longhaul aircraft. One of the big
In an ideal world O' Leary would look to offer transatlantic
flights for as little as 100 (photo: Ryanair)

The missing ingredient for Ryanair is an over-supply of aircraft to push down valuations (photo: Boeing)

difficulties we have is that, for the last five or


six years, the longhaul aircraft market has been
incredibly hot, partly because the Gulf carriers
will order almost all of the spare capacity.
So there you have it. In essence, nothing has
changed. OLeary made it known several years
ago that he will enter the transatlantic market
as soon as the economics make sense. Though
talk of 10 one-way fares is bluster, the business
model itself inches ever-closer to reality.
Next-generation widebodies such as the
Boeing 787 and Airbus A350 are chipping away
at fuel costs, in turn lessening the dependence
of longhaul operators on high-yielding
premium travellers. The missing ingredient
for Ryanair is an over-supply of aircraft to
push down valuations. Cyclical downturns
have historically created such a glut every five
years, OLeary said, but with the Gulf superconnectors buying jets faster than Boeing
and Airbus can build them, price-tags have
remained stubbornly high.
Ryanairs success in Europe over the past
decade has largely been down to the timing
of its 2002 deal for 100 Boeing 737s signed

14 / Low Cost & Regional Airline Business

at the bottom of a downturn when the OEM


was desperate for buyers. OLeary believes
a comparable opportunity for snapping up
widebodies could present itself in four or
five years.
Unless, and until, that happens, the airline
will not publicly commit to a transatlantic
launch. Someone in Ryanairs press department
evidently missed that memo.
In the meantime, two rival carriers
Norwegian Air Shuttle, a point-to-point 787
operator, and WOW Air, a hub-and-spoke
Airbus A321 operator based in Iceland offer
the closest thing to low-cost transatlantic
flights. Both undercut full-service prices by
selling one-way tickets for as little as 200.
That compares with an average fare of 415
among members of the Association of
European Airlines, according to CAPA.
With OLeary looking to keep prices under
100, Ryanairs transatlantic venture remains
a long way off commercial viability. But,
if nothing else, its PR blunder shows how
convinced the airline is that, at some point,
the sums will add up.

We do have a business plan it wont be

Ryanair, but a sister company that becomes


a longhaul, transatlantic, low-fare airline
Michael O' Leary, Ryanair

www.lowcostandregional.com / July 2015