Ryanair’s Utopia

Two dreams drive Michael O’Leary. The first one propably entails managing to provide long haul low cost travel some day. The second is probably the most utopist of all: providing free aviation travel.

I could also add one last one: to be the most controversial among aviation company CEOs!
But jokes aside, let’s only focus on the second one, free aviation travel.

Recently, about two weeks ago, Ryanair announced that it’ll increase its fares soon. Indeed, Ryanair Chief Financial Officer, Howard Millar, said the airline “will be aiming to cut costs over the coming year and will introduce the first fare rise in four years”.
I was surprised… Strange, I thought to myself when I first read the news. Why would the airline increase its fares during a recession? First, recession makes consumers reduce their spending. Second and most important, Ryanair always claims to perform better during a recession. According to his declarations and the current economic state, the Irish airline should perform even better and hence decrease its fares. Instead, it seems Ryanair has decided to increase its fares. O’Leary now claims that “Ryanair sees high growth end as passengers fasten their money belts“. It also brings back the toilet taxe on his agenda… Probably a recycled advertising stunt…
Where did O’leary talks and promise of running a free airline service go? I remember Ryanair’s CEO saying that “in a decade or so, airlines will pay travellers to distribute people around Europe. The airline industry is Tesco, is Ikea, is network TV in the way viewers watch for free and advertisers pay to access them, in the same way as the internet, where websites earn money for delivering click-through traffic to other sites.”
In the last years, Ryanair has decreased its average fare but, at the same time, considerably increased baggage charges, by 50 per cent and introduced new fees, such as charging its passengers £40 for reissued boarding passes. It also started advertising on its boarding passes. However regardless of all these new fees, Ryanair didn’t manage to significantly decrease its fares and now contrarily to what could have been expected, it has just decided to go the opposite way.
Throughout all this, it can be assumed that Ryanair’s model is now reaching its limits in terms of discounting fares. The recent failure of the 200 new Boeing aircraft deal will considerably bring to a halt its “volume strategy”, the very one that had made the airline so profitable thus far. With an expected decrease of passengers in the next 5 years, Ryanair will probably increase its fares more and more and set up new airlines charges to offset its low fares.
O’Leary’s dream to one day offer free airline tickets is unlikely to come to life. The aviation industry doesn’t seem to be one where you can apply the same recipes that brought us some of the Internet success stories, we’ve all heard about.

Like CAPA said in an article last week, it seems “the party’s over“