ANALYSIS: Business drives Ryanair's UK domestic return

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Ryanair's return to UK domestic services after a three-year break highlights both the shift in the evolving Irish carrier’s business model and the intensifying battle for UK business travellers.

The low-cost carrier, which last operated UK domestic flights in October 2011, will launch thrice-daily services from London Stansted to the Scottish airports of Edinburgh and its new base Glasgow International from 26 October.

“This is big news because it is returning to domestic routes in the UK. There is going to be a high frequency every day of the week,” explained Kenny Jacobs, Ryanair's chief marketing officer at a London press briefing announcing the new routes.

“I can’t emphasise enough the importance of these domestic routes. More and more, as times goes by, we will have a great schedule for business customers. The schedule is very orientated to business travel,” he says. “That metronomic service, same times every day, it’s a big change for Ryanair.”

The emphasis Jacobs places on the frequency and schedule to attracting business traffic underscores its strategy for returning to the UK domestic market. Crucially it is the airline’s ambition to develop its share of business traffic which is driving the return to these routes.

“We will have a better value solution for business travellers and we are connecting two of the biggest destinations for business travel to London. We could do more of this and we want to do more of this,” he says, pointing to the restricting impact of the UK’s air passenger duty. “The removal of the APD would make it more attractive.”

The new routes further deliver on Ryanair’s ambitions to deliver more business traffic through its Stansted base after reaching a long-term growth deal with the airport’s new owners Manchester Airports Group last year. In addition to new business friendly routes such as Edinburgh and Glasgow, Ryanair is this winter increasing frequency on 14 of what it identifies as business route - a number of which will be served thrice-daily.

“We are at number three in the UK market [with a 13% market share] and we want to be number one. Stansted is a big part of this,” adds Jacobs. The additional Stansted routes announced today means it now expects to fly 2.5 million additional passengers through the North London airport this winter - 500,000 more than originally envisaged.

The return to domestic flights has also been made possible by its new agreement to establish a base at Glasgow International airport. Significantly, when the airline previously flew UK domestic routes, it connected Stansted to Glasgow’s secondary airport, Prestwick.

“Prestwick is still very important,” Jacobs says, noting the airline has served the airport for 20 years and will still fly half a million passengers through this year. “But it’s a good example of how we can use two airports [in the same city]. One airport is focused on leisure markets and one focused on business. It’s a blended balance between the two airports.”

Ryanair has already recently implemented a dual airport strategy in other key markets, notably Brussels and Rome.

Alongside the network changes has come the high-profile re-positioning which has seen it tackle customer bug-bears, which by its own admission has seen it having to play catch-up to some of its rivals, by implementing allocated seating, relaxing its iron grip on bookings and carry-on bag restrictions and revamping its website. Jacobs sees a further business traffic boost coming from the imminent roll-out of further developments, including its mobile app and business-friendly product package.

“We are probably the airline that is evolving and changing the most globally. Probably no-one is going through as much change. And it is working. We see that through the market share, the forward bookings and the faces of our customers,” he says.

The move comes as airlines continue to jockey for position in the London market, which has seen a number of developments since British Airways’ acquisition of British Midland. That prompted Virgin Atlantic to launch its own domestic feeder flights under the Little Red brand linking Aberdeen and Edinburgh with London Heathrow – routes formerly operated by BMI and on which it codeshared.

Restructuring UK regional Flybe meanwhile pulled out of London Gatwick, citing the negative impact of APD on regional routes in particular, selling its slots to EasyJet and switching its London operations to London City. That brings intensifying competition at London City, with a revamped CityJet, now under private ownership after Air France-KLM sold the carrier in May, and British Airways. This will see all three compete from this winter on the London City-Dublin route.

Meanwhile, new ownership at Luton and Stansted airports has coincided with long-term commercial deals with EasyJet and Ryanair which have kick-started renewed growth at these airports.

Jacobs believes Ryanair’s cost base and fares mean it is well positioned in any battle in the UK domestic market. “The fact the UK has the highest penetration of low-cost carriers illustrates it has a savvy customer. Low-cost carriers will more and more take up the domestic routes. That’s what we have down in Italy, in Spain and in Poland.

“There might be a bit of a price war for a period,” he says. “What we have seen when we have gone in with a solution like this, is others have moved capacity elsewhere.”