ANALYSIS: Can Ryanair reinvent itself?

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This article appeared as a comment piece in the January-February issue of Airline Business.

Mention the words Ryanair and customer service in the same sentence and the usual reaction is laughter – or anger.

For an airline that has had “no frills” central to its customer relationship management (CRM) strategy for as long as most people can remember, the revolution under way at Ryanair is extraordinary.

Michael O’Leary and his band of merry men and women have worn that “we’re cheap as chips so take it or leave it” attitude as a badge of honour. And that infamous strategy has paid off – until now at least.

Ryanair was placed sixth in last year’s Airline Business World Airline Rankings for its net profit of $733 million in 2012/2013. It was also able to return €559 million ($764 million) to shareholders.

But consecutive profit warnings late last year gave the first indications that changes to the formula may be required. O’Leary has now launched a charm offensive, as he seeks to ­reposition the airline and drive higher revenue per seat by going after ­business travellers.

In tandem with the image reboot comes previously unheard of “innovations” such as flexible fares, allocated/reserved seating and airport fast-track.

This strategy is one that EasyJet has successfully implemented – but is O’Leary equipped to pull it off?

Airlines know all too well how hard it is to sway the perception of discerning consumers.

The transition at EasyJet has flourished under the charming leadership of Carolyn McCall, but formative steps began before her arrival.

The question is whether O’Leary – with his gruff image so imbedded in peoples’ minds – can get away with such a dramatic volte-face. What’s not in doubt is that he’s up for it, but given O’Leary’s established reputation, many Ryanair customers could be forgiven for feeling slightly queasy after watching him turning on the charm in a 60 second advert about the user-friendly initiatives being rolled out this year. Others may think the outspoken Irishman has finally lost the plot or is off his trolley.

If there is a leadership succession plan at the airline, it’s not obvious what it is. One of O’Leary’s two ­lieutenants – Michael Cawley – has departed. The other, Howard Millar, is still at his side. O’Leary himself is giving no hints about an impending departure, joking to Flightglobal last year that “I hope there’s not much prospect of me leaving Ryanair for the next couple of years because I have four kids under the age of seven and I sure as hell don’t want to spend any more time at home”.

The airline’s very public drive to boost customer appeal and promote its new caring, sharing image is the most visible aspect of Ryanair’s repositioning. Indeed, CRM was probably not an acronym heard much around the airline’s Dublin offices until recently. And if it was, the flight operations crowd were probably referencing cockpit resource management.

Strategic changes are being made around the network, with initial moves towards primary airports. As CTAIRA analyst Chris Tarry points out, Ryanair needs to fly from “somewhere to somewhere, rather than nowhere to somewhere or nowhere to nowhere”.

For an airline that flies 80 million passengers on budget routes, the network tweaks will hardly scratch the surface. But with 120 million customers targeted within a decade, it may be that the incremental 40 million comes from that higher revenue bracket.

One likely consequence of Ryanair’s move upmarket is the end of the true ultra-budget airline model so long associated with low-cost travel, and a silencing of all those jokes about how Ryanair flies to airports that are in a different country to the destination.