ANALYSIS: Ryanair network moves show shifting focus

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Ryanair’s latest shift into the mainstream at Brussels, Rome and Copenhagen underlines its determination to keep the pressure on rivals and lift its own yields.

Traditionally an unashamedly budget carrier, Ryanair has embarked on a customer service drive aimed at easing some of the shackles originally attached to flying with the airline. This includes, from the start of this month, allowing passengers to bring a second small carry-on bag on board and slashing the boarding card reissue fee. This comes on top of the airline introducing a 24h grace period to correct minor booking errors and ditching the free-for-all seating scramble by rolling out allocated seating.

Now, it appears to be taking steps to tackle its reputation for flying passengers to out-of-town airports. In the space of a week it has surprised many – including the airports themselves – by announcing plans to serve Rome Fiumicino and Brussels' main airport at Zaventem.

The moves have an added significance, given that the secondary airports of Rome Ciampino and Brussels Charleroi are two of its longest-established bases – the airline having literally put Charleroi on the aviation map when it picked the Belgian airport as its first mainland European base in 2001. Additionally, the change of tack heaps new pressure on struggling network carriers and in the process pits Ryanair head to head with emerging low-cost operator Vueling.

While Ryanair’s model has always centred around secondary airports, there have in recent years been opportunistic dalliances at more traditional primary airports – such as Barcelona and Madrid in Spain. But its decision to launch new routes at Brussels and Rome Fiumicino, as well as moves to request slots at Copenhagen and to start Moscow flights, and its fresh commitment at London Stansted, all point to a desire to step up its appeal to higher-yielding traffic.

Ctaira analyst Chris Tarry has long argued the need for Europe's low-cost carriers to increase their average fares by improving their traffic mix. That is a journey rival European carrier EasyJet has already travelled – lifting its total revenue per seat by more than a third since 2008.

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Ryanair has increased its average fare and revenue per passenger sharply over the last three years, but much of this has recovered the levels lost in the market slowdown between 2008 and 2010. Its average fares for the year ending March 2013 were at €48 ($65) only €4 higher than for the year to March 2008. Its average fares over the first half of the the current financial year were 2% down, though revenue per customer – as the airline now terms it – was up 2%.

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The Irish carrier's ability to continue its enviably strong profits streak has come under scrutiny after warning profits would this year fall short of original target – though the now-expected €510 million net profit would still be among the best in Europe.

Tarry notes that given its already low-cost base, the obvious way to improve its profitability is to increase revenues. "You don’t have much cost to be taken out, so you do it by enriching your revenues. You don’t want to do it overtly to your existing customers, so you target a new customer base. And if you target business travellers, you need to fly from where they want to fly to where they want to go," he says.

In the context of Ryanair's overall network, the new routes from the primary airports in Brussels and Rome – and any other moves to mainstream airports – make up only a small portion of its route network. But as Tarry notes: “You only have to increase revenues slightly and only a portion of your traffic."

At both new airports, Ryanair is head to head with the local network carriers – Brussels Airlines and Alitalia – and in more traditional Ryanair style, the carrier was unable to resist a tongue-in-cheek public offer to help struggling Alitalia with its restructuring in announcing the Fiumicino move.

Ryanair currently operates more than 50 routes from Rome's Ciampino airport, but will next year launch three domestic routes from Fiumicino to Catania, Lamezia and Palermo in Italy. It will also serve Brussels and Barcelona El Prat from Rome's main airport. The carrier plans to shift many of its nine domestic routes served from Ciampino, which it will use as its primary airport for domestic Italian routes. It says this will free up slots for further international services from Ciampino.

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It will compete with Alitalia – itself to set to embark on another restructuring – on its initial Fiumicino routes.

From its new Brussels base, Ryanair will operate 10 routes from next February. The airline will serve Alicante, Barcelona, Ibiza, Lisbon, Malaga, Palma, Porto, Rome, Valencia and Venice.

This brings it into sharp focus with Brussels Airlines. "It is a big battle, but we have the weapons," says Brussels Airlines chief executive Bernard Gustin, noting the carrier is used to facing low-cost competition. He points to the restructuring the carrier has gone through in its own short-haul business, and believes the carrier's product gives it a different offering in the market: "We have to continue to fight and focus on the service delivery we have."

But it is not just Europe's battling network carriers that come under Ryanair's gaze. News of the Brussels base came just three weeks after fast-growing Spanish carrier Vueling announced its own plans for a base in the Belgian capital. The similarities with the route structure of Vueling are clear. The Spanish low-cost carrier is planning to open new connections to Ibiza, Lisbon, Oporto, Palma de Mallorca, Rome, Santiago de Compostela and Venice from Brussels.

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It forms part of the fast-growing Spanish carrier's moves to expand beyond its Barcelona base, which also include growing its Rome base. Vueling last year launched a base at Fiumicino and is expanding further at the Rome airport this summer. Ryanair has also been on Vueling's doorstep at Barcelona since the autumn of 2010, though scaled back its presence there last year after Spanish airports operator AEA raised its landing fees.

"It shows the continued dynamism in this business," says Peter Morris, chief economist at Flightglobal's advisory service Ascend, of the strategic moves at Ryanair. "Nobody has all the answers, even if you have made a profit 10 years on the trot."