Ryanair sets out long-haul plans

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By Murdo Morrison, David Learmount, and Aimee Turner.

No-frills trendsetter to launch low-cost airline to USA with premium cabin to attract high-yield business travellers

When he steps down as Ryanair chief executive in three years' time, Michael O'Leary's parting gift to shareholders of the business he has turned into Europe's leading low-cost carrier will be a transatlantic no-frills airline.

As we revealed last week on flightglobal.com, the venture, which Ryanair will launch at the turn of the decade, will be a budget airline with a difference - a no-frills service offering one-way fares from $12, but with a premium cabin for business travellers. It will be run independently of Ryanair - with a separate name and management - and connect the airline's 23 European bases with half a dozen secondary airports in the USA.

O'Leary rules himself out as the venture's chief executive - he says he is too identified with the cost-paring Ryanair to market an airline pitched partly at business executives. But the company's track record means the plans are being taken seriously by manufacturers, airports and rival airlines.

Ryanair will order 40 to 50 of one narrowbody type, and - although the services will not interline with Ryanair's European network - the company will tap into the markets around its 23 bases and the 70 million passengers it plans to be carrying by 2009.

"It will be relatively straightforward for us to do a deal for 40 to 50 long-haul aircraft and connect these European bases transatlantically, and there would be no-one to touch us," vowed O'Leary, who has a reputation as the most outspoken airline boss, speaking to Flight International at the airline's Dublin head office last week.

So can Ryanair succeed when others, including most famously Freddie Laker's Skytrain service, have failed?  O'Leary has dismissed the idea of Ryanair entering the long-haul market in the past. But the introduction of open skies has changed his mind.  The agreement will give Ryanair carte blanche to deal directly with US airports and cities keen to lure tourists and business people. O'Leary says he is "already receiving offers from US airports".

Although Andrew Lobbenberg, an analyst with ABN-AMRO, suggests O'Leary's proposals may be "mischief-making" timed to coincide with an imminent competition policy ruling into its bid for Irish rival Aer Lingus, he says such a venture would be "negative news for network carriers, with hubbing carriers Air France and Lufthansa most obviously threatened".

He adds: "Network airlines have high overheads, restricted working practices and high social costs. New start-up carriers can benefit from substantial labour and overhead cost advantages and point-to-point operations simplify things."

As with Ryanair's European services, O'Leary expects ancillary sales to be a big economy-class revenue earner. "With movies, food and drink, duty-free and merchandising, we could make an average of $50 per passenger," he says.

Crucial to Ryanair's plans is acquiring aircraft "during the downturn". Ryanair is an all-Boeing 737 operator and struck mouth-watering deals with Seattle after 9/11. O'Leary expects prices to drop soon after the current orders surge. However, Lobbenberg has doubts about O'Leary's ability to acquire the aircraft he needs. "Notwithstanding his clout with Boeing, it is not clear how easy it will be to source 787s at the turn of the decade, let alone A350s since they don't get delivered until 2014," he says.

O'Leary revealed his plans after Canadian carrier Zoom Airlines said it would launch a low-fare service between London and New York in June. Several all-business class airlines, including Eos, Maxjet and Silverjet, have also entered the market in recent years.

The plans are unconnected to Ryanair's bid for Aer Lingus. While Ryanair has promised to retain its rival Irish operator's Airbus A330-based long-haul operation, it says its focus would be on "significantly reducing the costs and fares of its short-haul operations".