Ryanair’s core business model of stimulating passenger demand by slashing fares is "broken" and needs a fundamental rethink, argues Aer Lingus chief executive Christoph Mueller.
Mueller says Ryanair’s half-year results released on Monday revealed that "stimulation is not working any longer" and that there is need for a "step change" in the way airlines seek to attract passengers.
Ryanair boosted passenger volumes 2% to 48 million in the six-month period, but average fares fell 2% and further falls are expected in the second half. The Irish budget carrier has also reduced its full-year profit guidance from €570 million ($770 million) to €510 million.
"Stimulation is not working any longer and that's a big surprise for everyone in the market. The market leader Ryanair has stimulated the market with a 20% blanket reduction across Europe – Scandinavia to Malta, Spain to Poland – and has generated only 5% additional passengers," says Mueller.
"So the entire model of stimulating the market is broken," he adds.
The Aer Lingus boss says stimulation is no longer working because "markets are saturated": there is overcapacity on routes, while migrant workers – a core business segment for low-cost carriers – are no longer travelling as much as they have in the past.
Ryanair holds an almost 30% stake in Aer Lingus.