O’Leary is too focused on controlling costs while improving Ryanair to worry about whether all this work is making him a very wealthy man. And he’d rather have planes than champagne.
Ryanair CEO Michael O’Leary has maintained a singular focus for over 20 years: growing Ryanair. Why he may have refined his tone, he’s not changing his tune.
As he shared his insights for the future, O’Leary made it clear in Copenhagen that he’s only getting started.
While claiming to be ignorant about how technology works, he’s making sure Ryanair applies technology to support growth and improve its relationships with customers.
But is this new Always Getting Better, mobile-savvy Ryanair high tech enough now to offer start offering its customers Wi-Fi onboard? Well, we’ll get to that.
O’Leary is bullish on Ryanair’s adoption of digital, which he credits for transforming the airline’s relationship with customers.
“It’s working phenomenally well at the moment. I mean it’s still a work in progress, we’re still actively trying to improve the digital platform, but thus far we’ve seen a huge uptake of customers registering on the new My Ryanair feature,” he told Skift earlier this week. “There’s now discounts available to those customers who register. We’re seeing much more cross-selling of ancillary services, like business plus and reserve seating–stuff that we just began to cross-promote. But we’re really beginning to see the benefits of that and also the improved mobile app. The app is going to be the way we increasingly, not just sell to our customers, but communicate with our customers all the way through the journey.”
Distribution and Online Frenemies
Global Distribution Systems (GDS): “Ultimately distribution will continue but will continue to become cheaper,” O’Leary said. “Travel agents will continue to have to be forced to cut their fees. GDS systems will continue to become more and more open—and cheaper as well, because they will all be under pressure from the internet. As you see, these intermediaries, like the Sky Scanners and the price comparison websites, are continuing to drive down the cost of distribution. I think it’s generally good for the airlines and also for consumers. But airlines need to do more to migrate off onto the internet, the way Ryanair has. You still have too many airlines which are still too wedded to old form distribution, like GDSs.”
Google and Price Comparison Sites: While Ryanair has seen benefits from partnering with Google as it grows its travel services platform, O’Leary cautions airlines to keep an eye on the Alphabet company.
“We’re a part of Google Travel here in Europe. I would be weary of Google becoming too powerful, but frankly I think Google will increasingly become the driver of a lot of [change],” he said. “I think they will displace some of the price comparison websites, the Sky Scanners and the eDreams, and some of the misbehaving websites like that.” Ryanair took on Google and eDreams last year, through legal action, resulting from what the airline alleged were misleading and deceptive ads. The company claimed that Google had allowed eDreams to advertise “non-existing Ryanair fares.”
Less than 36 hours later, the companies to action to resole how eDreams ads appeared on the Google search pages, and Ryanair’s CMO, Kenny Jacobs, marked it as “a step in the right direction” saying the airline’s campaign to eradicate deceptive online advertising would continue.
These hitches aside, O’Leary said the Internet will shape the future of distribution, to the benefit of the airline.
“Ultimately, the internet is going to disinter-mediate all of that distribution information, and make it easier for passengers to find the lowest prices and that’s how they find their way to Ryanair,” he said.
New Distribution Capability (NDC)? We asked O’Leary whether he had any opinions on NDC. He replied, “I’m not sure what the new NDC platform is…” We weren’t sure whether he was pulling our leg or being serious (it can be tricky to tell with O’Leary), but we suspect the former. He interrupted as soon as we began elaborating, to say: “Nah, by the time IATA gets something developed it will be years late and far too expensive. Some kid in their garage will have developed a much better app or mobile app or something.”
Growth and Brand
During his meeting with the press, O’Leary touted the airline’s growth with 81 bases across Europe, flying to 200 airports in 31 countries and planning to serve 106 million passengers in 2016. O’Leary said he expects the Ryanair capacity to double from 90 million passengers served in 2015 to 180 million passengers served in 2023. The airline’s current fleet of 330 Boeing 737-300 aircraft will grow as the 350 aircraft on order are delivered.
“Ryanair continues to grow across almost every market in which we operate. We’re the number one or the number two carrier by market share, and we’re growing in all of those markets,” he said.
O’Leary attributes the sustainability of this growth to the success of its Always Getting Better project, of which he said:
“We are pioneering this revolutionary experience of offering customers, airline passengers, low fares but also being nice to them, which is not something we did particularly well in the past.”
O’Leary also made light of credit given to Ryanair for its improvement in a survey conducted by YouGov.UK, saying, “Somebody’s done a survey that says we’re one of Europe’s most improved brands, which you may say that since we’re starting from such a low base it’s not much of an achievement.”
Still Cheap After All These Years
While the CEO said customer service matters to Ryanair’s future success and that he and the organization is committed to Always Getting Better, Ryanair is still firmly committed to its original product differentiator: low fares.
“We expect to see our fares over the next twelve months decline by between 5 and 10 percent,” he said.
What allows Ryanair to offer customers consistent low-fares, while maintaining profitability, is that the Ryanair is a true low-cost operator.
“We have lower fares than every other airline. The average fare last year on Ryanair was 47 Euros. The next cheapest most of the other airlines we compete with, from easyJet, airberlin, Norwegian was double that at about 80-90 Euros,” O’Leary said.
“We also have Europe’s cost because we have more productive staff, bigger aircraft, we fly to airports where we negotiate significant growth discounts. Our average cost per passenger is 29 Euros significantly cheaper than any other airline and that’s what allows us to offer these kinds of airfares, massively cheaper than every other airline, which underpins our growth.”
Ryanair also plans to pass oil savings to its customers. “We have hedged forward our oil for the next 12 months. We’ve saved just over 400 million Euros, and we plan to pass on those savings on to passengers in the form of lower fares,” O’Leary said.
Those operating costs and fuel savings are the main thing keeping Ryanair customers off-line in-flight for now.
We asked O’Leary whether Wi-Fi would join other brand improvements with new aircraft, new cabin interiors, and new uniforms (which crew helped design).
“It’s something we would like to fit to our aircraft. It’s something we have under continuous review,” he said. “We’re talking to a number of suppliers. The problems we have in Europe is the roaming charges. You have to fit the antennas in the aircraft, which has a 4% impact on fuel drag. So it would increase your fuel burn by about 4% which is about 100 million quid a year for us. It’s an expensive product because you have the roaming charges when you’re flying across Europe, but as the technology improves I think we will have Wi-Fi in the aircraft at some point in time in the next few years, but only as the roaming charges come down and the technology allows us to fit them into the aircraft without having to put some sort of antennae on the outside of the aircraft.”
Wanting to pin down what solutions Ryanair might be considering, we asked whether ViaSat, which supplies high-speed Wi-Fi to JetBlue, Virgin America and United, and has recently extended its services to Asia Pacific with Qantas might be an option. The company has established a new partnership with Europe’s Eutelsat for commercial broadband applications. This same partnership could, in principle, extend in-flight Wi-Fi coverage in Europe, where the skies are open to competition.
O’Leary pled ignorance.
“Far too technical for a simpleton like me to follow all that,” he said, “but if someone comes along one day and says we’ll give you Wi-Fi onboard your aircraft for free and you can give it to your customers for free, we’ll have it in the morning.”
“The only thing holding us back at the moment is the cost of the Wi-Fi and reducing that cost so it is in fact affordable for our customers onboard,” he added.
So maybe. Maybe soon. And maybe free. Or at least affordable.
No Kick From Champagne
O’Leary has dedicated his life to Ryanair, and he’s not ready to stop.
A reporter asked O’Leary about his reported net-worth: “You are a Billionaire..Do you have any plan, like for instance Bill Gates, to give your money to charity, or do you want to order a new bottle of champagne?”
“Never believe the bullshit your read in newspapers,” O’Leary cautioned. “I want to buy more aircraft, carry more passengers at lower airfares, and keep growing Ryanair. All my wealth is tied up in Ryanair shares… I have four children who are under the age of ten so I have no desire to retire. I’m sure they’ll blow the money eventually, I’ll just keep working in the meantime.”
Photo credit: A Ryanair plane on the tarmac. Ryanair