Ryanair in 2014

[Flanker2]

FR certainly seems to be putting a stick in Vueling's wheels. But even without Vueling I think that FR would have come to BRU eventually with this new strategy.

Subsidies can play a role in BRU for FR but one shall not forget that FR will not spend 30 million euro's extra on airport taxes and other costs, just to receive 5 millions or less in subsidies that the EU hasn't even ruled on yet. The extension of subidies are also uncertain beyond the next 2 years I believe it was.

I think that there is more to this story than meets the eye and FR is taking calculated risks to achieve a goal to differentiate their business.

[Inquirer]

FR certainly seems to be putting a stick in Vueling's wheels. But even without Vueling I think that FR would have come to BRU eventually with this new strategy.
I think that there is more to this story than meets the eye and FR is taking calculated risks to achieve a goal to differentiate their business.

I agree with you.

The rapidly deteriorating financial performance of their old style routes (see the 2 consecutive profit warnings issued since summer), especially at a time when their direct competitors are all posting improved results, must have served as a wake up call to them that indeed they needed to ditch their old strategy of trying to be as spartan as possible and that in the end the sweet spot of the European shorthaul market is not at its low end after all, but rather somewhere in the middle, with most passengers willing to pay a modest premium for what is generally considered as a correct service.

I do however question their decision to differentiate under one and the same brand.
IMHO, it puts them at risk of 2 things:

1 is that as they become less spartan, they will face more costs, costs which will somehow have to be carried by ALL of their passengers, also the current ones.
In another topic you have given the example of the second bag, which is indeed a nice example of an extra cost which all passengers will somehow have to carry, regardless the airport they travel from or their own travel needs: other examples are the new leniency towards passengers with excess checked baggage.
These costs may erode their market leading position on price vs other discount style carriers, like for instance Wizzair.

2 is that as they try to morph into an easyjet or a vueling, they will also have to adopt their cost structure to offer the same kind of service levels: it's something which is inevitable really regardless how many slides MOL pulls out of his laptop, as I don't think easyjet for instance is deliberately overexpending for what they offer to their passengers.

If we take a look at the slides from the press conference Ryanair gave, MOL claims his average ticket price to be just 42 euro, but note that this is or the 'old ryanair', so from places like CRL, without any of the 'product improvements' already factored in yet: the 'new ryanair' from say BRU and with the new product improvements can very well advertise tickets at identical fares as at CRL still, but they will be selling far fewer of them at those prices or they will be operating at a loss here, which I do not think is their aim, so my take is they will have to add on average at least 25 to 30 euro to cover the full costs of operating from BRU over CRL while adding another few euro for the costs from the 'product improvements' itself.
Now, the thing is: are passengers going to be willing to pay in essence the same prices as at easyjet for 'just' a ryanair flight, given their negative image? (the slide shows easyjet to be at 80 euro on average)
The image of Ryanair may be playing against them once the price difference vs the competitors becomes close to zero, just as the image of its CEO is, which is why I also advocate that together with this strategic U turn, it's high time for the current CEO to leave because before you know it, he'll be defending a product (and the prices) which until 6 months ago he was still calling cruelly expensive.

Similarly, if we take a look from the other side, network airlines are -and will increasingly- making the same choices as ryanair is, offering a more diversified product with lots of frills, yet selling each of these individually rather than simply including them in their basic fares: Aer Lingus is successfully doing it for years already for instance, much to the obvious frustruation of ryanair and others are experimenting with it too.

At BRU, B.air's average revenu per shorthaul passenger must be something like what? 110 euro?
It can't be much more, or they'd surpass their total annual revenues if multiplied by the number of European passengers, taking into account their annual turnover also includes long haul, charter and cargo revenues as well as some non-operational income sources.
Imagine that just like it's parent Lufthansa (through Germanwings) they go the Aer lingus way and offer a new basic product, so just a seat and some handluggage, and taking out the check-in, the checked bag and the reserved seat: that's what? minus 25 euro on the average base price (added back to it later through the sell on concept, of course)? It's getting you damn close to easyjet, which as I have pointed out, is also roughly what ryanair is likely going to have to cost from BRU, long term.

My conclusion it that ryanair risks (in part) to vacate a market segment which it controls in full and where it is strongly in the driver's seat, for a market segment where it becomes just one of the players and not necesarrily the lead player any longer. That's a risky move they do not undertake because they like it, but because they are forced to do so by changed market dynamics.
The good thing for them is that the new segment they want to move into is very big and that their bottom line will still fare well from it, but the bad news is that their margins will likely erode as they will be faced with increased direct competition, competition which can compete with ryanair over price and may have a better image in the eyes of the public, so as an investor, the risks for ryanair are clearly on the downside, and I am definitely not the only one feeling that way.

[sean1982]

And again the usual negative spin, it's getting boring inquirer. Share prices went up from 38.23 at the start of 2013 to 54.05 now ... so the investors are clearly NOT feeling that way.

FR is not going to ditch it's 81m passengers it has at the moment in a quest for the "premium passenger". As I said before, the bottom line is still to offer the cheapest fare in europe and at the mean time pick up passengers that found FR to be to inconvenient. All you are doing at the moment is pure speculation as you don't even know yet how their business product is going to look like. What you should not expect is a 42EUR fare from BRU to FCO with full flexibility, free bags, free food etc ... Customers who want the premium product will pay premium prices. FR has one of the strongest brands in Europe when it comes to cheap flying ... that ain't going to change.

[Inquirer]

And again the usual negative spin, it's getting boring inquirer. Share prices went up from 38.23 at the start of 2013 to 54.05 now ... so the investors are clearly NOT feeling that way.

There's is no negative spin at all, just a two sided analysis, contrary to some very one sided approaches here.
Besides, it might be worth looking not just at ryanair's shareprice alone, but that of it's direct competitors too; what I am saying may suddenly make much more sense then and may show you who investors think is in the driving seat right now, and who's trying to catch up.

FR is not going to ditch it's 81m passengers it has at the moment in a quest for the "premium passenger".

As Flanker has been trying to explain already: if you go after premium passengers you increase your costs and this will have to be either passed on to all passengers (and thus risks opening an opportunity for another ultra-low cost), or it erodes your profit margin: either way it's a downside risk, like it or not, as there's no free luch.

As I said before, the bottom line is still to offer the cheapest fare in europe

Mind you, ryanair needn't only be the cheapest, it needs to be sufficiently cheaper to be considered by enough people.
At present, all indications are that the difference between ryanair and its nearest competitors has somehow narrowed to a point where it no longer is, hence ryanair had to widen it again (hence the profit warnings). Because your management doesn't like to do this long term, they have decided to change strategy and move up, but as I have pointed out and as others agree with, there's a risk linked to that too; what they are selling as a fantastic new expansion they suddenly decided upon is in fact a risky strategy change which they have tried to postpone for as long as they possibly could.

All you are doing at the moment is pure speculation as you don't even know yet how their business product is going to look like.

Is that forbidden? Trying to look ahead is considered good investorship, I would have guessed?
SAVE is demonstrating that in CRL, right now.

FR has one of the strongest brands in Europe when it comes to cheap flying ... that ain't going to change.

Which can be a disadvantage in premium markets too, you know?
This is why flanker and I have been saying they should be doing this under another brand: the reason they don't? maybe the urgency of the matter?

[sean1982]

2 sides?? As usual only see one side to your story ... and it's pure speculation.

[danieln]

FR is not going to ditch it's 81m passengers it has at the moment in a quest for the "premium passenger". As I said before, the bottom line is still to offer the cheapest fare in europe and at the mean time pick up passengers that found FR to be to inconvenient. All you are doing at the moment is pure speculation as you don't even know yet how their business product is going to look like. What you should not expect is a 42EUR fare from BRU to FCO with full flexibility, free bags, free food etc ... Customers who want the premium product will pay premium prices. FR has one of the strongest brands in Europe when it comes to cheap flying ... that ain't going to change.

Well, maybe we can compare it with the food industry. A lot of factories who manufacture premium brand food products also manufacture the same products for chains like Aldi and Lidl. Their strategy is: someone will deliver to Aldi and Lidl anyway, so why don't we do it ourselves? That way we take both parts of the cake.
I have the same feeling with Ryanair now (but the other way around).

[sean1982]

I was going to make an analogy with Delhaize where you can buy a bottle of Cava for 2.00EUR but at the same time buy a bottle of Champagne for 36EUR .... but frankly I'm sick of these pointless discussion with inquirer. He clearly has an agenda and it shines through in every gloating post he writes.

I think I'll save my enegry for things that are more fun.

[Inquirer]

FR is not going to ditch it's 81m passengers it has at the moment in a quest for the "premium passenger". As I said before, the bottom line is still to offer the cheapest fare in europe and at the mean time pick up passengers that found FR to be to inconvenient. All you are doing at the moment is pure speculation as you don't even know yet how their business product is going to look like. What you should not expect is a 42EUR fare from BRU to FCO with full flexibility, free bags, free food etc ... Customers who want the premium product will pay premium prices. FR has one of the strongest brands in Europe when it comes to cheap flying ... that ain't going to change.

Well, maybe we can compare it with the food industry. A lot of factories who manufacture premium brand food products also manufacture the same products for chains like Aldi and Lidl. Their strategy is: someone will deliver to Aldi and Lidl anyway, so why don't we do it ourselves? That way we take both parts of the cake.
I have the same feeling with Ryanair now (but the other way around).

Yep, and they too do so under another brand, because they know that if they don't, it distroys the capabilities of selling the same products at a premium elsewhere.

Thank you for this easy to understand example of what we have been saying here.

[Inquirer]

frankly I'm sick of these pointless discussion with inquirer. He clearly has an agenda and it shines through in every gloating post he writes. .

I don't have an agenda, sean.

I just comment on what I see, and as others above have pointed out, what is currently being sold to you as a fantastic product improvement by somebody who pretends he's always been a nice guy really but somehow got completely misunderstood for years, shows signs of something else!
There's definitely more than meets the eye to this and anybody with a close eye on the long term financial performance should be asking more pertinent questions than you're only willing to do, especially given the rather improvised character of it all.

I could add to that that the reported 25% loadfactor for their new flights from BRU in March isn't exactly a brilliant start either for an airline which is wel established in all markets served and is just transfering flights from CRL in some case even, nor is the fact that MOL comes to BRU to give probably his most non-telling press conference in years, but I won't go there, because THEN you would be having grounds to accuse me of having an agenda.

[sean1982]

25% loadfactor in march (which together with february is the slowest period of the year) in the first month of operation is actually not that bad. Given that we still have more then a month to go and that a lot of our business passengers book last minute. As usual, inquirer tries to spin the info to make it look dramatic and negative. Sad affair

That's what I have to say about that ... and the pressconference was in my opinion a cover up for MO'L coming to BRU to tell them to behave ... and that's the last I have to say about it. You don't have to try to convince me you don't have a agenda ... it's pretty clear

[sn26567]

I'm sick of these pointless discussion with inquirer. He clearly has an agenda and it shines through in every gloating post he writes.

I don't see why you are so much against all what Inquirer writes: he made, IMHO, a clear and unbiased analysis of the new situation arising from the fact that Ryanair is aiming at the business market and mainstream airports.

Furthermore, he does not resort to personal attacks, which we should all try to avoid here.

[sean1982]

off course you think it's unbiased ... you have the same agenda

Look it's very clear ... this forum is an SN forum and a BRU forum. The fact that Ryanair will carry more passengers then any belgian airline(to and from Belgium) and that you will see the harp flying out of your precious BRU is giving quite a lot of you stomach ulcers. I get that .... that doesn't mean that you constantly have to conjure up theories and try to spin EVERYTHING ryanair does into a negative fact. It's a company that has the largest customer base in europe and is making millions of EUR's a year for a long long time allready. The only thing FR is doing ... is making sure the seats on their 100 upcoming airplanes will be filled as well ... point!

[airazurxtror]

At present, all indications are that the difference between ryanair and its nearest competitors has somehow narrowed to a point where it no longer is

I have booked a day return BRU-FCO in early April that cost me 40,78 euros and the same mid-May for 63,22 euros. I looked at the competitors, they would have asked me 450 or 500 euros (I don't remember the precise numbers).
This is not what I call a narrow difference ...

[Inquirer]

off course you think it's unbiased ... you have the same agenda

Oh, so basically everybody not fully agreeing with your view and standing up to say so is automatically having an agenda, right? Me, André, Flanker... we're all on an anti-ryanair agenda now suddenly?
Maybe that means formost that YOU have an agenda?

Look it's very clear ... this forum is an SN forum and a BRU forum.

I think you must have missed quite a few topics then, as the one airline most bashed around here is Brussels Airlines, and by far. Onemust be very blind to put all the people I have quoted above in the same basket, btw!

The fact that Ryanair will carry more passengers then any belgian airline (to and from Belgium) and that you will see the harp flying out of your precious BRU is giving quite a lot of you stomach ulcers. I get that

Why would it?
To my knowledge, ryanair has always been bigger than any currently existing Belgian airline and none of them is obsessed with being the biggest: they all care for their bottom line and that alone.
Besides, BRU is probably the airport in Europe where the home carrier has traditionally held the smallest market share already, while its apron has been filled with low costs airlines for many years.
Maybe you need to come over to BRU to see for yourself all the easyjets, the vuelings, the germanwings, pegasusses, jetairflys, air arabias etc, because you seem to be having a completely wrong view of the airport and who knows: that may not even be a personal error upon you!
Maybe even your employer misread the market overhere and BRU isn't so eagerly awaiting your arrival as MOL believed it would be?
Since you accuse me of being on an agenda anyway: It coudn't possibly be that the press conference was actually planned some time ago to announce more planes and more routes from BRU for this summer already, but that it had to be re-oriented at the last minute because those plans got axed due to disappointing financial results so far, now, could it? What do you think of the press brief André, a bit much to do about nothing, wasn't it, and definitely not really MOLs usual style?

Ryanair a company that has the largest customer base in europe and is making millions of EUR's a year for a long long time allready. The only thing FR is doing ... is making sure the seats on their 100 upcoming airplanes will be filled as well ... point!

yes, and the only thing we are doing here is pointing out that there obviously have appeared a few major problems on the horizon with the current strategy to succeed at that (or are you going to deny that too now?), hence the new strategy which gets rolled out on an almost ad hoc basis.
I don't think this is going to be such a smooth sailing as you think it is, as can be evindenced by an increasingly number of signs, so the risks are definitely on the downside for now.

[sean1982]

you couldn't be more wrong ... time will tell please continue to convince yourself of your airline specialism.

[Inquirer]

I know I continue to buy easyjet shares, and keep away from ryanair, that much I know and the reasons for that I have stated above. Anybody willing to invest in airlines and making the most of his savings, I'd advice to do as I do, all without guarantee of course.

Other than that, I'll leave it here, because I have been insulted and accused once too many today by somebody who's been spending too much time reading the company's staff magazine.

A last question however, sean: managed to figure out if hand luggage taken off during boarding is delivered back to the passenger at the steps of the aircraft, like I once asked and you were going to look up for me?
If it is, it significantly increases handling costs to be carried by ALL passengers, if it isn't, it's making much of the product improvements in cabin useless for premium passengers...
It's another catch 22 situation to be added to flanker's example list of this morning, in fact.

[sean1982]

No it will not be delivered back at the door, it will be delivered on the baggage belt ... which in BRU means it will be there before you manage to walk from the A pier to the baggage hall .. unless you are going to sprint just to prove your point ... wouldn't surprise me

Let me mention before you write another 200 word post about that, that on most flights NO bags get offloaded and there is space for everyone, especially on the "business flights"

[Inquirer]

No it will not be delivered back at the door, it will be delivered on the baggage belt ... which in BRU means it will be there before you manage to walk from the A pier to the baggage hall .. unless you are going to sprint just to prove your point ... wouldn't surprise me

Let me mention before you write another 200 word post about that, that on most flights NO bags get offloaded and there is space for everyone, especially on the "business flights"

Thank you.
Just wait till you have a full business flight from BRU.
I regularly get my trolley moved to the hold (and delivered back at the gate) on the flights I take, and that's often on a bigger A319, with less seats and operating not near the usual ryanair loadfactors, I am sure.

Maybe I am just a difficult person to deal with, but since handluggage goes in the belly and onto the belt at ryanair, how exactly is it insured in case it gets damaged or worse even lost as there isn't an official check in receipt for it and the crew isn't standing at the belt's lost and found counter to support any claims passengers may have?

[sean1982]

It will be "checked in" by the dispatcher. The dispatcher will tag the bag at the aircraft door and you will get a receipt stuck onto your boarding card or handed over to you. The bag is insured the same way as when you would have checked it in in the terminal.

[Inquirer]

Actually if that's the case, I won't be insured as it should be as I have had a hand luggage lost that way on an SAS CRJ and the official reasoning is that the dispatcher tag isn't an official IATA tag from check in, where it gets officially checked in and weighed (something which is needed to get refunded), so I just got courtesy miles as a commercial gesture from SAS.

Bad concept, IMHO: hand luggage should not have to be recovered from the baggage belts after a long wait whenever allowed by airport security like in BRU.