As Europe scrimps, budget airline Ryanair soars

Europeans may be tightening their belts, but they're still flying Ryanair, whose profits were up in the first half of 2012. And the airline is eying expansion in Eastern Europe, Africa, and even the US.

Steve Parsons/PA Wire/AP
Ryanair's CEO Michael O'Leary speaks at a press conference in London Monday. Despite operating in cash-strapped times where many Europeans are cutting back on the pre-austerity habit of taking multiple weekend city vacations, it posted a 10 percent rise in net profit and 15 percent rise in revenues in the first half of the year.

Spartan, garishly colored cabin interiors, seats stripped of pockets, a seemingly constant bombardment of mid-air retail offerings, and a cheesy automated trumpet fanfare that announces “yet another on-time arrival.”

It could only be Ryanair, the budget airline European travelers love to grumble about while readily snapping up its fares. The pattern has transformed the nature of travel on the continent and forced more upmarket rivals, including British Airways and Lufthansa, to mimic its “no frills” model.

While companies from a range of sectors across the continent continue to struggle against the headwinds of deep austerity, better than expected results released this week by the Dublin-based carrier for the first half of this year underlined the apparent resilience of one of Europe’s most extraordinary business success stories. Despite operating in cash-strapped times where many Europeans are cutting back on the pre-austerity habit of taking multiple weekend city vacations, it posted a 10 percent rise in net profit and 15 percent rise in revenues to €3.1 billion (almost $4 billion).

The announcement Monday also came with the confirmation that Ryanair is adding nine new routes from English airports in a move slated to create 1,000 new jobs next year.

No transatlantic expansion... yet

While the airline continues to expand in Europe, where it carried 48 million passengers in the year up to September, don’t expect Ryanair to turn its attention to the US for the moment.

“I think it's unlikely we will see a Ryanair transatlantic [service] for the next three or four years,” the airline’s famously bombastic chief executive, Michael O’Leary, told British broadcaster Sky News. Mr. O’Leary cited the reason as being a delay in the delivery of new, long haul aircraft.

However, many experts who have long been fascinated by the story of Ryanair – a 27-year-old start-up that was losing large sums of money as recently as the 1980s, until O’Leary turned it around by copying the low-cost characteristics of Dallas-based Southwest – suggest that future long-haul ambitions may be a factor in the company’s ongoing interest in buying its Irish rival Aer Lingus.

“If they do acquire Aer Lingus, they have this ready-made way of trying to launch a budget transatlantic services,” says Eleanor O’Higgins of the School of Business at University College Dublin, who has written a series of case studies on Ryanair.

Now in the midst of its third attempt to take over Aer Lingus, Ryanair this week cranked up its efforts by submitting proposals designed to alleviate European Commission concerns about competition being stifled.

Dr. O’Higgins stresses some of the challenges of flying transatlantic service for the budget model, which she suggests might only work on shorter routes such as Dublin to New York, and envisages that Ryanair may have to compromise by providing free meals, extra leg room, and scope to bring more luggage.

But she adds: “It would be interesting to see if they can have success where others have failed. There have been others starting with Laker in the 1970s, and Canadian airline Zoom more recently, but I would say if anyone does succeed it would be Ryanair.”

For now though, talk of transatlantic service remains just that, as well as another handy way for O’Leary to continue attracting headlines.

Expansion east and south?

Much more likely is continued growth in Europe, where Ryanair aims to grow its share of the short-haul air travel market from 12 to 18 percent over the next decade.

Tom Lawton, professor of strategy and international management at the Britain-based Open University business school, suggests that, rather than westwards, the growth is more likely to be eastwards, and possibly southwards.

He says: “Low-cost airlines like Hungary’s Wizz Air have been looking to Russia, for example, and North Africa is also an option. Ryanair already flies to Morocco, although these destinations are outside of the EU and so the regulatory challenges are much higher.”

“Rather than transatlantic flights, it’s more likely that they will just keep doing what they are doing, and perhaps look at new opportunities such as Eastern Europe.”

Ryanair’s major achievement, and one that cannot be ignored, is to inject cost efficiency into the European aviation sector, says Professor Lawton.

Looking ahead, and with the stated aim of carrying 120 million people each year by 2022, Ryanair said in a statement Monday that "further airline failures and consolidations are inevitable given the fragmentation among European airlines and the existence of so many high cost, high fare airlines with poor punctuality records."

With characteristic bluntness, its boss was meanwhile once again batting away the often-voiced suggestion from journalists that it treats its passengers with little respect.

“In Ryanair we care more about passengers more than any other airline,” he told Sky News.

“That's why we give you the lowest fares, brand new aircraft, all leather suits, and on time flights, and that's what passengers really want. They don't want to be delayed in rubbish airports. They want to arrive at the airport, get on the plane and go, and save a bundle of money doing it."

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