Ryanair is Not Starting Transatlantic Flights Just Yet

It’s amazing how much traction a false story can get. Last night, it was supposedly leaked that Ryanair would announce in its earnings call today that it would begin transatlantic flights very soon. Today, it was proven that the rumor wasn’t true . . . yet.

Michael O’Leary has been quite vocal in the past in saying that it would happen (remember beds and blowjobs?), but he reiterated today that the time is not yet right. He’s waiting for it to become easy to get airplanes for cheap on the used market. Once that happens, he’ll start it up.

Listen to the BBC interview with Michael O’Leary for details.


9 Responses to Ryanair is Not Starting Transatlantic Flights Just Yet

  1. David says:

    The press article appeared in one of the ‘more populist’ (and very high selling !) newspapers on Sunday, which as you say caused lots of people to get excited.

    The following day, Ryanair announced their profits over the last 6 months ending 30 September had halved, and they would make a loss in the 6 months to March 2009. Further, some staff are being put on unpaid leave (temporary furlough ?) over the winter.

    There has been some chatter to suggest that this may have been a bit of smoke and mirrors – put out a good story 24 hours in advance, and hope it lets you keep the decline in profits quieter the next day… !

  2. JBM says:

    100% publicity stunt.

    Even getting 787s at a discount probably means paying $800,000 a month. With every cost advantage in its corner, Ryanair’s fuel, crew, overflight and basic passenger costs still drive at least $150,000 of base cost for each Florida rotation (assuming fuel is about $3 per gallon). At a 90% load factor with 270 seats, that’s over $700 per person including taxes. That’s a lot of baggage fees!

    The only plausible scenario is to have, as MOL has hinted, a premium business class to subsidize the back, just like British and Virgin do. But if you want the back of the bus to be $400 including tax, arguably the “clearing” fare ex UK for Florida – then on a 787 (42C/210Y) with 75% paid LF up front and 90% in back you still need close to $3,000 R/T from each front passenger. Ryanair knows perfectly well that Eos – with its premium positioning, lie-flat industry-leading product, multiple daily frequencies and stellar customer service reputation – never achieved that. Silverjet and MAXjet were way behind.

    The economics are miserable with 777s and A330s, primarily because you have a much higher gas bill to offset (making it harder to sustain frequencies while achieving high yields). So I agree this is a continuing stunt to distract from Ryanair’s deteriorating results.

  3. CF says:

    JBM – O’Leary is definitely not talking about 787s here. He wants to get cheap widebodies on the secondary market. Now that the 787 is delayed further, this may delay the availability of those planes. But at some point, it looks like the Allegiant model. Grab a bunch of airplanes that nobody else wants for cheap and it makes your fixed costs much lower.

    I tend to think that he’ll try this at some point. Whether it succeeds or not is a whole different question. I’ll wait to comment on that until I hear if he actually has a real, concrete plan.

  4. JBM says:

    CF – I understand what you’re saying, but the trade between (variable) fuel and maintenance cost vs. (fixed) rent isn’t the same on these stage lengths as on shorter-haul domestic.

    Say you get an A330-200 cheap for $400,000 per month (about 30-40% off of the current rate for a 10-year old plane). You’ll get 29 London-Florida rotations a month from that plane (vs. 30 on the new 787). That’s $13,800 in rent per round-trip. The 787 (new) might drive 30 monthly round-trips at $800,000 per month, or $26,700 per round-trip. So the “cheap airplane” strategy is worth $12,900 or so per round-trip. The A330 is likely to burn at least 30,000 pounds more fuel on a Florida round-trip than the 787 – or $13,000 at today’s (lower) fuel prices. And a 10 year old A330 has significantly higher maintenance cost than a new 787. I personally think you’d need to be sourcing A332s at $200,000 per month (or less) if you want an absolute (fully allocated) cost advantage. Only in a true global industry collapse are late-vintage A330s going to get close to those numbers.

    The Allegiant model is based on cheap rent on economically obsolete aircraft. A330s and B763s aren’t economically obsolete (yet). B744s are too big and brutally expensive to operate LCC (just ask Oasis). I don’t see what they’re waiting for.

  5. David says:

    Crank or JBM:
    How expensive would fares actually have to be to send a 737-800 from somewhere like London or Milan to somewhere like Bradley or Baltimore, with a refuel stop in Newfoundland (e.g. Gander)

    Yes, the additional cost of putting crew up for the night is incurred – but I can’t see RyanAtlantic spending a fortune on a luxury hotel.

    I know that Ryanair and RyanAtlantic will be separate companies, but there’s nothing to stop dry leases occurring at commercial rates.

    O’Leary already has plenty of 737-800s due to be delivered (as well as options) so doesn’t lack the metal. If a 1-year experiment doesn’t work, just end the lease, refit the interior and respray the paint back to the normal Ryanair scheme.

  6. Ron says:

    What happened to all the 747s that used to fly for Tower Air? I liked that airline.

  7. CF says:

    JBM – I’m definitely going to defer to you on this one, since you appear to have a much better understanding of the economics of an operation like this. But airlines are having trouble lining up financing for aircraft deliveries, so there could be a small window of opportunity to get really cheap rates if Ryanair can line up financing for it. But even if it doesn’t make sense, it doesn’t mean that MOL won’t give it a shot!

    David – I can’t imagine he’ll do the 737, because he wants to offer a very premium business class product as well. Nobody will take that flight if they have to stop.

    Ron – Those old birds have to be beer cans by now. Those were very old and tired airplanes.

  8. JBM says:

    CF – you’re right on MOL giving it a shot! Even if it’s publicity, having a couple of planes running the Atlantic may be worth the losses in order to spread the brand. Just like our friends at Kingfisher who (used to) run an airline to sell beer!

    David/CF – as you know the 737-800 can be equipped with auxiliary tanks. It’s sold as the BBJ2. It’s actually got good range so configured, but the MTOW stays the same so the payload/fuel/baggage tradeoff is significant. With lie-flat business taking up half the plane, it could work, but that doesn’t leave many economy seats to blow out for 10 pounds a head.

  9. Well I guess it is true what my mother told me. Everyone now a days is just out to make a quick buck. I am not sure if this tactic is going to work fro him or not. Guess we will just have to wait and see wont we.Affiliate Gal

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