Last month it was reported that Ryanair was hoping to finalize a deal that would allow it to feed passengers on to Norwegian long-haul flights between Europe and the rest of the world. This is an interesting agreement, but it isn’t Ryanair’s end game. The way Ryanair sees things, it and other low-cost carriers should be providing feed for every long-haul airline, replacing those who do it themselves.
The idea of serving connecting traffic would have been anathema to Ryanair or easyJet just a few years ago. But with growth opportunities slowing, both carriers have started to look for ways to broaden their bases. They’ve become friendlier to business travelers, and they’ve started to consider things that add cost, simply because the extra revenue makes it worthwhile. One of these things involves connecting passengers.
So far, Ryanair still won’t connect people between even its own flights, though it has done experiments. Yet it sounds like there will be a deal coming this quarter to connect Ryanair’s short-haul passengers on to Norwegian’s long-haul flights, and vice versa. Why would Ryanair want to do that? There are actually many reasons.
You might wonder why Ryanair wouldn’t just start its own long-haul operation. It still isn’t convinced there’s a way to do it profitably yet. Every time the rumor comes up, it ends up getting squashed. But if another airline wants to lose money trying something Ryanair doesn’t think can work, why wouldn’t Ryanair try to benefit from that? It would, and apparently, it will.
Ryanair historically hasn’t served many of the airports that handle the bulk of long-haul flying, but that has changed over time. With Norwegian it will be able to connect a fair number of people in Copenhagen and Barcelona. It has some more limited opportunities in other big cities too. But also, don’t forget about the small cities. Norwegian will be starting more service from Cork to the US. Just imagine someone from Wroclaw (a city Ryanair serves from Cork today) flying through Cork to get over to New York. That’s crazy, but it could be possible if this agreement happens.
For Ryanair, there’s a lot to be gained. Its fares within Europe are so low, that even a percentage of a low long-haul fare would still be worthwhile. Or it could end up that the airlines simply sell the sum of both local fares, in which case Ryanair gets its regular selling fare. Either way, Ryanair is happy since it’s getting good money to carry more passengers. I’d be it ends up pushing the burden of connecting baggage on to Norwegian as well, so Ryanair wins there as well.
This could end up helping the airline add more capacity. It could also displace lower-fare local passengers. Either way, Ryanair is happy. (Norwegian might not be, but then again, if it has a bunch of empty seats as it aggressively expands, then this will benefit that airline as well.)
It’s interesting to think about how this can help both airlines, but what really got me was a quote from Kenny Jacobs, Ryanair’s Chief Marketing Officer, in the article.
“What’s in it for us is that it supports the logical development of the market the way we would want to see the market develop,” he said, adding that short-haul flying in Europe should primarily be handled by low-cost carriers.
This is really what Ryanair is aiming for; the elimination of inefficient competition. I just wrote about Alitalia yesterday and its struggle to compete in the short-haul market. Wouldn’t it be better off killing that money-sucking part of its business and outsourcing to a lower-cost provider? The unions don’t think so, but for Alitalia it may very well be a smart path forward.
Certainly IAG-group airlines are interested in that model and are already experimenting with it as Vueling gets further integrated into the group. I don’t expect the big guys to walk away from short-haul flying entirely, but it’s hard to argue that they’re providing a much better experience than what Ryanair offers today.
British Airways has already thrown a ton of seats into its cabins, pulled free food, and more making the differentiation far less than it used to be. Other airlines are lining up to follow. Even the premium cabin on European short-haul flights is laughable. You’re just as well off in an exit row on Ryanair. The difference may be in the ground experience, but that’s something that can still be controlled by the long-haul airline.
Ryanair clearly thinks this kind of relationship is going to grow in the future, and easyJet is onboard with that vision as well. A deal with Norwegian may just be a small test of what’s to come in broader terms.