The Idea of Low Cost Carriers Connecting with Legacy Carriers Is Not New, But It Is for Ryanair and easyJet

This week, the Financial Times looked at the purportedly novel idea that Ryanair and easyJet may try to cooperate with legacy carriers to transfer passengers. This would be news for those two airlines, but it’s not a surprise. While it’s certainly not something without precedent, this plan is a little different. It’s going to be much harder to make this work.

Ryanair Interline

The article talks about how both easyJet and Ryanair are interested in bringing people to gateway cities and then transferring them to traditional long haul carriers. In other words, they’re looking for an interline agreement, but with a twist (which we’ll get into later). That these airlines are exploring this possibility is not surprising at all considering where they are in their histories.

When new airlines start, most fail in a short period of time. But when an airline finds a niche that works, it looks to grow quickly. Not only does growth help to keep unit costs lower (constantly adding new, entry level wages) but it also helps to compete with other airlines that might try to serve the same niche. During this phase of life, the goal is to just keep growing and keep costs low. It’s a beautiful thing.

Eventually, however, airlines start looking for other avenues to keep growth rates up. They start to realize that having the lowest costs won’t necessarily matter if they can increase revenue more than they increase costs. While low cost carriers traditionally don’t like the idea of partnering with other airlines because of the costs involved, the older they get, the more benefit they see.

In the US, take a look at JetBlue in New York and Boston. Look at Virgin America in San Francisco and LA. And though it’s a slightly different model, look at Alaska in Seattle and Hawaiian in Honolulu. All of these airlines share something unique. They have strong positions in major international gateways, and they can provide feed to a variety of airlines without adding too much cost. The revenue benefit is well worth it.

The situation with Ryanair and easyJet is somewhat different. Yes, they’re ultra low cost carriers but that’s not what’s different. They’re ultra low cost carriers that have been around a lot longer than their counterparts in the US so they’re further along in their life cycle.

What’s different is that JetBlue and Virgin America focus their partnering efforts on carriers abroad. Those foreign carriers can’t fly domestically within the US, so it makes sense for them to tap into the networks of US-based airlines.

What easyJet and Ryanair are talking about is partnering with airlines in their own backyard. So instead of feeding American or United for their flights across the Pond, Ryanair and easyJet want to put people on Lufthansa, British Airways, etc.

If this sounds crazy, it probably is for several reasons.

1) These airlines would have a hard time feeding each other considering their networks don’t overlap all that much. BA’s hub is Heathrow, yet there are no low cost carriers at Heathrow. Frankfurt? You won’t see Ryanair or easyJet there. Paris/Charles de Gaulle? easyJet does fly there but Ryanair doesn’t. This isn’t necessarily for lack of trying. If low cost carriers could get slots at Heathrow, they’d be there. And that could be part of the reason these airlines want to work with legacy carriers. It might help crack open the door.

2) Labor would lose their minds. When JetBlue feeds an Aer Lingus flight, it’s not pushing away passengers it would carry on its own (or vice versa). But if Ryanair puts people on British Airways, those could very well be people that BA could carry itself. Should BA be carrying those passengers? We can debate that, but I can guarantee where labor would land on that topic.

The idea, of course, is that legacy carriers could reduce their short haul operations and farm it out to more efficient airlines. But labor would go scorched earth if that were to happen. (You’ve seen them go nuts for much less, just look at every other week at Lufthansa and Air France.)

3) While the idea of interlining is great, it sounds like Ryanair wants to take absolutely no responsibility or bear any costs. (That’s the “twist” I was talking about.) According to the FT article, Ryanair refuses to have to deal with what happens if it delivers a passenger late and that person misses a connection. The way Ryanair sees it would be almost like an old regional airline prorate deal.

You wouldn’t buy a Ryanair ticket at all. You’d buy a ticket on the big long haul airline and it would just include a flight on Ryanair with it. But if anything goes wrong that long haul airline would have to deal with it.

That arrangement seems sweet for Ryanair. The airline gets more passengers and has nothing else to worry about. But were I Air France, I don’t think I’d be too thrilled.

I tend to think the best way to structure this is how GatwickConnects has done it. That’s a fantastic way to let the airport create the business of connecting airlines that don’t work together. More airports should take that lead.

But a relationship like the one that’s been envisioned in the FT article? There are a lot of hurdles to overcome.

[Original trenchcoat photo via Shutterstock]

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14 Responses to The Idea of Low Cost Carriers Connecting with Legacy Carriers Is Not New, But It Is for Ryanair and easyJet

  1. ABC says:

    Good write up. There is also the issue of buying a ticket from AF/LH/BA and having the product expectations of those airlines and then instead experiencing the product of the ULCC. That’s a bit of a marketing challenge to overcome.

    • Potcake says:

      “Bit of a marketing challenge” indeed.

    • ABC – I don’t know that it’s that big of a deal. After all, short haul flying on legacy carriers has gotten worse and worse within Europe. Lufthansa’s coach seats are pitched tightly and uncomfortable from what I understand. BA keeps squeezing legroom out. It’s more of the soft stuff that needs to change – for example, they’d have to find a way to deal with baggage fees and things like that. But other than that, I don’t think there’s much of a product difference.

  2. David SF eastbay says:

    Hard to believe the big guys in Europe would go for this, but if they see a benefit in it they will do it even if it really doesn’t make sense.

  3. EconStudent says:

    To some extent, there already is an example of this with BA/Iberia and the IAG company, Vueling. You can buy Vueling tickets through Iberia and British Airways and vice-versa. I understand this is different, but it is a similar situation

    I could see a ULCC partnership working for a carrier like Air Europa and/or Iberia who have scraped away at their short-haul offering. It would be a good opportunity for them to extend their reach into the rest of Europe and develop Madrid and Barcelona into bigger gateways to Europe. Easyjet and Ryanair already have significant operations in Spain at the major airports as well. I don’t think that it would work well for AF/BA/LH because the level of service expected with those brands is not compatible with the offerings of EasyJet and Ryanair, however there could be some interesting opportunities at LGW to connect leisure pax to the Florida market on BA and/or Virgin.

    • Neil Chalk says:

      As mnetioned in the article from a consumer POV, would GatwickConnects be a better way of exploring the lesiure pax connecting to Virgin or BA? Definitely think airports and companies like National Express have a lot to offer in this scenario.

      • EconStudent says:

        As mentioned in Cranky’s article on GatwickConnects, there are some severe limitations and problems when a delay happens. I personally think that it is a great idea to have GatwickConnects, but some problems might be alleviated by a true interline agreement. I need to do some more of my own research into it, and if the GatwickConnects service is improved and/or expanded, I would say that there is no need for any interline agreement at Gatwick.

    • TC says:

      However, both Air Europe and Iberia are already flying to MIA on their own. Why would they want to connect with BA, LH, or VA?

  4. Oliver says:

    What happened to RyanAir’s plan to fly long haul over the Atlantic?

    Would AF flight attendants be required to provide O’Leary’s envisioned, uh, “special services” for business class passengers?

    • Sean S. says:

      Same thing that has happened to every low cost long haul idea outside of ones that have a geographically well positioned hub (the Icelandic and Gulf carriers). As long as transatlantic and intercontinental flights are driven by business class, there will be little appetite for ULCC’s in a long haul situation.

  5. DougYWG says:

    Oh dear, oh dear. Legacy carrier interlining is a long way from low cost. Ryanair and Easyjet would need industry standard res and revenue accounting systems. They would have to join the IATA clearing house. So, a fairly significant one-time investment for system purchase and all the testing, installation and training required plus all the ongoing costs. And for what?

  6. WilliamRIC says:

    BA bought Aer Lingus (then 30% owned by Ryanair). BA is planning a North Atlantic hub in Dublin to take advantage of the US Customs and Immigration facilities and without the constraints of Heathrow. Ryanair has an extensive route system from Dublin that could deliver large numbers of passengers to BA. For passengers from North America, they could clear EU customs and immigration in Dublin and go to many destinations in Europe on Ryanair. BA could concentrate on business customers in London and use Dublin for other passengers.

  7. USBT says:

    easyJet had a small partnership like this recently. It had a code share agreement with Transearo on its Gatwick-Moscow Domodedovo route, without an interline agreement. Transaero was selling through tickets from LGW to international “connecting” at DME. Except that with no interline agreement baggage couldn’t be through checked, pax had to go through immigration to collect and recheck them. Many who thought they were just connecting airside were denied boarding by easyJet for not having Russian visas. What a mess.

    Of course with UN’s bankruptcy that omnishambles of a code share has disappeared. I hope that’s not what easyJet and RyanAir have in mind for BA, LH and co.

  8. Someone says:

    “BA’s hub is Heathrow, yet there are no low cost carriers at Heathrow” => Germanwings (now Eurowings) has a number of daily flights to and from Heathrow.

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