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.
Excelllent analysis. A link up like this also seems to make so much sense for an airline like Sourhwest. Why can’t WN at least enter into some type of codeshare agreement with a European LOC like Ryan, Norwegian, WOW or Condor? I think it’s one of WN’s largest potential sources of new growth, as North America becomes more and more saturated.
As I understand it, WN’s constraints are twofold: their IT systems can’t handle interline/codeshare agreements and any movement in that direction will bring them back to square one in the pilot negotiations.
MarylandDavid – I believe Itami is right on the first part; Southwest’s current IT system can’t support it. But Southwest is finally moving to a new res system. On the second part, I believe the last pilot agreement allows for more flexibility on codesharing and interlining, so it’s likely going to be coming. The bigger problem is that Southwest’s big airports don’t connect to any international airlines of note. Think about Houston/Hobby, Dallas/Love, Chicago/Midway… not great for connections.
BWI does and the Baltimore/Washington market has the income & demographics (not to mention the large stable WN network) to make Southwest feeds work.
That is exactly what I was going to say (selfishly…it is my home airport). We have accumulated a lot WN points, and I’d love to be able to use those to fly to Europe on WOW or Condor (both fly from BWI to Europe). My guess is that WN could shuttle a lot of passengers through BWI and onto Europe via a codeshare partner. Also, doesn’t Hobby now have an international terminal? Furthermore, WN does fly into airports such as EWR and BOS. It may not be WN, but I predict that some American LCC or ULCC will eventually develop a partnership with a kindred European carrier.
Didn’t the history with Pan Am teach us that an airline cannot exist on international traffic alone? Alitalia might suck at domestic operations but if they rely on a Ryanair to feed their long haul they no longer have any control of their destiny. The moment O’Leary decides to buy a widebody they are finished.
A – Well, it’s not really Ryanair suggesting it should handle all short haul travel. But think about IAG which has effectively farmed out an increasing amount of short haul to Vueling. On the BA side, it’s just turning itself into a low cost carrier (or at least offering the product of one). I guess the point is that there are a lot of ways low cost carriers can take over, and Ryanair is one option.
I don’t think Ryanair will find many partners for this. Yes, there could be a short term benefit to Norwegian to have Ryanair feed them passengers for their long-haul flights, but what happens once Ryanair has milked as much profit out of that arrangement as possible? That’s when Ryanair is going to be in a position to start offering their own long-haul flights and cut Norwegian out of the loop.
It’s no different for the legacy carriers. They don’t want to strengthen competitors like Ryanair or cede routes to them, because it makes them reliant on the LCCs.
You are right that the premium experience within Europe has decreased dramatically, but that doesn’t change the fact that economy on a legacy carrier is still better than any experience that Ryanair cares to provide. Even with Ryanair now flying out of the main airport in Oslo I will still pay more to fly with SAS or book a connecting flight rather than flying with them.
It is certain that this will put even more pressure on EU legacy carriers.
This model and the deterioration in quality of intra-European flying just enhances the likelihood that carriers will operate nonstop flights between the US and Europe.
It is ironic that US legacy carriers have figured out better how to compete with low cost carriers and by many metrics are offering higher quality service than US low cost and certainly ultra low cost carriers (which Ryanair really is).
As more narrowbodies with transatlantic range become available during the next couple of years, there will likely be a great deal of benefit to having connectivity (and decent OD) on at least one side of the pond.
Certainly an airline like JetBlue, with focus cities in New York and (perhaps particularly) Boston would be better positioned to capitalize on transatlantic narrowbody flying, relative to other LCCs attempting transatlantic service.
Anything that Norwegian can do now to shore up connectivity to its transatlantic operation on the European side of the pond will only help ensure the continued viability of these routes once the competition really heats up during the next few years.
How reliable are Ryanair flights to make connections to/from? If they have a history of delays or flight cancels, who would want to take the risk.
Also you have to think if Ryanair doesn’t want to connect passengers with themselves, how well can they do it with someone else.
David – Ryanair is one of the most reliable airlines in Europe. It’s a far cry from the ultra low cost carriers in the US.
I’m still not convinced that the Norwegian model will be viable over the long term. Lots of political and economic black swans that would kill the ecosystem that makes their existence possible.
I realize I may be preaching to the choir here, but does anyone else have trouble reading the comments on iOS devices? All I ever see is two circles spinning around. I’ve never had a problem on my laptop.
There are 2 core problems with this kind of business model. If anyone can explain how they will be solved, I’d be very grateful:
Long haul flights under this business model are unlikely to be more than once per day on any specific route. Ryanair fly some short haul routes less than once per day. If airline X has a plane that is a few hours late to a connection point:
1 – Who incurs the responsibililty and cost of any rebooking onto the next flight on airline Y (especially if the plane is full)
2 – If this is to be sold as a formal connection and a missed connection occurs, who pays for EU261 compensation ?
David – No doubt these are the issues that need to be worked out together. But presumably it’s the airline that causes the delay that has to handle reaccomm and would pay for compensation.
Ryanair’s track record on these issues is not exactly stellar.
Re: WN DEN connections to Europe… Japan
WN according to their media site, has 184 daily departures from DEN.
DEN has one daily nonstop to FRA on LH, a 747.
DEN has non stop service to MUC on LH, 5 (ish) days a week.
DEN has one daily nonstop to LHR, on BA, a 747.
UA is flying DEN to Narita, Japan, nonstop, daily, on a 787.
Weather report: DEN is looking at up to two (2) feet of snow at the airport, by end of the day tomorrow,
Thurs. 5 Jan 2017.
Predicted high temp in DEN tomorrow, Th. is + 8 F.
Frontier is getting a lot of bad TV press, right now, due to how bad they screwed up in the last Denver snow storm.
Local media documented that Frontier contract employees, who are paid minimum wage, were walking off the job, in the last DEN snowstorm. This includes ticket counter, and ramp employees, which have all been contracted out.
You get what you pay for… !
Westjet seems to be doing alright turning their low-cost domestic model into a transatlantic position.
I wonder when the availability of the trans-atlantic tracks will become a factor limiting the number of flights that can cross the atlantic. Everyone wants to reduce the size of the planes, but eventually, ATC will run out of tricks to maximize tracks.
The main reason for not flying Ryanair exit row is cabin luggage – I carry on a purse and a Red Oxx bag, and you can’t really do that on the classic low cost carriers.