Connections suck. Oh sure, as a traveler you don’t like them, but I’m looking at it from the other side. Airlines don’t like offering connections because they add operational complexity and cost. What the airlines eventually figure out, however, is that there’s enough commercial benefit to make the effort worthwhile. It appears Ryanair has finally gotten to that point with the introduction of connections on a few routes via Rome. But Ryanair is doing it differently than how more traditional airlines do it. And to understand how it’s different, we’re going to need to dive into a bit of a history lesson first.
The History of Connections, Part I
The big hub-and-spoke airlines learned long ago that connections were vital to their businesses. See, they figured out that if they could have more flights in a market than other airlines, they could get an outsized share of the lucrative business travel spend in that market. But it’s hard to just add a ton of flights in a market when there’s not enough demand for that capacity. Take Dallas/Ft Worth, for example. To really own that market, airlines need to have a lot of frequency in small and large markets. Sure, a big market like Dallas to Houston can probably support a bunch of flights on its own, but what about Nashville? Or Oklahoma City? It’s important to have a lot of flights in every market, but there aren’t going to be enough people flying solely between Dallas/Ft Worth and those cities to fill those seats.
Enter the hub. American might not be able to run a bunch of flights from Dallas/Ft Worth to Nashville based solely on local demand, but once it could start gathering people from LA, San Francisco, Seattle, Albuquerque, etc then it could fill up those airplanes to Nashville with ease. Today, for example, American has 9 flights in that market with 1,336 seats (soon to be 25,482 seats once American finishes adding density to its fleet). That’s a ton of seats, and they’re largely supported by the connections that are offered. This means American can offer a killer schedule for the Metroplex business traveler by filling the extra seats with connections. (The flip side is that American can now get people in Albuquerque to an incredible array of destinations with a single stop, so it’s good news on both fronts.)
The only problem for American is that while there isn’t much competition in the nonstop market from Dallas/Ft Worth to Nashville, there’s a ton of competition for people flying from Albuquerque to Nashville with a stop. So fares are likely to be lower even though costs are higher. (This has changed recently in smaller markets where no low cost competition means connecting fares are higher, but I’m not going to get into that today.) The system works in one sense, but from a consumer perspective, it seems weird and confusing why something that costs so much more to operate would actually have a lower ticket price. After all, the cost differences are somewhat significant when connections are introduced. For a nonstop flight, the airline takes someone’s bags and puts them on the airplane. Then it offloads them on the other end and the traveler picks them up. With connections, airlines need a whole infrastructure to transfer bags. This doesn’t even get into the issue of missed connections and other operational headaches. Flying nonstop is much simpler.
The Ultra Low Cost Carrier Connection Strategy
If you think about it from an ultra low cost carrier perspective, the idea is simple at the beginning. These airlines can cherry pick the routes that have the most traffic and the highest fares. They can avoid all those extra costs of having connections while still having plenty of traffic to fill their airplanes. And without those costs, they can offer fares that are even lower, helping to siphon traffic away from the established airlines while also stimulating new traffic.
Over in Europe, Ryanair became a master at this by serving lower cost airports that weren’t even in a city. Anyone who has been to Hahn Airport, for example, would be hard-pressed to really call that “Frankfurt.” But the fares were low enough that people flocked to Ryanair and took buses into Frankfurt. The same thing occurred at Stansted (London), Charleroi (Brussels), Girona (Barcelona), and in a perverse way that only the Italians could manage, Ciampino, which is an alternate airport that’s actually closer to Rome than the primary airport at Fiumicino.
Ryanair also had the benefit of not trying to explicitly serve the business traveler. So as it grew, it was able to serve more routes that had enough demand for a couple flights a week but not enough for a daily schedule that a business traveler would need. This created whole new markets where British people bought vacation homes in France and Spain. Just the existence of the cheap flights helped to spur growth in demand over what was previously there.
As Ryanair grew, it started running out of good growth opportunities. So it started to look for ways it could grow its revenues. One option was to start flying into primary airports, even if they were more expensive. Today you’ll find Ryanair in Brussels, Barcelona, and Rome/Fiumicino among others. Sure it costs more, but the revenue benefit outweighs the cost. Yet as the airline continues to grow, it needs new outlets to help sustain itself. And now the time for connections — to both other Ryanair flights and flights on other airlines — has arrived.
The Ryanair Twist on Connections
The initial test involves just a few routes flowing over Rome. (See, Alitalia, who needs you?) People flying from Alicante, Barcelona, Bari, Brussels, Catania, Comiso, Malta, and Palermo can connect to each other via Fiumicino. But this isn’t Ryanair following the script of hub-and-spoke airlines of years’ past. Just look at the pricing.
I looked at several routes, and they’re all roughly pricing in a similar manner. There is no discount for connections. If you want to connect from, say, Catania to Barcelona via Rome, you’re going to pay the sum of the local fares in each market plus a small premium (been around 10 euros on the options I’ve seen, but it varies) for the privilege of pricing them together on one ticket. Ryanair isn’t alone here, though it’s a bit more subtle than what some others have done. Notably, AirAsia actually sells its connecting service as an additional branded product called FLY-THRU.
From a cost perspective, treating connections are a more expensive, premium product makes sense. But from a revenue perspective it doesn’t… if you’re thinking with a traditional mindset. Ryanair may be roughly price-competitive with other airlines on the route (except Vueling which flies it nonstop), but in most cases I’ve seen, the layovers are pretty lengthy. And Ryanair is never about being competitive. It’s about having really, really cheap fares that undercut everyone. I assume Ryanair is just looking at this differently than a traditional airline would. It’s not trying to build a business travel schedule. It doesn’t need extra volume to fluff out a flight schedule. But if it can get a few people at a premium to what it sells in the local markets, then that will help it grow and add flights over time. If not, so be it. It’s not worth it for Ryanair to offer super cheap connections just to try to goose the size of the network. It only wants profitable connections.
Right now this is just a test, but when you think about the power of the Ryanair network, even one person each day on some of these routes will aggregate enough in Rome to help fill an airplane, especially once it rolls out to the whole network… and beyond.
It’s not just Ryanair’s own flights that are in play here. Ryanair just started selling Air Europa flights from Madrid to South America on its website. This may seem odd since it doesn’t involve connections or Ryanair flights at all. For example, see this:
But that’s because this is again a test. Later this year, you’ll be able to buy connections from Ryanair flights on to these long-haul Air Europa flights at Ryanair.com. Other airlines will follow. With such a large network of options, even tiny numbers can add up quickly and provide a benefit to the Ryanair network.
For Ryanair, this is a different path than others have taken. It has already built a massive and successful European network. But if it can get more passengers to fill its airplanes, whether from its own connections or from other airlines, then it will be able to keep up the growth rate that it needs to keep costs lower. And it can do it profitably.