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In Depth Analysis Ryanair Business Model Air Scoop Nov2010
In Depth Analysis Ryanair Business Model Air Scoop Nov2010
In Depth Analysis Ryanair Business Model Air Scoop Nov2010
Ryanair’s skyrocketing
success: flying on thin
air?
_____________
01/11/2010
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www.air-scoop.com
Table of Contents
Introducing Ryanair ........................................................................................................ 8
Internal Structure ..................................................................................................................... 12
Tickets: scheduled revenues .......................................................................................... 13
Ticket structure: a quick reminder of airline pricing systems ........................................ 13
Scheduled revenues: hidden charges in miscellaneous taxes & fees............................... 14
Determining best prices: Ryanair’s “capacity controlled” pricing system ........... 16
“Sold with strings attached”: Ryanair’s minimum fare construction ................... 17
- Airport & Government charges:.................................................................... 18
- Wheelchair & Insurance levy: ....................................................................... 19
Creating revenue: additional services sold with tickets ...................................... 20
- Internet Check-in: ......................................................................................... 21
- Dynamic Currency Conversion:................................................................... 22
- Priority Boarding: ......................................................................................... 22
- SMS Confirmation: ....................................................................................... 23
Delays & “no-shows”: earning money on no refunds.......................................................23
- Airport check-in: .......................................................................................... 24
- Rescheduling penalty: .................................................................................. 24
- Re-editing fee: .............................................................................................. 25
Ryanair’s ancillary revenues ......................................................................................... 26
Towards a definition of ancillary revenues ..................................................................... 26
Ancillary revenues in the airline industry: a brief history .............................................. 26
Worldwide: born on Southwest ............................................................................ 26
In Europe: Legacy carriers versus Low-Cost, how ancillaries came bundled with
Ryanair ......................................................................................................................... 27
Understanding Ryanair’s conception of ancillary revenues ........................................... 28
An attempt at rebuilding Ryanair’s ancillaries ............................................................... 29
Non-flight Scheduled a la carte features .............................................................. 29
“Opt-in” features................................................................................................ 29
Non-flight related products and services ..................................................... 29
“Opt-out” features .............................................................................................. 31
Car Hire ..................................................................................................................33
In-Flight ................................................................................................................. 34
Internet Income..................................................................................................... 36
Frequent-Flyer activities ....................................................................................... 39
3
Planes ............................................................................................................................. 41
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Historic of acquisitions...................................................................................... 44
“We raped them”: The case of the Boeing 737-800 .......................................... 46
Subsequent acquisitions .................................................................................... 47
The 2002 Boeing contract .............................................................................. 47
The 2005 Boeing contract .............................................................................. 48
Perspectives: Future acquisitions ...................................................................... 50
Investments for a transatlantic venture? ...................................................... 50
Maintaining aircraft renewal rates at Ryanair ............................................... 51
Leasing, Reselling and Disposal ............................................................................ 52
Leasing ............................................................................................................... 52
Liberating cash-flow: Ryanair’s sale & leaseback procedures .......................... 53
Disposal .............................................................................................................. 54
Fitting airplanes................................................................................................................ 55
Internal outfitting of aircraft ................................................................................. 55
Seating and cargo............................................................................................... 55
Seating arrangement ...................................................................................... 55
Cargo loading ................................................................................................. 57
Custom made cabin ........................................................................................... 58
Speculative projects ........................................................................................... 59
External outfitting of aircraft .................................................................................61
Winglets ..............................................................................................................61
Publicity ............................................................................................................. 62
Using airplanes ................................................................................................................. 63
Rules of use ............................................................................................................ 63
Turn-around ...................................................................................................... 63
Traditional usage and limits .......................................................................... 63
Ryanair’s airport turnaround process ........................................................... 65
Advantages and efforts to improve ............................................................... 68
Fuel management .............................................................................................. 68
Care and maintenance........................................................................................... 70
Care process ....................................................................................................... 70
Ryanair’s maintenance facilities ..................................................................... 71
Maintenance workforce management .......................................................... 74
Safety Issues ....................................................................................................... 75
- Birdstrikes: ................................................................................................ 75
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- Insufficient maintenance:......................................................................... 76
- Poor pilot training: ................................................................................... 77
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- Fuel shortage emergencies: ...................................................................... 77
Personnel ....................................................................................................................... 79
Cabin crew ........................................................................................................................ 79
Recruitment ........................................................................................................... 79
Geographical origins ......................................................................................... 79
Outsourcing ........................................................................................................ 81
Recruitment process ...................................................................................... 82
Employment .......................................................................................................... 85
A multiple contract system ............................................................................... 85
The many roads to becoming a Ryanair employee ...................................... 85
Too many contracts in a sea of employees? ................................................. 86
Salaries ........................................................................................................... 86
Terms of employment ....................................................................................... 87
Base affectations ............................................................................................ 87
Duties ............................................................................................................. 87
Pilots at Ryanair’s ............................................................................................................. 89
Different status among pilots ............................................................................... 89
Hiring ..................................................................................................................... 90
Recruitment ................................................................................................... 90
Training ........................................................................................................... 91
Overall cost .................................................................................................... 92
Employment .......................................................................................................... 93
Salary .............................................................................................................. 93
Salary schemes ............................................................................................... 93
Terms of employment ....................................................................................... 94
Locations ........................................................................................................ 94
Duties ............................................................................................................. 94
Terminations, Unions and Litigations: maintaining control over the
workforce ................................................................................................................. 94
Unions ............................................................................................................ 94
Employee / management relationships ........................................................ 95
Litigations: “social dumping” cases against Ryanair .................................... 96
Perspectives on Ryanair’s employment strategy: Contentious on European
Law ....................................................................................................................... 98
Airports......................................................................................................................... 100
Ryanair’s general relationship with Airports .................................................................. 101
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France.................................................................................................................... 103
Spain...................................................................................................................... 105
Portugal ................................................................................................................ 106
Italy ...................................................................................................................... 106
Belgium ................................................................................................................ 106
Germany............................................................................................................... 106
Malta .................................................................................................................... 106
Slovakia ................................................................................................................. 107
Perspectives: A sustainable model? ................................................................................ 107
External structure ...................................................................................................................109
Financial construction ................................................................................................. 110
Advertised financial structure ........................................................................................ 110
“hidden” items ................................................................................................................. 110
Relative to personnel ............................................................................................ 110
Cabin crew ......................................................................................................... 111
Pilots...................................................................................................................112
Relative to aircraft ................................................................................................. 113
Relative to airports ............................................................................................... 114
Subsidies recuperation ..................................................................................... 114
Reconstructing Ryanair’s financial structure: a global overview.................................... 115
Adding it all up: driving cost down through tax avoidance .......................................... 116
Communication ........................................................................................................... 118
Verbal and visual communication: the identity game ................................................... 118
Appear cheap to be perceived as such ................................................................. 118
Vocabulary ........................................................................................................ 118
Visual and furniture.......................................................................................... 119
Polarization: Don’t try to please .......................................................................... 119
Buzz: Being talked about is key, no matter the terms .................................... 119
Being mean doesn’t mean being bad ............................................................... 120
Rhetorical virtuosity: never be wrong ..................................................................121
Repetition is better than demonstration ..........................................................121
Transforming reality: skillfully playing on words never to be caught lying ....121
Legal.............................................................................................................................. 123
A peer into Ryanair’s legal team ..................................................................................... 123
Ryanair’s legal strategy ......................................................................................... 123
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Ryanair’s legal crusade against Irish and British airport monopoly ........... 126
Some perspectives on Ryanair ..................................................................................... 128
Appendices .............................................................................................................................. 130
Appendix 1: Cumulative and outstanding order from Boeing..................................... 131
Appendix 2: List of all aircraft owned then sold by Ryanair ...................................... 134
Appendix 3: List and legal owners of aircraft leased by Ryanair ................................ 137
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Introducing Ryanair
Founded in 1985, at a time when most major actors in the airline industry were already
well established, when major legacy carriers were already undergoing fusion, Ryanair
could have been deemed a failure waiting to happen. Indeed, by trying to follow the same
business model as other legacy carriers, it almost went bankrupt. But, after a change in
direction, the company underwent a major shift in strategy and began conquering the
European market at an ever-faster pace. Today it culminates at over 70 million passengers
per year, making it the largest European airline in terms of passenger transported and one
of the most successful airlines in the world.
What’s even more remarkable with the airline is that it consistently managed to
announce growing profits in an industry plagued with diminishing margins while offering
constantly lower fares as it transported more and more passengers. Constant efforts over
time to drive down costs and fares have led the airline to be so closely associated with
lower-costs that it seems to have – arguably – almost eclipsed its inspiration, Southwest
Airline, becoming the embodiment of the low-cost model. Many have hailed Ryanair’s
business model as the future of air travel. But the airline also has many detractors,
disappointed passengers calling it a rip-off, pilots and cabin crew protesting harsh working
conditions, foreign unions denouncing unfair practices for workers, public institutions
attacking disproportionate aids received from airports and competitors calling on the
airline’s practices.
However, after a decade during which the airline went from underdog to top airline in
the European skies its success can hardly be negated. Critics may protest its methods the
fact remain that the airline’s low-cost/low-fares business model is likely to be as much as
an inspiration for competitors as Southwest was for Ryanair in the beginning of the 1990’s.
But the Irish airline’s business model may not be quite as well understood as that of its
American counterpart. While it has always defended the idea that it has been able to drive
down fares by putting into practice extremely thorough cost control measures, cutting
down margins and maximizing volumes, it seems that Ryanair’s own words may not paint
a complete picture of its business model.
Unsurprisingly, humongous price discrepancies between Ryanair and competing
legacy carrier might not entirely be explained by offering paid-for food onboard planes and
quicker turnaround time at airports. Indeed, up to the arrival of low-cost airlines, the air
transport industry had all always been making most of its revenues out of passenger
transportation. However, the arrival of low-cost airlines changed that model, the most
extreme incarnation of that new model being Ryanair. The airline has based its success on
astonishingly low fares, going to extreme length such as offering tickets below £ 1 on large
scale promotional offers. At that level, preserving margins may seem impossible. It is – for
an airline behaving like a typical legacy carrier. History has proven it, companies trying to
duplicate Ryanair’s success by competing on the same grounds all failed. It wasn’t uniquely
a question of momentum or investment; even subsidiary low-cost airlines created by larger
legacy carriers have all proved uncompetitive. What is it then that allows Ryanair to be so
successful?
To answer that question, one needs to consider the airline’s business model in depth.
Ryanair is actually quite opaque when it comes to its own structure and functioning. The
airline almost maniacally outsources everything it can and has surrounded a plethora of
subsidiaries which are barely – if not at all – accounted for in the annual reports of its
holding. But there’s an inherent logic to that organization, and that logic is highly
8
dependent on financial profitability. The structural maze that has developed Ryanair
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serves one purpose: driving down cost while maintaining income growth.
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The purpose of this report is to try and provide an in-depth look at the different pieces
that make the Ryanair machinery. Taking a look at the airline’s estimated real revenue
breakdown, it appears that it has reached such a high level of differentiation in its income
sources that each of these need to be examined in their own right. This will be the purpose
of the first part of this analysis. A second fold of the analysis will try to provide a more
transversal look at key component that make up the strategic positioning of the airline.
Hopefully, then the mechanisms of Ryanair’s business model and the reasons for its
success as well as the vulnerabilities it bears will appear clearer.
highly dependent on the number of passenger transported. Be it because they’re goods and
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to the number of passenger it transports or the number of visitors its website gets thus
forgoing its leveraging of passenger number to boost income
Another critical aspect of Ryanair’s business model is its exploitation of aircrafts. Like
any airline, aircraft are central to Ryanair’s business. They’re both an essential tool, and –
it is worth noting – one of the few elements on which it doesn’t claim to be cheap, and a
huge financial liability. Because aircraft represent a major asset, they have required
extensive – some would say reckless – bargaining to minimize cost when acquiring them.
Putting forward its impressive passenger growth and obvious future need for a large fleet,
and taking advantage of difficult economic conjunctures, it has successfully negotiated
surprisingly low prices. These bargains have led Ryanair to acquire a large fleet of Boeing
737, at very low cost. The airline has maximized the opportunity offered by the prices it
had negotiated and has now successfully resold some of its aircraft at a price largely offset
the primary investment. Ryanair now has one of the largest fleets in Europe but, in
keeping with its lower costs philosophy, it is also doing the maximum to avoid being taxed
on those assets. As a result it has developed a complex system of finance lease and sales
and leaseback schemes to isolate the aircraft from government taxation.
Every aspect of aircraft usage is tightly controlled and pushed to maximize every cent
invested in them and in their crew. Ryanair has one of the quickest turnaround times in
Europe, thus allowing for many more trips per day and per planes, it has also avoided a
large part of maintenance and cleaning costs and optimized almost every part of its
processes to squeeze the highest rate of return on its investments. Not so surprisingly, the
same philosophy applies to cabin crews and pilots, who are also expected to avoid
downtime as much as possible when working. The company uses a combination of
incentive – such as only paying actual flown hours – and coercion – requiring that flight
attendants clean the cabin between flights or that pilots limit their emergency fuel reserve.
But an analysis of Ryanair’s relationship with its employees also reveals that further
than minimizing by extracting optimal returns from every employee, it has actually turned
the recruiting and employment business into a lucrative business in itself. The airline
externalizes recruitment and training, avoiding any costs linked with these activities while
making sure that employees who have paid for their training will have a higher incentive
to stay with the company and be more cooperative whatever their conditions of work. This
is why, however complex relationship between the company and its pilots and flight
attendants may be, the company can still afford to not recognize unions and get away with
it.
Furthermore, to ensure that employees constitute the minimum financial liability, and
in accordance with recent changes in European law, the company declares all its
employees – even based under year-long contracts in a foreign country – as Irish
employees being paid under Irish law. This allows the company to avoid most heavy social
charges imposed on companies basing their business in continental Europe. Ryanair also
relies heavily on external contractors employed by satellite companies. These are most
useful for young recruits or older pilots as they allow for more flexibility with them while
isolating Ryanair from the dangers of disgruntled employees lashing back at it. As will be
seen, the airline has been hugely successful at limited the costs represented by employees.
So much so that a significant part of the profit it turns out every year actually depend on
the success of that strategy. A strategy which is, nowadays, being put under scrutiny by
governments around Europe;
The last part of Ryanair’s revenue structure lays in its relationship with airports. When
10
it comes to route definition, the airline has quickly taken a stand against the hub-and-
spoke system used by legacy carriers and opted for the popular point-to-point route
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system used by many low-cost carriers. However it has pushed the logic even further,
deeming the price charged by major airports too high for its low-cost / low-fares model
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and their slot system too constraining and unreliable for its efforts to shorten turnaround
times, it has turned to smaller regional airports. This came as a blessing for these airports
who, up to Ryanair’s arrival, struggled with low traffic and weak appeal faced with the
facilities offered by larger airports. The airline’s management was well aware of that and of
the possible economic fallout its potential traffic meant for the regions. Soon it started to
use its passenger volumes as rhetorical leverage to bargain lower landing charges with
regional airports. The airline has gone even further so as to demand that airports subsidize
new routes, in effect totally overturning the traditional relationship between carrier and
airports and charging to land its aircraft at a given airport. Estimates show that monetizing
potential economic fallout has come to represent an income source superior to the actual
profit amounts the airline turns out year after year. This has been a blessing for Ryanair,
but also a dangerous venture that has left it vulnerable to potential regional and state-wide
policy changes.
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Internal Structure
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Tickets: scheduled revenues
1
See C de Marken « Computational Complexity of Air Travel Planning », ITA Software,
http://www.demarcken.org/carl/papers/ITA-software-travel-complexity/img0.html
2
Ibid
3
Ibid, depending on season and airline rules.
4
13
http://online.wsj.com/article/SB10001424052748704540904575451653489562606.html?mod=djemTE
W_h
Page
5
See, J. Meissner, A. K. Strauss, « Prix Structure optimization in Mixed Restricted/Unrestricted
Fare Environments », March 8 2010, Department of Management Science, Lancaster University
Management School, Lancaster
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ticket structures and allowing the company to deny any responsibility in a missed
connection while having the opportunity to intensively utilize aircraft and crews.
In fact Low-Cost carrier’s pricing policy stand in stark contrast against that of legacy
carrier’s for many more reasons:
1° They offer only a single-class and no free “bonus” amenities to regular
passengers, letting price be the sole decision-making factor for customers
2° They usually sell one-way trip tickets, forcing their customers to buy the return
ticket separately (allowing for maximization of fees-paid)
3° They do not offer last-minute deal but rather coerce their customers into buying
a long time in advance to get the cheapest deals
By taking the opposite stand on airline tickets, Low-Cost carriers are betting against
most Revenue Management techniques, putting more emphasis on price than services to
discriminate and avoid competition while maximizing passenger yield. In fact, carriers like
Ryanair rely entirely on the rationale that customers will try to maximize their benefit by
going for the cheapest fare at any time. This is why most of them encourage their
customers to book early by slowly raising fares. Yet, broadly, the logic remains the same,
both type of carriers are betting that passengers will pay more for more services, but that’s
where the comparison stops: Where legacy carriers try to highly discriminate between
classes and levels of services so that their customers are more willing to pay more, Low-
Cost carriers take the opposite approach and try to drag their customers in the planes first
– using price as a bait – before they tax them for any extra.
6
See, for example, http://www.motherboard.tv/2010/7/1/ryanair-completely-outdoes-itself-
offers-vertical-seating--2 , http://infoireland.wordpress.com/2010/04/07/ryanair-ups-checked-
baggage-cost-to-e20/
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Ticket-related
fees
Non-
compulsory
ticket-related
services
Additional
compulsory
charges
Variable
amount fare
These four strata of charges form a complex web of rules destined to maximize
passenger expenses by exposing them to numerous rules and taxes very hard to avoid.
They can be understood according to different characteristics:
1° Variable amount fare: corresponds to the base fare Ryanair charges, and advertises,
for a single trip
2° Additional compulsory charges: are charges directly to the ticket or the act of travel
that cannot be avoided by travelers except in the case of an exceptional rebate or
promotional offer
3° Non-compulsory ticket related services: are charges and expenses that most
passengers won’t avoid, because they’re directly linked with and often part of the process
15
failing to abide exactly to the – complex – rules of ticket buying with Ryanair.
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Determining best prices: Ryanair’s “capacity controlled” pricing system
It would be a mistake to think that Ryanair’s refusal to bite into Revenue management
techniques as practiced by other traditional airlines has led to a “basic” pricing system.
Though price structures and determinations have been simplified, pricing points are still
paramount in managing yield and, as a consequence, profit for the airline7. While relying
on a point-to-point network has given Ryanair the opportunity to drop any routes the
second it ceases to be profitable, it has also been a constraint for the airline, forcing it both
to maintain low-prices to attract customers and manage ticket-pricing to maximize yield
and maintain profitability.
Because they cannot take advantage of a distinctive class system or customer loyalty
while thriving for cost reductions, low-cost carriers have heavily relied on techniques
called “dynamic pricing”8. As stated by the airline in its annual report:
“Ryanair’s discounted fares are “capacity controlled” in that Ryanair allocates a specific
number of seats on each flight to each fare category to accommodate projected demand for
seats at each fare level leading up to flight time. Ryanair generally makes its lowest fares
widely available by allocating a majority of its seat inventory to its lowest fare categories.
Management believes that its unrestricted fares as well as its advance purchase fares are
attractive to both business and leisure travelers.”9
What the term “capacity controlled” means, in extenso, is that ticket prices are subject
to adjustments depending on seats availability. Generally speaking, as seat availability
diminishes and departure date closes in, prices tend to rise in proportion. The
augmentation factor may be several times that of the lowest ticket price offered for the
flight if the airline considers there is still demand for the flight.
With regard to this model, Low-Cost prices, when represented in a graphic pitting sold
seat versus prices on a timescale ranging for ticket-release to flight departure, will
generally display “J” – hyperbolic – type of curves, with prices increasing exponentially as
maximum capacity is progressively reached. It is worth noting that this phenomenon is
not the fruit of a blind mechanism of offer and demand based on product rarity but rather
a thoroughly thought through process marked by sporadic “bumps” in the curve signifying
punctual price-increase followed by rapid decrease and stabilization to try and maximize
yield.10 The bumping has a double interest in that it allows the airline to extract more from
passengers ready to book at any price at any time and to create a false impression –
whenever the bump disappears – that prices have hit rock bottom, pushing more frugal
customers to hurry their buying.
Likewise, low-cost carriers have been found to adjust the moment they release tickets
for sale according to projected demand and capacity on the route. If the projected demand
is very high (out of which a proportionally high number of passengers will be willing to
pay above original mark-up price) and capacity is low then the airline has all interest in
7
A. Knorr & S. Zigova, « Competitive Advantage Through Innovative Pricing Strategies : the
Case of the Airline Industry », Berichte aus dem Weltwirtschaftlichen Colloquium der Universität
Bremen, Nr. 93, Institute for World Economics and International Management (IWIM), Universität
Bremen, November 2004
8
P. Malighetti, s. Paleari, R. Redonbi, « Pricing strategies of low-cost airlines : The Ryanair case
16
study », Journal of Air Transport Management, Vol. 15, 2009, pp. 195-203
9
Ryanair Annual Report 2009, p.54, found at
Page
http://www.ryanair.com/en/investor/download/2009
10
O. Koenigsberg, E. Muller & N.J. Vilcassim, « easyJet pricing strategy : should low-fare airlines
offer last-minute deals ? », Quantitative Marketing and Economics, 17 January 2008
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waiting before release the ticket for sale, thus allowing for a steeper augmentation curve
and a higher number of passenger paying more for the same service. On the contrary, if
capacity is reasonable and demand not equally satisfying, the airline will have all interest
in releasing its tickets for sale a long time in advance, in order to maximize chances of
filling the plane to maximum capacity, even if passenger-yield is lower than in the
preceding case.
Another factor in price-determination for Ryanair is its occupancy of a route. It has
been found that on routes where it is the sole carrier, fares tend to be lower than on
average. The reason for such a counter-intuitive phenomenon can be found in the fact that
the routes on which Ryanair has quasi-monopoly are very often set between two minor
airports, sometimes quite remote from large centers of activity. Lower fares on these
routes are then used as an incentive to increase demand11. Inversely, Ryanair’s prices have
been proven to be relatively insensitive to intense competition on a given route, with the
sole difference in strategy being that tickets booked in advance tend to be granted greater
discounts.12
Lastly, it should be noted that low-cost carriers are prone to discount flights that
happen during the “low” that is mid-week for airlines while maintaining higher base price
for flights taking place during the week-end or during holidays. A finer approach also
reveals that flights departing very early or very late in the day may be priced for slightly
less than flights taking place at more practical hours. Globally, Ryanair’s pricing strategy
make it apparent that, contrary to traditional carriers, the airline has made price its
primary channel of attraction for passengers. This is coherent with a “no-frills” approach of
the transportation industry.
11
P. Malighetti, s. Paleari, R. Redonbi, 2009, Op. Cit.
12
Ibid
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13
See, http://www.oft.gov.uk/news-and-updates/press/2009/79-09 , for precisions on relevant
regulation, see also, http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:293:0003:0020:EN:PDF
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Fixed Fare
Airport &
Government
Charges
Wheelchair
& Insurance
Levy
14
http://www.ryanair.com/en/questions/what-is-covered-by-taxes-fees-and-charges-in-my-
reservation
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15
http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_
pageLabel=pageExcise_InfoGuides&id=HMCE_CL_001170&propertyType=document
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o Ryanair’s website also states that depending on the country of
departure for the flight, passengers might exposed to several
“Government Tax” depending on local regulations16. As an example, in
France, passengers will be exposed to a Civil Aviation Tax of € 4.11 for
passengers departing from France to a European country and € 7.38 for
a non-European country17. It is worth noting that this is, according to
Ryanair’s own internal policy and Irish law, the only part of a ticket that
the company is forced to refund to its customers. It has yet to happen,
as the company passes onto its customers a charge covering
“administration fee” that is systematically superior to the amount of the
tax.18
o Airport Charges are, as stated on the company’s website: “This is a
charge made by the airport authority to an airline for the use of the
terminal, runway, emergency services, security facilities etc. In some
cases this charge also includes the cost of passenger and ramp handling
at the airport. This non refundable charge is made on a per passenger
basis and varies from airport to airport.”19 Ryanair has been well-known
for its bitter – ongoing – struggle with airport against these charges, as
the company strives, by all means, to lower its operating cost. As its
growing customer base has given the company more and more
momentum to negotiate with airports throughout the year, it has
become bolder and bolder in its actions, boycotting Dublin’s airport in
a protest against increasing charges and government taxes.20
- Wheelchair & Insurance levy: regroup two different expenses charged to cover
exceptional events that may represent a cost to the company21:
o Soon after 9/11, Ryanair created an Aviation Insurance Levy. Indeed, the
terrorist attacks of 9/11 contributed to the widespread idea that planes
were much less safe than previously though and insurance prices rose
dramatically during the following year. To make up for that spike in
costs, Ryanair introduced said-charge. The charge was originally set to £
1.85 per passenger per flight but by 2006 it had undergone a 70%
increase to reach £ 3.15. It is now22 € 6.35 (or roughly £ 5.30) per
passenger. The charge has been criticized23 for not corresponding to
real variations in insurance prices, as aviation insurance prices have
since consistently gone down. In 2006, the company defended itself by
saying it was covering for losses generated by originally under-pricing
16
http://www.ryanair.com/en/questions/what-is-covered-by-taxes-fees-and-charges-in-my-
reservation
17
http://www.developpement-durable.gouv.fr/Guide-de-la-taxe-de-l-Aviation.html
18
http://www.thisismoney.co.uk/bargains-and-rip-
offs/article.html?in_article_id=418459&in_page_id=5
19
http://www.ryanair.com/en/questions/what-is-covered-by-taxes-fees-and-charges-in-my-
reservation
20
http://www.ryanair.com/en/news/ryanair-announces-flight-and-job-cuts-at-dublin-airport
and see http://www.dublinairport.com/at-airport/latest-news/080710.html for Dublin airport’s
response
19
21
It seems worth adding that these charges may be waived on exceptional deals and
promotional ticket offers.
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22
At the time of writing (fall 2010), Ryanair’s English (UK) website does not display the charge
in £ but only in €. Estimation of the £ was made using Google’s conversion system.
23
http://www.guardian.co.uk/business/2006/may/08/consumernews.money
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the levy. It is highly doubtful that the company hasn’t yet covered up
theses losses. Furthermore the company blamed for incurring such a
blind charge on its passengers while constantly attacking its concurrent
for adding fuel charges to make up for the cost generated by increase in
oil prices.
o The wheelchair levy was created after Ryanair lost a court ruling against
Rob Ross in 2004. Mr. Ross a sufferer of cerebral palsy and arthritis was
forced to pay £ 18 for a wheelchair because he was unable to walk to the
check-in desk in 2002. Ryanair claimed it was not its responsibility but
that of the airport to make sure that disabled passengers could reach
the plane. Mr. Ross took the airline to court and won a compensation of
£ 1336 after it was ruled that even though some airports were passing
the cost of wheelchair services to airlines, it was discriminatory against
disabled people to pass that cost onto them24. Following that decision
and the repeal of its appeal, Ryanair declared that it would impose a
charge of € 0.50c (or £ 0.33) per passenger per flight to make up for the
cost incurred by offering wheelchair transports to its disabled
passengers25. The amount of this charge has been heavily criticized has
largely exaggerated (considering that the airline boasts more than 65
million passenger per year, the charge should represent more than a 30
million gain for the airline) compared to the estimated cost of putting
wheelchairs at the disposal of disabled passengers. Competing company
EasyJet estimated that such a service costs no more than 10p per
passenger and campaigners for the disabled decried the company for
profiteering from disabled customers26.
24
S. Creaton, « Ryanair, the full story of the controversial low-cost airline », 2009, Aurum Press
Page
www.air-scoop.com
Priority
Boarding
Dynamic
Currency
Air SMS
confirmation
Conversion travel
Internet
Check-in
27
http://www.ryanair.com/en/news/gen-en-230108
www.air-scoop.com
close all its airport desks28 in order to force passenger to check-in online29.
Since then online check-in still incurs a € 5 fee per passenger per flight that is
applied to all tickets booked with Ryanair (except those under special “Free”, “€
1” or “€ 5” promotion) and passengers have to check-in online. Failing to do so
would incur a € 40 charge at the airport, on top of the € 5 already paid when
buying online. The company presents this solution as an advantage for its
passengers when it has been the one to make the most of it, avoiding all the
cost of having a traditional check-in desk system in airports and replacing them
with a simple baggage drop desk.
- Priority Boarding: is the option given to passengers to be the first to board the
plane. When it started turning towards a low-cost / low-fare model, Ryanair
quickly abandoned pre-assigned seat as it incurred organizational costs and
slowed-down the boarding process. Instead it opted for a free-for-all system
where passengers pick a seat as they get on the plane much like in a bus or a
metro. But as the airline felt passengers travelling in groups would be willing to
have a few more chances to be seated next to each other it started selling
“priority-boarding” tickets. The priority boarding option is priced at € 4 per
passenger per flight when buying through the website or € 5 when buying
through the call-centre. Yet, this option has been regularly criticized, several
reasons are usually invoked. First, the maximum quota of priority boarding
tickets on a plane is considered far too great. As a matter of fact, Ryanair allows
a maximum 90 tickets to be sold with priority boarding per flight. Considering
that its 737-800 can hold a maximum of 189 passengers, it makes a potential of
close to 50% of passengers possibly having priority boarding, thus practically
voiding the supposed benefits of being among the firsts to get inside the
plane32 . Next is the fact that in some airports, priority boarding may be
completely useless, as passengers with priority boarding will be the first to get
on the bus taking them to the plane and, thus, the last to get inside the plane33.
Eventually, it has been reported several time that priority boarding wasn’t even
28
http://www.telegraph.co.uk/travel/travelnews/4736024/Ryanair-to-remove-airport-check-in-
desks.html
22
29
http://www.ryanair.com/en/news/ryanair-moves-to-web-check-in-only
30
http://www.guardian.co.uk/money/2010/feb/15/ryanair-costs-currency-conversion
Page
31
http://www.guardian.co.uk/money/2010/feb/15/ryanair-costs-currency-conversion
32
http://www.timesonline.co.uk/tol/travel/news/article3976441.ece
33
http://goireland.about.com/od/travelingtoireland/qt/ryanair_priority_boarding.htm
www.air-scoop.com
respected as the crew was under so much pressure to accelerate ground turn-
around while priority passengers boarded the plane through the front door the
rear was open to non-priority-boarding passengers.34
- SMS Confirmation: by choosing this option, passengers will have the possibility
of receiving a text on their cell-phones confirming that they correctly booked
their flight. This option is charged € 1 per passenger per flight and presented as
an opt-in feature at the end of booking process. It has been presented as having
been rendered virtually useless by the forced generalization of online booking.35
34
http://www.airlinequality.com/Forum/priority_board_ryanair.htm
35
http://www.ihateryanair.co.uk/ryanair-sms-booking-confirmation-scam/
www.air-scoop.com
• Passengers must check-
Aiport in online
check-in
• Penalty: € 40
• Passengers must be
Re- able to travel on chosen
scheduling date
penalty • Penalty: € 35 online / €
55 offline
• Passengers must
provide correct
Re-editing identification
fee information
• Penalty: € 100 online / €
150 offline
Figure 4; Corrective penalties and fees
- Airport check-in: starting May 1, 2009, Ryanair has stopped offering its
passengers the option to check-in directly at the airport. Check-in must be
done in priority online. Though checking-in online is already paid for by a € 5
during booking, failing to provide a checked-in ticket at the airport will incur a
€ 40 “boarding card reissue” fee per passenger per flight for failing to book in
online.36
36
http://www.guardian.co.uk/money/2009/may/14/ryanair-online-check-in
24
37
http://www.ryanair.com/en/questions/table-of-fees
38
The only refundable part of a ticket are government taxes but administration cost incurred by
Page
such refunds (typically UK Air Passenger Duty) are known to be higher than the tax itself. For more
information on this see http://www.thisismoney.co.uk/bargains-and-rip-
offs/article.html?in_article_id=418459&in_page_id=5
www.air-scoop.com
- Re-editing fee: Ryanair has a very strict policy on personal information and
identification papers. Even when travelling inside the same country or between
countries whose customs and immigrations services do not specifically require
it, passengers are to present their passports along with their boarding passes.
Failing to present a valid passport will bar the passenger from getting onboard
the plane 39 . Moreover failing to provide the airline with the correct
information, misspelling a name of mistyping a date40 will incur a nominal
“name change fee” between € 100 if done through the website or € 150 when
done at the airport or though a call centre41.
25
39
http://www.guardian.co.uk/money/2009/sep/06/ryanair-visa-check
Page
40
Conditions for this last charge are supple and subject to interpretation by the check-in
attendant, depending on the situation, the charge may not always be applied.
41
http://www.metro.co.uk/news/145107-ryanair-blasted-for-name-change-rip-off
www.air-scoop.com
Ryanair’s ancillary revenues
Trying to define ancillary revenues can be a long way. In essence, anything ancillary to
an object is barely – if at all – related to it. Conceptually, ancillary revenues can be defined
as “revenues that a company derives from anything other than its main business”43. By way
of consequences, ancillary revenues are generally perceived as no more than bonus to a
business’ main activity. Though ancillaries may very well become the main source of
revenue for a business – say, for example, a pool bar or a concert hall whose most
important revenues come from liquors instead of pool tables or gigs – they’re generally not
perceived, and treated, as core business elements susceptible of bringing growth in the
long-term. More precisely, ancillary revenues are generally not susceptible of being
bettered or enriched in the same way a core product could be susceptible to amelioration.
They’re an add-on designed to be sold along a main product but are not considered
indispensable to it, though this may be non-reciprocal.
42
http://oxforddictionaries.com/view/entry/m_en_gb0026760#m_en_gb0026760
Page
43
http://financial-dictionary.thefreedictionary.com/ancillary+revenues
44
"Ancillary Revenue Conference Preview 2007 Preview", September 2007, OnBoard Services
Magazine - Worldwide
www.air-scoop.com
a “get more for what you pay for” logic. The dominant train of thought amongst airline
companies was that airline travel was undergoing a slow build towards more services for
the same price and that customers would not accept fewer services than what they were
getting used to.
Southwest Airlines took a different approach to air travel, trying to compete on the
lower end of the customer spectrum by offering lower-fares than any other companies in
the U.S. The key concept behind Southwest’s strategy was betting on the fact that
dropping fares by a slight, yet meaningful, percentage compared to legacy carrier’s
historical prices would manage to open air travel market to a much larger customer base.
What came to be renowned as the Southwest Effect was fueled by severe cost-limiting
measures such as aggressive fuel-hedging, rapid turn-around for airplanes reducing
ground-time and maximizing air-time as well as the displacement of a wealth of
complimentary services towards paid-services.
In Europe: Legacy carriers versus Low-Cost, how ancillaries came bundled with Ryanair
In Europe, perhaps none has a pushed the use of ancillary services further than Irish
company Ryanair. Drawing on Southwest’s aggressive model of low-fare pricing, Ryanair
took advantage of the European Union’s deregulation of the air industry to expand its
bases throughout the continent. Ever since Michael O’Leary’s take over as Chief Executive
Officer during the beginning of the nineties, the company has adopted a very aggressive
low-cost/low-fares business model. Pushing the use of ancillary services to counteract
fares diminution, Ryanair has developed several very innovative strategies throughout the
years to maximize ancillary revenues.
Broadly speaking, the concept behind Ryanair’s development for ancillary services has
been to strip air travel from all amenities, heavily unbundling the core of its services, air
transportation, from anything that would have been included by another company, and to
charge it as an extra. By way of consequences, as Ryanair’s minimal price for plane tickets
became lower and lower, extras being charged to customers grew exponentially.
Eventually, ancillaries became a business in itself, up to the point where the company
launched a contest for the most innovative idea for ancillary services45. Another side of this
business is that as Ryanair’s reputation for charging anything – other than transportation
by plane – to its customer grew, the company – through its CEO – actually started making
use of that reputation for its external communication: announcing that it would come to
charge for the use of sanitary facilities46, thus generating free advertisement through
publicity stunts.
27
45
However, this can easily be taken as a part of the airline’s communication strategy
Page
http://www.ryanair.com/en/news/passengers-to-suggest-next-discretionary-charge
46
Again, this is fundamentally an instrument being played in communicating around the
airline, http://news.bbc.co.uk/2/hi/7914542.stm
www.air-scoop.com
Ancillary services are usually understood as services charged to customer onboard the
plane (such as food, drinks or duty free products). Yet Ryanair grew to include a very wide
range of services as ancillary services. All checked-in baggage are considered ancillary
services (and charged as such) as well as reservation changing fees, ticket reissue, etc.
Further than that, Ryanair has come to make heavy use of the traffic its website gets to
generate a lot of ancillary revenues through online booking of miscellaneous services
(sometimes not even related to the travel itself) such as hotel and car rental.
Though the – generally accepted – definition of ancillary services implies a rather easy
categorization of each of them, such is not exactly the case when it comes to Ryanair’s
internal typology of what does and what does not constitute ancillary revenues. For what
may be accountability reasons, Ryanair relies on four distinct categories to distinguish
between its sources of ancillary revenue:
47
See Evolution of Ancillary Revenue chart preceding page
www.air-scoop.com
An attempt at rebuilding Ryanair’s ancillaries
Ryanair isn’t fully transparent about its internal classification of ancillary products. But
knowing what qualifies as ancillary and what comes down – in financial terms – to
scheduled revenues seems sufficient when it comes to classifying ancillary services offered
by the company. For that purpose, the following classification relies heavily on Jay
Sorensen’s classification 48 of ancillary revenue distinguishing between “1) à la carte
features, 2) commission-based services, and 3) frequent flier activities”49.
“Opt-in” features
Hotel reservations
Travel insurances
48
Jay Sorensen’s definition created for IdeaWorks®
49
Jay Sorensen, « Ryanair – The Godfather of Ancillary Revenue », IdeaWorks, 2007
www.air-scoop.com
Motor coach & train transfer: Being that Ryanair has a preference for relying on
secondary airports, most passengers find themselves having to cover additional distances
once they land. Through partnering with buses and train transport providers, Ryanair sells
on its website and aboard its plane, tickets for these services. In most cases these services
are provided by Ryanair’s partner Terravision a company specialized in low-cost airport-
to-city shuttles. It remains to know if this is financed on a per-ticket sold commission basis
or if the commission depends on the number of passengers getting to the destination
where the service is provided over a period of time.
Hotel reservations: All hotel reservations made through Ryanair’s website have now
been channeled through a contract with Booking.com 50 – before 2007 it used to be
Needahotel and between 2007-2008, Expedia 51 . In accordance with this contract,
Booking.com handles all aspects of hotel reservations services. To be able to do so,
Booking.com pays a fee to Ryanair. The exact amount of the fee is unknown, yet its order
of magnitude might be inferred from the € 10 million that Needahotel had to pay after its
owner, Cendant, terminated its contract with Ryanair52.
All other types of accommodations booking (camping, hostels, bed-and-breakfast and
villas) are channeled through Hostelworld.com (for hostels, bed & breakfasts and budget
properties) and Ryanairvillas.com, a Ryanair subsidiary offering advertisement solutions
for property owners and agents interested in renting vacations of holiday homes53.
50
http://www.hotel-blogs.com/guillaume_thevenot/2009/01/exclusive-ryanair-chooses-
bookingcom-as-their-hotel-partner.html
51
http://www.travolution.co.uk/articles/2008/11/20/1959/ryanair-drops-expedia-content-from-
website.html
52
Ibid
53
Page 9, http://www.ryanair.com/doc/about/090831_fr_media_pack.pdf
54
http://www.news-assurances.com/assurance-voyage-ryanair-mise-sur-son-offre-de-garanties-
30
tres-complete/016740598
55
http://gospain.about.com/od/ryanair/tp/ryanair_fees.htm
Page
56
http://www.which.co.uk/reviews-ns/travel-insurance/how-to-buy-travel-insurance/index.jsp
57
http://www.thefirstpost.co.uk/57928,business,ryanair-airline-almost-taunting-customers-
over-extra-fees-says-oft-head (find better)
www.air-scoop.com
“Opt-out” features
Excess baggage fees: Excess baggage fees may be the most renowned of Ryanair’s
ancillary fees. They’ve been praised by industry pundits as the future of low-cost travelling
on the one side and chastised by angry customers on the other. Whichever side one may
be on, it is hard not to recognize the tremendous amount of work Ryanair has put into
designing these lucrative fees:
Object Fee(online) €/£ Fee (Offline) Note
€/£
Checked-in 15 35 Per passenger /
luggage below 15 kg per one-way ticket
High season 20 40 [idem]
(July / August)
Checked-in 25 45 [idem]
luggage below 20 kg
High season 30 50 [idem]
(July / August)
Additional 35 70 Per additional
luggage below 15 kg bag / per one-way
(only 1 authorized ticket
per passenger / per
flight)
High season 40 80 [idem]
(July / August)
Overweight - 20 Per kilo / Per
luggage : per kilo fee bag / per one-way
ticket
Infant 10 20 Per item / Per
equipment (1 one-way flight (max
pushchair carried 20 kg)
free of charge)
Sports 40 50 [idem] (expect
31
Musical 40 50 [idem]
Instruments
www.air-scoop.com
Cumulating an overweight baggage or two on Ryanair can quickly bring total fees over
100€ per passenger per one-way ticket. Ryanair’s corporate mentality relies on the idea that
its two objectives are offering lowest-fares to attract customers while maintaining
profitability, at any cost.
Because an airplane only has a given load capacity and Ryanair’s flights are more often
than not filled to maximum capacity with passengers, the company has done all it could to
cut down on passenger’s luggage. Meanwhile, Ryanair has followed a very restrictive policy
on hand baggage (free of charge within limits) to push forward more lucrative checked-in
procedures: whereas the maximum legal limit for hand baggage is 56cm x 45cm x 25 cm
(which most legacy carriers and many low-cost carriers have adopted as their own
standards), Ryanair’s volume limit per
IATA hand bag is 55 cm x 40 cm x 20 cm58.
Ryanair As most baggage manufacturers build
guidelines their products according to major
airline’s specifications most passenger
(but cases tend to decrease as
knowledge of this fact expands with
media coverage and Ryanair’s
increasing market share) find
themselves unable to fit their hand
luggage into the company’s template
and have to have it checked-in.
Moreover, the company enforces a
strict “one hand-luggage per person”
policy, so any duty item bough must
fit into the hand-bag without it
making the bag too large or too heavy
for company templates.
On a side note, Ryanair has
recently launched a € 79 Ryanair-compatible hand bag in conjunction with Samsonite,
which it sells on its website, offering the bag to be bought along with the ticket59. The
Ryanair-Samsonite carry-on bag is accounted for in the “Internet Income” part of ancillary
revenues.
Credit and debit card fees: The ultra-liberal airline has based all of its business strategy
on the rationale that customers behaved as pure homo-economicus, always trying to
maximize cost-advantage. The idea is that the cheaper the mark-up price, the more
customers buy into it. As a consequence, maintaining the lowest advertised fares has
become paramount in Ryanair strategy. The day it ceases to be cheap is the day it ceases to
be profitable.
This rationale is also the reason why, while it can try all it wants to generate cash from
its passengers through ancillary revenues, it can never add completely unavoidable fees on
its tickets without having to (in keeping with the law) respectively raise-up its advertised
prices. Credit and debit card fees have been some of the most discussed of that type of on-
32
58
Notably, baggage size and weight limits are not poolable between passengers. This means
that a passenger travelling with a 5kg luggage wouldn’t be able to “lend” part of his unused
Page
www.air-scoop.com
the-verge-of-being-compulsory fees 60. Before 2010, Ryanair used to charge a € 5 per
passenger per flight on all ticket bought. The only loophole was to use a Visa Electron card
for payment, which would not incur the fee. By the beginning of 2010 the company
changed its policy and began applying its credit and debit card fee to all payments made
with a Visa Electron61. To avoid having to incorporate the fee in all its mark-up prices, it
changed its policy so that the fee wouldn’t be applied to any payments made with a
Prepaid MasterCard.
In doing so, Ryanair stayed snuggly on the right side of the law, giving customers an
opportunity to avoid the fee. Yet, Prepaid MasterCard remain conspicuously rare in Great
Britain, and the cost of buying one can sometimes outweigh the benefits of avoiding to pay
Ryanair’s fee62. This sort of Catch-22 has raised tremendous63 amounts64 of critics6566.
Car Hire
Ryanair’s car-hire services are offered in conjunction with Hertz. It has become such
an important part of ancillary business that it has seen an entire category of “ancillary
revenues” category dedicated to itself in Ryanair’s annual reports. Of course, car-hire deals
offered by Hertz benefits from significant exposure on Ryanair’s websites Ryanair.com and
RyanairHotels.com as well as on its telephone reservation system. The significance of the
car-hire business is in itself, both an indication of Ryanair’s website growing importance
and laudatory illustration of its capacity to negotiate advantageous deals with its service
providers.
The deal has been going on for years on a five years basis and has been renewed as
recently as 2010. It also seems that it has been a very lucrative deal on both sides,
providing high brand exposure to Hertz, thanks to Ryanair’s millions of visitors on its
website, bringing the airline every year a significant amount of money. It is reported in the
airline’s annual report that Hertz pays a per-passenger fee whose amount is listed under
“Car-Hire”. As to why Hertz would pay a fee based on Ryanair’s total number of passengers
and not a per-customer commission is another example of the airline’s amazing bargaining
power. As Michael Cawley stated at the Low Cost Carriers Congress in 2007 in London:
“We choose the best vendors. Why are they the best? They are the ones that are willing
to guarantee their revenue production, or advance it to us as cash. Why should we take the
risk when they know their business?”
This represents, obviously, a major advantage for Ryanair, avoiding all the financial
risks usually associated with commission-based payment systems. Further than that, Mr.
Cawley also revealed that Ryanair was responsible for 700 000 rentals annually for Hertz
(in 2007), which would help highlight why Hertz would accept to pay as much as € 0.50
60
http://blogs.thisismoney.co.uk/this_is_money_blog/2009/07/how-to-get-a-visa-electron-
card-to-beat-airline-charges.html
61
http://www.thisismoney.co.uk/bargains-and-rip-
offs/travel/article.html?in_article_id=495106&in_page_id=1093
62
http://www.thisismoney.co.uk/savings-and-banking/ask-an-
expert/article.html?in_article_id=495107&in_page_id=111
63
http://www.thisismoney.co.uk/bargains-and-rip-
33
offs/travel/article.html?in_article_id=496812&in_page_id=1093
64
http://gospain.about.com/od/ryanair/qt/electron_card.htm
Page
65
http://www.thisismoney.co.uk/bargains-and-rip-
offs/travel/article.html?in_article_id=496826&in_page_id=1093
66
http://www.walletpop.co.uk/2010/09/29/easyjet-and-ryanair-rip-off-credit-card-fees/
www.air-scoop.com
per passenger carried (Ryanair’s total passenger carried in 2007 was 42.5 million it posted
Car-Hire revenues of € 22 972 000)67.
In-Flight
Ryanair’s categorization of “in-flight” ancillary activities is posed to cover all sales
taking place onboard a Ryanair plane. The following classification is a bit broader in its
scope and comes to include publicity and special mobile services contract with On Air
which, though being mentioned in Ryanair’s Annual Report, do not seem to be specifically
attached to any of the four ancillary revenues categories. Based on the fact that both
onboard publicity and mobile services are restricted to in-flight presence they may be
classified as part of In-Flight ancillary revenues.
Publicity
• Onboard only
• Overhead lockers, trays and convenience bags
Beverages, food & merchandise: the complete absence of complimentary drinks and
food aboard Ryanair’s plane may have a been one of the most salient features of the airline
when it first adopted its actual model but it has now become a consistent part of almost all
low-cost business models. Yet, it is worth noting that Ryanair still remains markedly more
expensive than its competitors68. In-flight sales of food, beverage and merchandises have
often been considered a key factor in covering up for the loss of profit that goes with lower
fares69. Yet, as much as that section of ancillary revenues can be lucrative it might also not
be the most lucrative.
The main problem being that, compared to excess baggage or credit card fees, the
inner features of food and beverages make them susceptible to deterioration. So in the
overall cost of offering in-flight food and beverages have to be factored costs of
67
Citations and numbers taken from « Ryanair – The Godfather of Ancillary Revenue »,
IdeaWorks, 2007, last found at
http://www.traveldailynews.gr/pdf/021908AnalysisRyanairAncillary2008.pdf
68
http://www.telegraph.co.uk/travel/travelnews/7544143/Airline-guide-food-and-drink.html
34
69
See J.F O’Connell, G. Williams, “Passenger’s perceptions of low cost airlines and full services
carriers – A case study involving Ryanair, Aer Lingus, Air Asia and Malaysia Airlines”, Air Transport
Page
www.air-scoop.com
transportation for goods that may not be sold and good that will have to be thrown away.
Furthermore, because these are sold onboard, Ryanair has tried to incent selling by giving
a commission based on overall sales to flight attendants. These commissions have to be
taken out of the profitability of onboard sales. Such operating costs have driven prices
upwards and a bottle of water can reach up to £ 470,
The way Ryanair makes money out of beverage, food and merchandise sales is by
charging third-party caterers a per-flight fee so that their goods can be sold onboard
Ryanair’s plane71. Having offered no in-flight entertainment for several years Ryanair
recently tried to broaden a bit its offer in that field. Yet it only did so in a pay-per-item
fashion and adapted quickly to demand, eventually ditching DVD-movies and players as
the success of lottery cars was over-shadowing these first72.
Publicity: Perhaps one of the reasons Ryanair’s third-party caterers are actually willing
to pay a fee for the products to be on the planes is that the airline uses its large number of
passengers to generate ample sales and profits through direct advertisement of products
sold onboard. A flight with Ryanair, and it often comes as a surprise to passengers used to
legacy carriers, is generally deafening with in-flight commercial announcements for
products sold on
board the plane.
Using revenues
created through
in-flight
commercials, the
company has
managed to open
a new spot for
ancillary
revenues.
Passengers can
now find
advertisements in
the (free) in-flight
magazine 73 , on
boarding cards,
overhead lockers
and tray tables 74 .
Further than that,
the company even
70
Studies have shown that Low-Cost companies tend to increase prices of in-flight food and
beverages by up to 350% on average. For more on the same topic, see
http://www.lovemoney.com/news/get-the-best-deal/rip-offs/the-five-worst-ryanair-ripoffs-
4817.aspx and http://www.moneywise.co.uk/news-views/2010/04/07/avoid-the-airplane-food-rip
71
Page 3- http://www.rotman.utoronto.ca/bic/Case%20Series/flying.pdf
35
72
http://www.timesonline.co.uk/tol/life_and_style/article676356.ece
73
The in-flight magazine is free but handed out only on demand, it is picked up by flight
Page
www.air-scoop.com
Precise amount generated by in-flight advertisement are unknown but it is a fact that
management of overhead locker and tray’s advertisement is done by Fourth Edition, a
branch of Brand Connections Global. The average rent price is € 110 per panel per month
(counting on 41 panels per aircraft) and these are sold on a per country basis with a
maximum of four different advertisements in the same plane.
Mobile phone services: As of April 200877, Ryanair began a test contract with OnAir, a
provider of in-flight mobile voice and data solutions. The goal was to provide an array of
in-flight communication services offering Ryanair’s passenger the opportunity to use their
cell phones, smart phones and other miscellaneous communicating devices, while
onboard. Of course, such services would be charged to passengers based on international
roaming rates78. The agreement stipulated that Ryanair would pay a one-time fee for the
equipment and bear the cost of its installation on its aircraft while it would receive
commissions on mobile calls made and text messages and emails sent using the service79.
Service Price
Voice Calls € 1.50 to € 3 / minute
Text Messages Starting at € 0.40
Emails € 1 to € 2
After trials in its Dublin, Rome (Ciampino), Pisa and Milan (Bergamo) bases Ryanair
decided to go on with the project. Yet, after thirteen months proving period of service
operations, and though Ryanair was willing to go on it could not reach an agreement with
OnAir about the roll-out. As a result the Irish company decided to proceed with another
request for tender inviting all other providers of in-flight phone services to participate.
Internet Income
Ryanair’s website is, in itself, an illustration of how attached the company is to cost-
cutting. When the company decided it needed a website, it sought quotes from established
web consulting firms. When Michael O’Leary was given a first quote of £ 3 million, he
turned to two seventeen year’s old students, asking them to design his company’s website.
They offered quotes of £ 17 500, £ 16 500 and £ 15 500 dependent on the timing and quality
he would need. Michael O’Leary selected the lowest quote and, when they delivered the
final product, tried to coerce them into accepting £ 12 000.80
Ryanair.com has been in use by the company since the beginning of 2000, since then,
and contrary to popular trends in web design, it has grown more and more cluttered as its
frequentation grew. Having now become the only possible mean of buying a Ryanair
ticket81 it has reached an audience of over 12 million visitors a month82 (for Ryanair.com
only) making it one the most visited commercial website on the internet. Such a large
76
http://sicksack.com/g-eu-ns.htm
77
http://www.ryanair.com/en/news/gen-en-300806
78
http://www.travelmole.com/stories/1134768.php?mpnlog=1&m_id=_rbbbT_v
79
http://www.telegraph.co.uk/travel/travelnews/4732424/Ryanair-mobile-phone-service-Hello-
Im-on-the-plane.html
80
36
http://findarticles.com/p/articles/mi_qa5291/is_20080131/ai_n24392313/pg_3/?tag=content;col1
81
http://www.guardian.co.uk/money/2009/may/14/ryanair-online-check-in and
Page
http://www.telegraph.co.uk/travel/travelnews/2510867/Ryanair-takes-action-against-website-
screen-scraping.html
82
http://www.trafficestimate.com/ryanair.com
www.air-scoop.com
amount of traffic has made the
website itself an ideal source of
ancillary revenues, all the more as
internet check-in have now become
compulsory and the company does
not allow third-party travel agencies
to sell its tickets83.
The company takes an
unconventional approach at ticket
selling through its website. Instead
of focusing on limited aspects of its
business: promoting the company
and selling tickets, it features a wide
range of products ancillary to
travelling. As a result, many users of
Figure 7: Screenshot of ryanair.com's main page the website can be a bit unsettled84.
“Vegas-style”, “grand bazaar”, “cluttered” are but many of the words that frequently come
back in commentators’ opinions about ryanair.com. Indeed, when it comes to its website,
the company seems to go against all established rules of web design in use since the 90’s.
There is absolutely no color coding or font consistency, the homepage is blatantly over-
ruled by flashing ads, any buying action is buried more than three clicks away, menus
seem to change every time a new page is loaded and it’s not focusing on its core business:
selling airplane tickets. Where many would the experience of going on Ryanair’s website
as, at least “confusing”, it seems to be the exact strategy of Ryanair85.
There can be some good grounds for an analysis in that direction. As a matter of fact,
Ryanair may have some very good reasons of maintaining such a cluttered website:
1° Its look screams “cheap”, and that’s the precise message the company tries to
carry anywhere it communicates. As a matter of fact, ryanair.com is nothing but the
child-spawn of a brilliant marketing department. One that has understood the value of
corporate consistency, the fares are low, the company is cutting on every costs, so the
website has to look cheap.
2° It isn’t focused on the company core business, where, in fact, it’s focused on one
of the company central process for money-making: ancillary revenues. By putting
forward its partner’s offers, Ryanair leverages its multi-million visitors to make multi-
million revenues from ancillary sales through commission-based contracts with third-
party providers.
As a result, not only does the site manage to deliver on its original goal by serving as
the main gateway for 65 million passengers per year, but also does it serve the company’s
grail by generously delivering ancillary revenues (in excess of € 56 million in 2009). And
83
Which may have actually cost ryanair.com some of its visitors. Since, it launched its
campaign against screenscrapers, the company has lost its ranking among the top 100 results for
« cheap » in Google UK, see http://www.ip-seo.com/latest/2008/12/its-a-bumpy-ride-for-some-on-
cheap-flights/
84
See : http://hubpages.com/hub/wwwRyanAircom ;
http://www.iqcontent.com/publications/audits/ryanair-vs-jetblue--reflecting-company-culture ;
http://mammon.typepad.com/root_of_all_evil/2009/02/ryanair-is-a-great-brand-discuss.html ;
37
http://amas.ie/documents/AMAS_state_of_the_net_No7_nov07_web.pdf ;
http://econsultancy.com/blog/3353-ten-things-ryanair-could-do-better-online
Page
85
It also seems that Ryanair’s website team is working, in its words, on “tight resources”
limiting web designer’s ability to take care of all the website’s flaws,
http://www.wired.com/autopia/2009/02/ryanair-slams-p/
www.air-scoop.com
that’s not even counting, air travel tickets or car rentals. The reason ryanair.com is making
so much money? It capitalizes as much as possible on ancillary sales to customers visiting
its website. The website looks as if it’s trying not only to be the place where you get the
lowest fares, but the place you can find the cheapest holidays… nothing included!
Indeed, Ryanair seems to be – almost unknowingly – waging a war on travel agencies.
After first fighting with all its might against “screen-scrapers” selling Ryanair tickets, the
company has actually managed to reverse positions: it is now selling travels. Actually, that
last statement needs a bit of clarification: Ryanair is not, itself, selling travels like an
agency would usually do. But by depriving travel agencies of the opportunity to sell
Ryanair tickets and by offering all the components of travelling on its website (from hotels,
resorts, theme parks and foreign currency exchange to insurances and ticket for theatre,
concerts and sports), unbundled, it has made travel agencies irrelevant.
There are two major ways Ryanair makes money through its website: first by selling ad
space on its homepage, there are actually two banner spaces available on the page, for rent
for an undisclosed amount (other opportunities for advertisement have also been
suggested by the company with the institution of newsletters, “before you go” emails and
“welcome back” emails”)87, and second – and foremost – by the establishment of partner
relationships directly integrated into the website. Because, in fact, ryanair.com is more
than a brand-website, it has turned itself into a portal where companies are dragged by the
millions of visitors. As Michael Cawley – Chief Operating Officer of Ryanair – stated in
2007:
“We choose the best vendors. Why are they the best? They are the ones that are willing
to guarantee their revenue production, or advance it to us as cash. Why should we take the
risk when they know their business?”88
This statement is both an illustration and an explanation of Ryanair’s internet business
strategy: outsourcing and maximizing. Instead of offering incomplete homemade ancillary
services, it gives other companies – specialized in their respective fields of business – the
opportunity to use Ryanair’s website as their own. In exchange, the company expects them
86
2007, taken from « Ryanair – the godfather of ancillary revenue »,
38
http://www.traveldailynews.gr/pdf/021908AnalysisRyanairAncillary2008.pdf
87
More can be found in Ryanair’s media pack
Page
http://www.ryanair.com/doc/about/090831_fr_media_pack.pdf
88
Quote taken from
http://www.traveldailynews.gr/pdf/021908AnalysisRyanairAncillary2008.pdf
www.air-scoop.com
to pay not a per-sale commission but a per-visitor fee, thus generating massive ancillary
revenues directly correlated to the success of the airline. Apart from Hertz, counted in its
own category, ancillary revenues coming from the website are made of partnerships with
Axa Travel Insurance, Booking.com, MBNA Europe, Terravision, Hostelworld.com89, and
Ryanairvillas.com90.
Frequent-Flyer activities
Though there is no such a thing as a
“Frequent-Flyer” line in Ryanair’s annual
report, evidences and corporate
acknowledgment of such activities are present
in the chapter concerning ancillary revenues.
The company itself doesn’t try to precise how
such activities are being accounted for, but it
is highly likely that they are counted as part of
“non-flight scheduled revenues”. While this
does not give a precise measurement of the
amount of earnings generated, it provides an
Figure 8: Sample image of a Ryanair co- order of magnitude.
branded credit card Apart from a quick foray into elaborate
services between 1988 and 1989 when the company tried to introduce a business class and
Frequent Flyer Club, Ryanair has made no secret of its disdain for frequent flyer programs.
Yet, even after its radical turn to a low-cost / low-fares model the company has repeatedly
tried to venture into frequent flyer activities. Indeed, frequent flyer programs can be a
lucrative way of generating both ancillary revenues and customer fidelity. If the Irish
airline has obviously never bet on the latter, it is certainly one of the most resourceful
companies in the world when it comes to generating ancillary revenues; so, in 2003, it tried
to introduce a “Ryanair credit card”.
Quickly discontinued, this first credit card was reintroduced in August 2007, in
conjunction with GE Capital and MBNA (the latter for Ireland only). While, at first,
restricted to British and Irish consumers, availability grew over time to include Poland and
Sweden91. The card is very similar to other airline co-branded airline credit cards; it is a
MasterCard (which complies with Ryanair Prepaid MasterCard exceptions on credit/debit
card fees). The card was relaunched wit MBNA in May of 2010 with a new “bonus flights
program”, offering card holders a wider choice of bonus flights on more routes, more
often92.
Thought Ryanair’s management has always been openly dismissive of Frequent-Flyer
cards, in her announcement of the card’s launch, Suzanne Holmes, head of
communications for MBNA openly acknowledged the card as a “rewards product”93. And a
rewards product, it is indeed, the credit card scheme is structured so that certain spending
89
Even this last one, a direct subsidiary of Ryanair Holding Plc, is but a paying portal for
39
91
http://www.allbusiness.com/operations/shipping-air-freight/4494102-1.html
92
http://www.ryanair.com/en/news/ryanair-re-launches-mbna-credit-card
93
Ibid
www.air-scoop.com
1 free flight 1 roundtrip 2 roundtrip
flight flights
behaviors will be rewarded by free flights (in the form of gift vouchers). But the
comparison with normal frequent-flyer cards stops here, the program is highly restrictive
and implies very controlled use of the card to unlock its full benefits.
Moreover, the six months timeframe is not dynamic; it doesn’t begin with the first
penny spent and ends six months later. Rather, the time frame is arbitrarily fixed in two
strips of time, going between December 11 to June 10 and June 11 to December 10. This
scheme prevents customers from taking advantage of the fact that they’ve spent over £
1500 in the course of six months at any time during the year and rather forces them to
postpone or preempt their purchases.
Furthermore, rewards flight are attributed in the form of a Ryanair gift voucher and
can only redeemed under special conditions:
1° Limited seat availability
2° No travel during July and August
3° 8-month validity from day of issue
4° Flights must be booked one month in advance
5° All taxes and fees are paid by the reward traveler
In its annual report, the company states that it generates revenue from MBNA and GE
Capital on the basis of the number of card issued and the revenues generated through the
use of the credit card. Though nothing is specified regarding the terms of this double-
commission-based system, it needs highlighting that any customer signing up for a
Ryanair co-branded card begets both immediate and long-term ancillary revenues for the
40
company.
Page
94
Taken from « Ryanair – the godfather of ancillary revenue »,
http://www.traveldailynews.gr/pdf/021908AnalysisRyanairAncillary2008.pdf
www.air-scoop.com
Planes
Getting airplanes
When Ryanair started its operations between Waterford and London-Gatwick, in 1985,
it was operating only one route on one plane, a 15-seater Embraer Bandeirante aircraft. It is
now operating more than a thousand routes and has over 250 planes in its active fleet. For
the past twenty-five years, the company has been expanding its fleet at an outstanding
rate, moving through different strategies and adapting to the global context and its own
financial capabilities to increase overall service capacity.
When it comes to buying, using and reselling airplanes, Ryanair as in all other sector of
its business has been tightly managing costs while consistently striving for profit and
capacity maximization. In that area, the company has made a name for itself by driving a
hard bargain and always making the most of its airplanes, be it with its order of a 100
Boeing 737-800 in 2002 or its record average turn-around time of 25 minutes in airports.
Secured Direct
Lending Purchase
Sale &
Leaseback
Aircraft Operating
Wet Lease
finance Lease
Dry Lease
Finance
Dry Lease
Lease
41
Page
www.air-scoop.com
Each financing options have their own particularities and some of them can take very
exotic forms such as the different geographically related options for finance lease. Major
conceptual differences are:
Direct Lending
Operating Lease
Finance lease
• Long-term
• Total payments cover at least 90% of the fair market-value
of the aircraft
• Purchase option is given at the end of the lease
42
Page
www.air-scoop.com
Leasing has now become the dominant option for aircraft finance. Leasing options are
often dependant on the nature of the operator offering the lease and on the characteristics
of the carriers. Airline with meager cash-flow or a high level of exposure are often obliged
to resort to high interests leases as they cannot afford direct lending. Furthermore,
operating leases are generally offered either by commercial aircraft leasing companies,
specializing and aircraft carriers themselves. Aircraft carriers will generally offer operating
leases to other carriers as a direct lease (if they own the plane) or as a sub-lease. For that
reason a distinction must be made between the two most common forms of leasing95:
Wet Dry
Aircraft, crew,
Lease maintenance and Lease Only the aircraft
insurance is provided by the
provided by the lessee
lessee
Generally offered
Only offered by by leasing
carriers companies and
banks
Ryanair has usually made use of a variety of financing options. Where it began by
heavily leasing its aircraft, it has since come to rely heavily on a mix of Direct Lending,
self-financing and Finance Lease. The company seems to have become reluctant to wet-
lease aircraft for itself, only punctually recurring to such arrangements, however it does
still happen to wet lease to other airlines punctually.96 It is worth noting that, as a
consequence, most Ryanair aircraft are bought on loan and mortgaged as security for
loans.97
95
For more information on available types of leases, see
43
http://www.globalplanesearch.com/view/aircraft/aircraft-leasing-def.htm
96
See http://www.ryanair.com/ie/lease and
Page
http://www.rte.ie/news/2010/0320/britishairways.html
97
Ryanair, Annual Report 2006, p.41, http://www.skycontrol.net/business-general-
aviation/boeing-ryanair-agree-to-order-for-32-additional-737-800s/
www.air-scoop.com
Historic of acquisitions
Ryanair has historically heavily relied on aircraft leases. As any start-up company it
began by lacking the capital to increase its fleet in-house. Subsequent financial difficulties
delayed acquisition opportunities and up until the 2000s the carrier had a mixed fleet of
aircraft makes. It began with a 15 seater Embraer Bandeirante, leasing as soon as the next
year, two forty-six seater turboprop BAE748.The airline didn’t start operating proper jet-
powered aircraft until 1987 when it wet leased three BAC 1-11 aircraft from Romanian
company Tarom. For the following years it increased its wet lease engagement with
Tarom, up to six BAC 1-11 and relied on GPA and other company’s capabilities for dry
leasing ATR42. It is not until 1993 that Ryanair started buying its own aircraft. Acquiring
four ex-British Airways ATR42 and buying, the next year, its first Boeing 737, announced
the beginning of a mono-aircraft era for the airline.
In the following years Ryanair would only focus its buying and leasing on one type of
aircraft at a time. Yet, it’s not before 2005 that it reached its final form, reselling its last
twelve Boeing 737-200 to Autodirect Aviation LLC, for 10 million dollars – a price sufficient
to offset the eventual depreciation costs of the aircraft. From then on the company would
only focus on buying Boeing 737-800, one of the best sold aircraft around the world, a
favorite for low-cost companies and a signature plane for Ryanair.
1985 1994
1 Embraer 1986 First Boeing
Bandeirante First BAC 1-11 737
Retired 1989 Retired 1994 Retired 2005
In enlarging its fleet, Ryanair has been constantly building towards lower costs. It
began by wet-leasing aircraft from Romanian company Tarom, then dry-leased larger and
newer aircraft before eventually – when it reached sufficient cash-flow – moving to buying
its aircraft. In doing so, the company focused on progressively restraining the spectrum of
its fleet. While legacy carriers tend to try to have a wide spectrum of aircraft at their
disposal to adapt to different route length, for a company whose route length stays within
a very narrow range focusing on only one type of aircraft can be remarkably advantageous.
The idea here is to generate economies of scale by only necessitating one type of qualified
maintenance and spare parts, a single formation and qualification for crews and being able
to rapidly exchange and replace planes on routes. As stated by Ryanair itself:
44
“The Board believes that […] its strategy of limiting its aircraft to one type will enable
Page
Ryanair to minimize the costs associated with personnel training, maintenance and the
www.air-scoop.com
purchase and storage of spare parts, as well as affording greater flexibility in the scheduling
of both crews and equipment.”98
Following that logic, Ryanair has worked – between 1999 and 2002 – towards the
reduction of its fleet to a single aircraft type. When confronted with the need to buy new
planes in 1999, it decided to begin a move towards an all 737-800 fleet; planning to slowly
phase out all 737-200 by 2007 (it had done so by 2005)99. Ever since, Ryanair has only been
using Boeing 737-800 for its fleet, except for the rare few occasions on which it wet leased
planes from other companies.100
As of now, Ryanair’s fleet is one of the largest in Europe, having gone past that of
British Airways; it is considered on par with Air France-KLM’s. Its sole competitor to have
a larger number of planes is Lufthansa. However it should be taken into account that
comparing airlines based on their fleet sizes does not exactly reflect their passenger
transportation capacity. This is dependent on aircraft types, seating arrangements and
pilots’ availability.
98
Ryanair, “Proposed Purchase of up to 150 Boeing “Next Generation” 737-800 Aircraft”, Notice
of Extraordinary General Meeting, 2002, http://www.ryanair.com/doc/investor/2002/egm_davys-
clean.pdf
45
99
See Appendix 1 and 2
100
In 2006 it wet-leased two Airbus A320 from Monarch and Erjet. For more information, see
Page
http://forum.keypublishing.co.uk/archive/index.php?t-40412.html ;
http://www.flightglobal.com/articles/2006/03/30/205753/pilot-faces-accidents-branch-quizzing-
after-ryanair-wet-lease-carrier-lands-at-wrong-uk.html
www.air-scoop.com
“We raped them”: The case of the Boeing 737-800
While, for most of its early years the company made a point of only buying used
aircraft – whose prices are usually set in accordance to their remaining service-life – it
underwent a major shift in strategy in 2002. At the very beginning of 2002, Ryanair was in
possession 21 Boeing 737-200 and 23 Boeing 737-800; in 1998 it had made a command for
25 firm Boeing 737-800 with an additional 20 as options. By 2000 it had exercised three of
these options, abandoning the 17 others. By the beginning of 2002, 23 of those aircraft had
been delivered and Ryanair was in need of more.
The necessity was pressing and the timing seemed right. The company was planning a
25% per annum passenger increase; it was surfing on its financial success (40% increase in
profit with a profit margin moving from 23% to 26%) and its stock market share had
generated huge amounts of cash flow. The only choice it had to make was whether to buy
new or old aircraft. After undercover negotiations with both Boeing and Airbus, in the
beginning of 2002 Michael O’Leary announced that it had reached a deal with Boeing.
Ryanair was to buy 100 Boeing 737-800 (more than twice the size of its existing fleet) with
an additional 50 options. The order would be progressively delivered according to a preset
calendar until 2008. The rationale behind such a bold move was that101:
o Ryanair was in a strong position on the European market with very
optimistic perspectives towards a steady increase in passengers number
and new base development
o The events of September 11 2001 and the collapse of major carriers
Sabena and Swissair had provoked an important decrease in demand
for new and used aircraft – “I grew up in Mullingar and farmers know
that the time to buy is when everybody else is selling” as Michael O’Leary
would be quoted in saying.102
o Boeing was offering a competitive offer – an estimated 37% rebate on
mark-up price.103
o More seats and lower per-seat cost on the Boeing 7373-800 than on
the Airbus A320 or the Boeing 737-700.
o The fact that Ryanair was already operating Boeing 737-800.
o Economies of a scale correlated with a mono-aircraft type of fleet.
o Phased deliveries, which would give Ryanair the opportunity to adapt
to its foreseen passenger growth rate.
o Widespread use of the Boeing 737-800 in the airline industry meant
cheaper parts and a large amount of qualified pilots.
The last reason the deal was interesting for Ryanair can be found in the financial
conditions of the deal. Further than the fact Boeing and CFMI had agreed to a significant
rebate (through credit memoranda and allowances for promotional and other activities),
Ryanair had stricken a deal with America’s Export Import Bank (EXIM) for a loan covering
85% of the aircraft prices at a very advantageous interest rate (below 5%). Ryanair would
only have to bring the remaining 15% in cash, which its free cash-flow could largely cover.
The total transactions amounted to around $ 9.1 billion, had the planes been negotiated at
101
Most information taken from Ryanair, Annual Reports 2002 through 2010, found at
http://www.ryanair.com/ie/investor/investor-relations-news
46
102
Siobhàn Creaton, « Ryanair : The full story of the controversial low-cost airline », 2007, p.212,
Op. Cit.
Page
103
Ryanair, “Proposed Purchase of up to 150 Boeing “Next Generation” 737-800 Aircraft”, Notice
of Extraordinary General Meeting, 2002, http://www.ryanair.com/doc/investor/2002/egm_davys-
clean.pdf
www.air-scoop.com
catalog price, but the record deal obtained by Ryanair from Boeing actually brought the
bill much lower.
Ryanair’s boss, Michael O’Leary, is known to drive a hard bargain but on the 2002
Boeing negotiation he seemed to outdo himself. Not limiting his foray to only one aircraft
manufacturer he pitted Boeing against Airbus, reportedly faxing each one the other’s offer
so as to drive prices down. He had apparently managed to get Airbus to cut its prices by
half and was getting ready for a public announcement when Boeing made a last-minute
bargain a seized the deal104. Later, describing the deal with Boeing, Michael O’Leary would
be quoted in saying “we raped them”.105
The deal was widely quoted, at the time, as illustrating the powerful negotiating skills
of Ryanair and the strategic opportunism of its management. Ryanair had been able to see
that the downturn the airline industry had been facing since the end of 2001 was
temporary and that it could take advantage of it. By choosing to invest when nobody else
wanted to, it gained in bargaining power; all the more as Boeing was facing dire financial
difficulties and not in a position to refuse a 100 aircraft offer. Eventually, investing at that
time gave Ryanair the momentum to make the most of the air travel crisis and effectively
follow its growth predictions by being able to cater to customers once the crisis was over.
Subsequent acquisitions
Ryanair growth predictions and effective results have usually coincided pretty tightly,
making further aircraft investment a necessary step for the company. In 2002, a
conservative estimate considered Ryanair’s fleet to be of 128 Boeing 737-800 by 2009. That
estimate was made assuming the company wouldn’t exercise any of the 50 options it had
taken during its record acquisition of 100 Boeing 737-800 earlier that year. By 2009, the
company’s fleet counted 181 aircraft with more still to be delivered. That was above
expectations, even including the 50 aircraft Ryanair had taken as options.
104
http://theairlineblog.blogspot.com/2009/06/buying-airplanes-ryanair-way.html and
Page
http://findarticles.com/p/articles/mi_qa5291/is_20080131/ai_n24392313/pg_2/?tag=content;col1
105
Siobhàn Creaton, 2007, Op. Cit., p.212
106
Ryanair, Annual Report 2003, p.56
www.air-scoop.com
4 BAE-146107. Yet, Ryanair didn’t even try to extend the leases and got rid of the aircraft as
soon as possible108. Its strategy was clearly focused on getting and maintaining a mono-
aircraft fleet in the long term. A second fact that can be inferred is that the company was
set on keeping its fleet the youngest possible. Ryanair has long made a point that its fleet is
“the youngest in Europe” and it has obviously become a selling point for a company that
has made a name for its cheapness. Be it the psychological effect it may have on its
passenger (newer aircraft are less likely to fault) or the financial interest the company
might have in reselling its planes while they still retain some value while minimizing
maintenance cost, nonetheless Ryanair has made its orders so that it could maintain a
high turnover in its fleet.
107
Ibid, p.57 http://www.ryanair.com/doc/investor/2003/2003annualreport.pdf
48
108
See Annex
109
Ryanair Holdings plc, “Proposed Purchase of up to 140 Boeing “Next Generation” 737-800
Page
www.air-scoop.com
Date Purchase Option Number of Aircraft Delivery Dates
Exercised
June 2005 5 Feb 2007 to May 2007
October 2005 9 Sept 2007 to Nov 2007
June 2006 10 March 2008 to June 2009
August 2006 32 Sept 2008 to June 2009
April 2007 27 Sept 2009 to March 2010
June 2008, September 30 June 2010 to March 2011
2008, October 2008 and
January 2009
December 2009 10 Sept 2012 to Nov 2012
Since then, no new deal has been negotiated with Boeing. This is not so surprising
considering that global economic trends had gotten noticeably better until 2008. Though,
Ryanair has punctually exercised some of the left-over options from the 2005 Boeing
Contract.
It did so with an order of 32 options Boeing 737-800 in August 2006111. In June 2006 it
had exercised 10 options, was leasing 17 Boeing 737-800112 which sprung from the fact that
it had put 4 aircraft (in addition to 13 others in the previous years) under a sale and
leaseback agreement with third party investors113.
It exercised 27 more options in April 2007114. In engaged an operating lease on 15 more
aircraft under a sale and leaseback agreement.
In 2008 it entered a similar sale and leaseback agreement for 3 more aircraft and
exercised options for 3 more aircraft. And in 2009 it exercised a further 10 options
remaining.
As of March 2010, the company still had 70 options outstanding and hasn’t planned on
exercising them until 2013 whence it will have reached an expected fleet size of 299
airplanes.
111
http://www.skycontrol.net/business-general-aviation/boeing-ryanair-agree-to-order-for-32-
additional-737-800s/
49
112
Ryanair, Annual Report 2006, p.65,
http://www.ryanair.com/doc/investor/2006/060901annualreport.pdf
Page
113
Ryanair, Annual Report 2006, Op.Cit., p.47
114
Ryanair Annual Report 2007, p.30,
http://www.ryanair.com/doc/investor/2007/070920annualreport.pdf
www.air-scoop.com
Delivery 1998 2002 2003 2005 737-800 Total
date Boeing Boeing Boeing Boeing Disposals number
Contract Contract Contract Contract of Boeing
737-800
2010 54 3 51
2011 50 10 40
(projected)
2012 25 10 15
(projected)
2013 15 3 12
(projected)
Expected 28 103 24 193 49 299115
Total
yet/
118
http://www.independent.ie/national-news/oleary-plans-new-allfrills-airline-for-flights-to-us-
Page
43198.html
119
http://www.flightglobal.com/articles/2007/04/11/213208/ryanair-boss-michael-oleary-plans-
launch-of-transatlantic-no-frills-airline-with-fleet-of-50.html
www.air-scoop.com
would fit Ryanair’s bill, the Boeing 787 Dreamliner and the Airbus A350. The problem, for
now, is that both planes still have a very expensive catalog price, using modern composite
material and onboard technology. Furthermore, the Dreamliner is barely finished, the
A350 is still under development and neither have begun to be delivered yet. As a matter of
fact, orders have been piling up120 for the aircraft and it is very unlikely that Ryanair would
be able to negotiate rebates on them any time soon.
solder-ses-avions-a-ryanair-.php
125
http://blog.seattlepi.com/aerospace/archives/181117.asp
Page
126
http://www.flightglobal.com/articles/2009/11/02/334278/ryanair-pressures-boeing-with-
threat-to-cancel-737-orders.html and http://atwonline.com/airline-financedata/news/ryanair-
reports-surging-first-half-profit-issues-boeing-second-half-warning
www.air-scoop.com
had already done. He concluded that such a decision would generate massive amounts of
cash surplus over the next three years – as Ryanair wasn’t likely to engage new
negotiations before 2013 – and that he considered only fair to redistribute it to
shareholders. Nonetheless Michael O’Leary confirmed that there would be no delay or
disruption in Ryanair’s outstanding orders with Boeing127. However, it is possible that
Ryanair might be carefully playing its card to make an advantageous bid on an order of
Boeing 737-900 ER.128
Leasing
For any airline, an aircraft is only generating money when it is flying. Any time the
aircraft is on ground, it represents an increasing cost in terms of maintenance, airport fees
and crew salaries for its own.
In order to maximize profit and minimize aircraft related costs, Ryanair tries to avoid
having idle aircraft for too long. When passenger demand is too low or, more broadly,
when the company is in over-capacity in aircraft to passenger terms, the airline adjusts its
fleet size to limit repercussions on its profitability. If it thinks passenger demand will pick
up again on the short term or that the second-hand aircraft market is too, then it will set a
pool of aircraft to be wet-leased through its wet-leasing infrastructure129.
Wet-leasing allows Ryanair to move the cost of an aircraft and its crew on another
company while making money on the lease. The only restriction is that the company is
deprived of an aircraft for the duration of the lease. It is a double-edged solution as it
tends to limit adaptability. The airline has a wet-lease hotline number just one-click away
from ryanair.com’s homepage130. In a very ironic turn of events, it even provided wet-
leased planes to British Airways during a recent strike131.
127
http://www.lexpansion.com/economie/actualite-entreprise/ryanair-renonce-a-acheter-200-
52
boeing_215266.html
128
http://www.glgroup.com/News/Ryanair-Will-Only-Buy-From-Boeing-50459.html
Page
129
http://www.ryanair.com/ie/lease
130
http://www.ryanair.com/fr/lease
131
http://www.rte.ie/news/2010/0320/britishairways.html
www.air-scoop.com
Liberating cash-flow: Ryanair’s sale & leaseback procedures
Over the years, Ryanair has entered a number of sale & leaseback agreements with
various third-party financial institutions. The logic behind sale & leaseback financial
products is to sell a product to another financial actor who will then lease it back to its
original owner for a fixed rate over a given duration.
132
Ryanair, Annual Report 2010, p. 171,
Page
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
133
http://www.independent.co.uk/news/business/analysis-and-features/the-investment-
column-bail-out-of-ryanair-at-this-level-527130.html
www.air-scoop.com
institution values it. In other words, getting into sale & leaseback agreements could
actually contribute to making a direct profit for Ryanair – considering the alleged rebates
it got on its Boeing 737-800.
Disposal
Boeing 737-800 have an expected 23 years-long useful life from date of manufacture,
but, generally Ryanair doesn’t keep its aircraft for the entire length of their useful life.
There are two reasons why it does so:
Up until now, Ryanair has managed to buy its Boeing 737-800 at
a drastically rebated price and, taking into account depreciation,
it can be financially very profitable for the company to sell its
aircraft before they get too old. As a matter of fact, during major
economic downturn, in the airline industry, the second-hand
aircraft market tends to be more attractive to potential buyers.
Augmentation of demand in the face of a relatively constant
offer drives prices up and Ryanair can actually sell its aircraft for
a price equal or higher that which it paid for them.
The second reason is tied to brand communication. As its
Boeing 737-800 started being delivered, and as Ryanair was
buying them new, the company’s fleet grew to be one of the
youngest in Europe with an average fleet age oscillating between
2.1 and 3.2 years over the last five years. This statistic has been
widely publicized by the company during that time. It can be
explained by the fact that Ryanair, broadcasting the brand
image of a drastic cost-cutter134, does not have the reputation of
going all out to ensure proper maintenance and safety on its
aircraft. Of course this is a point where customers rely more on
perception than on rational deduction – Ryanair has perfectly
compliant maintenance and safety procedures – but repeated
reports of Ryanair planes arriving low on fuel135 or journalistic
investigations documentaries 136 have contributed in eroding
public confidence in the company137. Maintaining a young fleet
has become key for the company’s public image of a safe,
reliable, mean of travelling.
These two, very different, trends and necessities have contributed in the company’s
policy to regularly resell aircraft. Yet, one limit remains as Ryanair must keep on
maintaining and increasing the size of its fleet if it wants to satisfy demand and fuel
growth.
In 2007, Ryanair entered into a sale agreement for the disposal of 20 Boeing 737-800
aircraft in the period September 2006 to April 2010138. In 2008, it sold 6 Boeing 737-800
aircraft for a total value of € 150 million and entered into an agreement to dispose of five
such aircraft in 2009 and 2010. Further than the three options exercised in 2008, by
134
http://www.tetracom.ca/transtalk/?p=1497
135
http://www.airlinepost.com/airline-news/is-flying-with-ryanair-dangerous.html ;
http://www.timesonline.co.uk/tol/news/world/ireland/article4641716.ece ;
http://airobserver.wordpress.com/2009/11/18/spanish-pilots-complain-about-ryanair-fuel-saving-
54
practices/
136
See Channel 4 Broadcast, “Ryanair Caught Napping” as a part of the Dispatches series, first
Page
www.air-scoop.com
January 2009, it had exercised a total of 30 options for Boeing 737-800. In 2010, it sold
three more aircraft and two spare engines.
Overall Ryanair doesn’t sell many of its aircraft, except when the second-hand market
is really booming and the temptation to make a profit is too great. The spike in selling in
2007 and 2009 can be explained by that fact. The other reason why Ryanair might have
sold these aircraft is to boost its income as both years very difficult for the airline industry
as a whole.139
Fitting airplanes
Seating arrangement
The Boeing 737-800 is one of the best-sellers of the aircraft industry. Widely sold over
the years and under its many different configurations, it’s also one the most common
aircraft in any airline fleet. It’s been used all over the world for a variety of purposes, the
first of them being passenger transport.
55
139
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a2.ujS2qhvKg
140
Additional proceeds in that year amounted to € 23.6 million in respect to the sale of two
Page
spare engines and insurance proceeds for the aircraft damaged in the bird-strike at Ciampino in
2009. Source : Ryanair Annual Report 2010,
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
www.air-scoop.com
The aircraft does offer a wide variety of internal arrangement, but Ryanair has opted to
only one of them, common to all its aircraft. Loyal to its cost-cutting philosophy, it has
managed to make the most of its aircraft, cramming up to 189 inside each one of them. For
comparison, a typical Boeing 737-800 in a two-class seating arrangement offers 162 seats
and 175 seats in a single-class arrangement with standard spacing. By slightly diminishing
spacing between each seat, Ryanair has managed to obtain from Boeing a very high density
arrangement, cramming 189 seats. This represents four more ranks of six seats than the
typical single class arrangement can provide.
Of course, such choices haven’t gone unnoticed and Ryanair’s comfort onboard is
usually described, at best, as passable141. Indeed, by way of consequences, the airline offers
one of the smallest seat pitches in Europe, 30” compared to an industry average of 32”
inches and above in economy class142. Yet the company doesn’t seem bothered, it has
repeatedly stated it wanted to bring air travel experience closer to that of a bus than what
is offered by traditional carriers. In asserting so it has even gone so far as speculating that
it could make passengers pay for toilets, allowing it to suppress one or two toilets on
plane143, gaining room for more seats. Though diverging voices within the company have
tried to water-down their CEO’s allegations, it seems to be a recurrent speculation coming
56
141
It should be noted that 189 seats is the maximum number of seats for which a Boeing 737-800
Page
is certified and that this configuration is not totally uncommon among low-costs.
142
http://www.uk-air.net/seatpitch.htm
143
http://uk.reuters.com/article/idUKLR88835420090227
www.air-scoop.com
from Michael O’Leary and the company might come forward again with the same idea in
the future144.
In the same vein, Michael O’Leary has also stated that the company was “in talk” with
Boeing to install standing seats on planes, so it could cram more passengers inside145. This
said, Boeing has expressed strong reserves on such an idea, saying that Ryanair’s plan
would be hampered by the legal requirement that seats must be able to withstand 16G
forces in case of a crash.
Cargo loading
While trying to manage costs and maximize profitability, Ryanair is well known for its
established airport routine. It managed cutting turn-around time down from an average
1h30 with other companies to 25 minutes at best. Twenty-five minutes, during which the
plane must taxi, disembark its passengers and cargo; the crew must clean the plane and
start loading a new batch of passengers while their cargo is loaded as well.
Of course, an average Ryanair plane doesn’t have the
same amount of cargo traditional carriers do. Because of fees
on checked-in luggage, Ryanair’s passengers tend to travel
light so as to minimize costs. But the company tries to
increase performances on cargo nonetheless. It has been
reported that the company insists on loading, in priority,
B only one of the two cargo bays that are on its Boeing 737-800.
Generally of the two cargo loading bays on each aircraft, the
front one is the only one in use. This could be just another
taylorism-applied-to-air-travel improvement if it didn’t have
the direct consequence of affecting aircraft balance at take-
off and landing. As a matter of fact, aircraft balance is critical during take-off and landing
phases. Usually weight-distribution is done pre-flight through seat assignment or the
equal loading of cargo bays. Because Ryanair operates neither pre-flight seat assignment
nor cargo repartition, some of its flights have had to take off with rows 2 to 4 blocked to
passengers146.
It is worth noting that Ryanair is planning on moving towards a 100% carry-on luggage
policy147. As a matter of fact Ryanair has always put negative pressure on passengers willing
to check-in luggage, applying expensive fees and restrictions to checked-in luggage. For
any airline, checked-in luggages represent an additional cost, as it has to pay a service
provider to load and unload luggage into the plane cargo bay. Checked-in bags also
represent a cost for the airline in the extent that loading and unloading processes tend to
slow down airport turn-around time. By moving to a 100% carry-on luggage policy, the
company would spare itself of service provider cost, computerized baggage system and
check-in desks while gaining in overall efficiency. In its 2009 annual report it stated that it
would move toward this 100% carry-on baggage policy while lifting restrictions on carry-
144
http://www.guardian.co.uk/money/2009/feb/27/ryanair-toilet-charge ;
http://www.wired.com/autopia/2009/02/insert-catchy-r/
145
http://www.thestar.com/news/world/article/831562--ryanair-looking-at-standing-seats-pay-
toilets ;
57
http://www.travelweekly.co.uk/Articles/2010/07/01/34155/ryanair+still+considers+standing+seats+a
nd+paid+toilets.html ; http://www.metro.co.uk/news/833750-ryanair-creates-standing-up-flights-
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with-vertical-seats
146
http://www.airliners.net/aviation-forums/general_aviation/read.main/2120583
147
http://www.businessweek.com/magazine/content/10_37/b4194058006755_page_2.htm
www.air-scoop.com
on bags numbers148. According to Ryanair, passengers will eventually bring their carry-on
bags to the boarding gate, where they will be placed in the hold, and retrieve upon
deplaning149.
Possible issues
Moving to a 100% carry-on luggage model would still be problematic to passengers.
Even if Ryanair was to allow more luggages per passenger, these would still be exposed to
national and international rules and restrictions concerning carry-on luggage (such as
liquid transportation restrictions and various goods interdictions). In the same way,
oversized goods would seemingly be barred from Ryanair flights (sport equipments,
musical equipments, animals, etc.).
The stripped down characteristics of the seats, combined with the, shorter than
average, 30” pitch between them has allowed Ryanair to drastically diminish outfitting
costs while maximizing seat capacity. Such a move spawns from the belief that short to
58
medium haul planes do not need to offer comfort. Where other airlines are losing in
Page
148
http://avstop.com/news_sept_2010/ryanair_to_operate_hand_baggage_only_flights.htm
149
Ryanair Annual Report 2009, Op. Cit., p.7
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seating density and overall capacity installing expensive business/executive – and
sometimes first – classes in their planes to cater to regular business customers, Ryanair has
taken the opposite stance. If the flight is short, extra comfort is not a decisive factor in
buyer’s choice – even business passengers150. The company seemingly operates on a
perception of customers as ultra-rational homo economicus, who will always select the
cheapest alternative for an equivalent service (getting from point A to point B).
The company has also managed to maximize profit by offering advertisement on
otherwise unused or blank spaces inside its aircraft151. Advertising spaces have been made
available for sale on overhead lockers, trays and sick-bags, turning the traditionally
stripped-down aesthetic of commercial plane-flying into a visual debauchery of
advertisement152. From the company’s standing point, selling advertising space helps in
bringing down cost and maximizing profits made on flying.
Speculative projects
Over the years, a number of speculations and projects have been publicly envisioned
by Ryanair’s management for internal arrangement of its planes. While the airline’s CEO,
Michael O’Leary is known for his brash rhetoric style and controversial allegations, his
verbal bravados have rarely been verified in reality. Though some of them have been
repeated over the years and could be serious, others are simply unrealistic publicity stunts.
A select sample of these would include:
o Making passengers pay to use the toilets.153
This has been a repeated allegation from Ryanair throughout
the years. In spite of the many times it has talked about such a
fee the proposition has never gone through. Legally the airline
could have done it has there is no requirement to have toilets on
an aircraft in Irish law. Yet a number of reasons have been
invoked for the airline no doing so, the first of which is the
purported cost of installing payment systems on every aircraft
toilets which would largely offset the benefits.154
o Suppressing two toilets at the rear of the plane and
For the same reason that the airline could have charged for
using the toilets – namely that it wasn’t legally forced to provide
this service –, suppressing two lavatories at the end of aircraft is
also possible. But the airline never went through with his either.
A reason that can be invoked is that as the airline never went
through with lavatory charges it wouldn’t be able to constrain
the average demand for lavatories onboard. 155
o Installing standing seats on short-haul flights156.
150
For these passengers, the decisive factor is commonly understood as being flight frequency
on routes: http://www.icea.co.uk/archive/low%20cost%20strategy%20040405.ppt
151
http://www.ryanair.com/ie/advertise
152
http://www.ryanair.com/ie/advertise
153
http://www.timesonline.co.uk/tol/travel/news/article5815088.ece ;
http://www.timesonline.co.uk/tol/travel/news/article5814577.ece
154
It is worth noting that in 1987, Alaska Airline had already used the idea of paid toilets in one
59
of its commercial. Except, that at the time, it was to show that the company wouldn’t do that:
http://www.youtube.com/watch?v=EYspsgIjb4U&feature=player_embedded
Page
155
http://airlinenightmare.com/blog/?p=890
156
http://www.telegraph.co.uk/travel/travelnews/7864921/Ryanair-to-sell-5-tickets-for-
standing-room-only-flights.html
www.air-scoop.com
In July 2009, Ryanair announced it was considering installing
standing seats in its short-haul flights to cram up more
passengers inside planes and drive down costs157. Contrary to
toilets, there are some tight regulations on onboard safety.
Ryanair would have had to find a way to make sure passengers
had seat-belts on during take-off, landing and turbulences, that
they could reach a secure position in case of emergency landing
and most of all that their upward-standing seats could
withstand a 16G force158. Because of high constraints, plans for
such seats have been stalled. While such an announcement has
contributed in generating press for Ryanair and fostering its
cost-cutting image, it seems that company’s management might
have studied the idea a bit more in-depth hadn’t there been so
many legal and technical difficulties.159
o Creating a “fat tax” for passenger unable to fit in one of Ryanair’s
markedly small seat.160
Such a tax has not been enforced as it is highly likely that it
would have been repelled in a European court as discriminatory.
Nonetheless, on its website, Ryanair advises overweight
passengers to buy an extra-seat to accommodate their size.161
o Launching a transatlantic subsidiary162 and
Though the first announcement of a possible transatlantic
subsidiary date back as far as 2008, no decisive move in that
direction have been made yet and for now plans are on a freeze
until 2013-2014 has for now the company is in the impossibility
of buying cheap new wide-body transatlantic aircraft.
o Introducing a business-class on transatlantic flights with full-beds
and sexual gratifications163.
While the possible launch of a transatlantic subsidiary is
probably not a hoax and Ryanair might have to offer a business
class if it wants to seize all potential customers on transatlantic
flights, the description Michael O’Leary gave of that would be
business class is purely phantasmagorical. It was a move clearly
designed to provoke outrage amongst journalists and generate
157
http://www.telegraph.co.uk/travel/travelnews/5753477/Ryanair-to-make-passengers-
stand.html
158
http://blogs.wsj.com/middleseat/2009/07/07/why-there-wont-be-standing-room-only-jets-
or-pay-toilets-not-even-on-ryanair/
159
Indeed, both Boeing and Airbus declared it wasn’t possible, for legal and safety reasons; see
http://www.nytimes.com/2006/04/25/business/25seats.html?_r=3&scp=1&sq=airbus%20standing%2
0seats&st=Search It is also worth noting that recent announcements in the field of aircraft
furnishing have opened perspectives for Ryanair. The creation of semi-seated seats could open a
middle-way for the company, letting it make more room for more seats inside its aircraft.
http://www.aviointeriors.it/index.php?option=com_k2&view=item&id=141:aviointeriors-launches-a-
super-high-density-seat&Itemid=155
160
http://www.guardian.co.uk/business/2009/apr/22/ryanair-obese-fat-tax ;
http://www.timesonline.co.uk/tol/travel/news/article6146887.ece
60
161
http://www.ryanair.com/en/questions/can-i-purchase-an-extra-seat-for-a-large-person
162
http://www.guardian.co.uk/business/2007/apr/12/theairlineindustry.travel ;
Page
http://www.telegraph.co.uk/travel/3373190/Ryanair-reveals-cut-price-transatlantic-plans.html
163
http://www.ryanair.com/en/news/ryanair-s-beds-and-blowjobs-video-clip-climaxes-to-no-1-
position
www.air-scoop.com
free publicity for the airline while attracting the sympathy of the
25-44 years old audience, which makes an overwhelming part of
its customer base.164
Winglets
Aerodynamic studies of aircraft have long been aware of the importance of airflow on
overall flight performances. In fact, winglets have been conceptualized as early as 1897, a
time were human flight was more of an idea than a reality. The idea behind winglets is to
maximize flight performances of a winged aircraft.
The concept spawns from the behavior of airflow on a wing design. During flight, as
the plane goes through the air, airflow is directed over and along the wing, towards 165the
wingtip. Because conventional wingtips offer a clean cut, they generate wingtip vortices as
they drag through the air. These vortices
create turbulences which perturb
laminar airflow at the tip of the wing,
nullifying lift in that area and creating
additional drag for the plane.
Blended winglets provide a remedy to
such a problem, their form, a near
vertical extension of the wingtip, allow
for the vortices to strike the winglet at an
angle, leveraging vortices otherwise
wasted energy to generate additional
thrust for the aircraft. Another effect of
blended winglets is that they reduce the
size of wingtip vortices thus limiting
vortex interference with laminar airflow
at the tip of the wing.
As a consequence, blended winglets
present a number of advantages for
commercial airliners:166
o Improved climbing
gradient
o Reduced climb thrust
o Reduced noise and
exhaust emissions
o Reduced cruise thrust
o Improved cruise
performance
www.air-scoop.com
interesting artifact in the aircraft industry until the end of the 1970’s. As succeeding oil
crisis drove prices upward and commercial airlines became concerned that fuel expenses
where never going to come back preceding levels, aircraft manufacturers began offering, in
the mid 1980’s, to retrofit blended winglets on compatible aircraft. Later, the Boeing 737-
800 became an industry favorite for blended winglets outfitting as its general design was
highly compatible with such installations and the general purpose of the aircraft made it
great candidate for the advantages they offered.
Ryanair did not make the move to the installation of blended winglets on its Boeing
737-800 until the 2005 contract. The retrofitting and subsequent incorporation of blended
winglets represented a significant investment for the company. Retrofitted winglets were
provided by APB under discount and installed during routine maintenance on aircraft. All
aircraft delivered from 2006 onwards have benefited from pre-installed winglets.
Ryanair justifies the investment in winglets by the significant noise reduction they
offer and – above all –the estimated 4% reduction in fuel consumption they represent.
Considering average fuel prices and consumption per flights the airline estimated its
benefit would quickly outweigh the cost of installation. As stated by Ryanair in its 2005
notice to investors:167
“Given that fuel is the largest single cost of the Company, the Company expects a
significant reduction in the amount of fuel consumed per hour once the winglets have been
fitted to the fleet."
Publicity
Ryanair has repeatedly used its aircraft to broadcast messages to the world. They were
intended as promotional mediums for the airline, spreading messages from Ryanair’s
management to airport they visited. Messages have usually been short phrase intended to
be passive-aggressive spikes at competitors like “Bye bye latehansa”, “Auf Wiedersehen
Lufthansa” or “Bye bye Skyeurope”.
Using its own aircraft for advertising
purpose may have been a good idea, but
there was even more profit to be made by
offering to do the same thing for other
non-airline industry clients. Over the
years, like its model company Southwest,
Ryanair has moved to offering aircraft
fuselage as rentable advertisement space.
167
Ryanair Holdings Plc., « Proposed Purchase of up to 140 Boeing “Next Generation” 737-800
Aircraft: Notice of Extraordinary General Meeting”, 2005, Op. Cit.
Page
168
Accessible at http://www.ryanair.com/doc/advertise/ExteriorBranding.pdf
169
http://www.ryanair.com/doc/advertise/ExteriorBranding.pdf and http://www.berlin-
spotter.de/airlines/ryanair.htm [PICTURE SOURCE]
www.air-scoop.com
Using airplanes
It is a basic fact in the airline industry that when an aircraft is not flying, it is actually
losing money. As a matter of fact, when an aircraft is on the ground, it represents a pure
cost for the company operating it, it incurs operating and maintenance costs as well as
airport charges and fees. That aircraft will only be making money the moment it starts
transporting passengers. These reasons explain the tremendous importance airport
turnaround time has for carriers willing to cut cost and maximize operating profit. In
order to improve cost cutting and profit maximizing, Ryanair imposes a certain number of
rules on the way aircraft are put to use.
Rules of use
Because Ryanair’s management tries to shave off cost everywhere it looks, it has come
to impose a large number of rules regarding the usage of its aircraft. The idea behind that
is to set goals that Ryanair’s employee and contractor will try to reach to make the most of
the airplanes. One the first steps in that direction is imposing drastic measures to shorten
turnaround time170. This logic has led to an almost complete revision of care, maintenance
and general usage processes with the aim of squeezing every last drop of profit from
aircraft usage.
Turn-around
170
http://www.tetracom.ca/transtalk/?p=1497
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Another major obstacle in turnaround timing management spawns from the different
procedures the aircraft has to go through once it has come to a stop. Between its final stop
and next take-off a number of routine procedures are executed sequentially inside the
aircraft:
• Passengers deplaning
Post landing
• Cabin cleaning
Ground
• Passengers boarding
Pre take-off
Questions of brand image management and role assignment have led legacy airlines to
sub-optimize this process. Generally, aircraft crews stay inside the plane until the last
passenger has disembarked and wait for cleaning contractors to come inside and perform
cabin cleaning. Once cleaning is done the cabin crews proceed to boarding the next load
of passengers. This sequential process can be extremely time-wasting. Because each task is
begun after the other is completed it does not make full use of all the resources available
at any time. Especially as passengers generally deplane through one door (sometimes two
on large long-haul planes) and have to wait in line behind one another before they can get
out. The same goes for the process of boarding the plane. Usually passengers are invited to
start boarding by rank group in a back-to-front direction. It has been proven that such a
process is completely sub-optimal and can lead to multiple interferences between
passengers, thus lengthening boarding time171.
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Page
171
Menkes H.L. van den Briel, J. Rene Villalobos, Gary L. Hogg, “The Aircraft Boarding
Problem”, Department of Industrial Engineering, Arizona State University, found at http://leeds-
faculty.colorado.edu/vandenbr/papers/IERC2003MvandenBriel.pdf
www.air-scoop.com
Meanwhile, when aircraft have come to a full stop at the gate, a number of routine
check and maintenance procedures are being led on the ground:
• Unseen damages
Post landing • Possible security issues
• Refueling
Parking • Reprovision of food supplies
• Pre-flight check
Pre take-off • Exterior walk-around
Airport turnaround and aircraft handling have been one of the first major changes
brought by low-cost airlines.
172
http://www.hse.gov.uk/pubns/priced/hsg209.pdf
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o Loading/unloading cargo in only one bay,
o Relying on a single type of aircraft to minimize maintenance costs and
facilitate swift servicing173,
o Imposing strict fuel consumptions limits on its pilots to avoid repetitive
refueling,
o Imposing passenger boarding even if cleaning process is not finished.
Avoiding large hubs and choosing to land at small, less congested, airports
For reasons exposed above (as well as for financial reasons), Ryanair tends to select
smaller airports to land its plane. While this has given the airline a reputation of taking its
passengers “from nowhere to nowhere” 174 it has also largely served Ryanair’s self-
proclaimed reputation for punctuality175. The company’s huge customer base serves it well
when it comes to negotiating premium service with small airport who take such amounts
of potential passengers as a blessing. As a consequence, wherever it chooses to land,
Ryanair generally avoids slot attribution hassles and general congestion.
173
Siobh{n Creaton, “ Ryanair: The Full Story of the Controversial Low-Cost Airline”, Op. Cit.,
p.68
66
174
Sir Stelios, CEO of EasyJet talking about Ryanair’s Point-to-point system,
http://airobserver.wordpress.com/2009/09/29/stelios-tackles-ryanair-at-the-word-low-cost-airline-
Page
congress/
175
http://www.ryanair.com/en/about
176
http://www.europeanceo.com/news/home/headlines/article489.html
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cleaning within the 25 minutes timeframe before the next load of passengers boards the
plane.177
Relying on a single type of aircraft to minimize maintenance costs and facilitate swift servicing
This point has already been explored in depth, but the fact that Ryanair has extended
the use of Boeing 737-800 to the integrality of its fleet is a strong factor in its quick
turnarounds. The 737-800 is a common type of plane in the airline industry and it is easy
to find a large pool of qualified contractors to work on it during turnarounds. This comes
down to reducing both the cost and length of turnarounds maintenance checks.
Imposing strict fuel consumptions limits on its pilots to avoid repetitive refueling
This will be explored more into details further on, but Ryanair puts a lot of pressure on
its pilots for them to limit fuel consumption. Usually pilots have decisional power over the
marginal fuel supply they want to load in excess, in case external contingencies would
require the plane flying longer than foreseen or consuming more fuel. Ryanair enforces a
very strict policy, limiting that additional reserve to 300 kilograms (or, depending on
67
177 177
See Channel 4 Broadcast, “Ryanair Caught Napping” as a part of the Dispatches series, first
Page
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prices, a volume costing a maximum of € 227) of extra fuel180. That amount fuel translates
into very little additional flight time, on average five minutes extra once the tanks are
empty, leaving planes in a very difficult situation if they’re rerouted at the last minute. To
ensure that pilots won’t binge on fuel, the company allegedly internally ranks its pilots
based on their capacity to economize fuel. Such drastic measures have been noted to lead
to quicker escalation in case of emergency and more frequent maydays – even if that
would be badly seen from a pilot.181
Fuel management
Ryanair’s policy regarding fuel management would deserve in report of its own,
considering how central it has become to the company over the years. Indeed, fuel has
become a major issue for every part of the transportation industry in that same time
180
http://www.timesonline.co.uk/tol/news/world/ireland/article4641716.ece and
http://extras.timesonline.co.uk/ryanair.pdf
181
http://airobserver.wordpress.com/2009/11/18/spanish-pilots-complain-about-ryanair-fuel-
saving-practices/ and
http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article4641399.ece
182
See Channel 4 Broadcast, “Ryanair Caught Napping” as a part of the Dispatches series, first
68
toilet/
184
Ryanair, Annual Report 2010, p. 54,
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
www.air-scoop.com
frame. But for Ryanair, whose entire strategy is based on cost management, expenses
incurred by fuel dwarf any other by a long measure185.
As a result, the company that strives to cut cost everywhere it finds them has put
under very heavy scrutiny its fuel consumption. But there are few ways an airline can
lower its fuel bill except by playing on aircraft efficiency. Ryanair possesses the most
recent aircraft in their class, the majority of them almost brand new and fitted with
winglets, the last thing it can do with its aircraft is optimize their usage. This has
translated into tremendous pressure upon pilots.
For instance, Ryanair tries to limit how much additional fuel its pilots can take and
consume with their aircraft. For the majority of other airlines, it is the pilot’s sole
judgment that governs how much reserve fuels is added in the plane as they have the duty
to anticipate delays from headwinds, storms and possible rerouting. In addition to that,
European regulation186 stipulates that every plane operating within European territory
must carry a “contingency” load of at least 5% of the total trip fuel and enough to carry out
an approach, divert to an alternate airport or hold for 30 minutes at an alternate airport.
Where carrying more fuels becomes a problem for Ryanair is that fuel quickly adds up
to more weight, dragging down the plane – and possibly limiting passenger capacity – this,
in turn, adds up to heavier fuel consumption thus increasing the cost of the flight. To
counter-act this Ryanair enforces a tight fuel control policy. As recently as 2008, the
company circulated a memo187 among its pilots strictly limiting their amount of unjustified
extra fuel to 300kg – which translates to approximately five minutes of extra flying time –
and warning of dire consequences if pilots were to pill up abusively on extra fuel without
direct agreement from management at Ryanair.
Such heavy pressure on fuel consumption and turnaround time has led to bigger
problems. Because pilots fly with little amount of extra fuel in their tanks, they can barely
afford to be delayed or rerouted188. Of course there are a number of existing emergency
procedures to limit the risk of planes crashing because they ran out of fuel, but these are
hardly an option for Ryanair’s pilots. Indeed, any call for an emergency landing, such as a
“Mayday” entails a posterior inquiry about the incident which can lead, in turn to
sanctions against the airline.
Ryanair’s pilots are well aware that being the cause of such inquiries towards Ryanair
could have consequences for their records. So they try to avoid emergency landings and,
pressured by their lack of extra fuel, will sometimes resort to dangerous maneuvers to land
in time189. Undertaking such “high energy approaches” has put Ryanair’s pilots into a sort
of “catch-22” as these rarely go unnoticed, and a 2007 internal memo issued by Ryanair
warned pilots that they would be demoted the first time they made a dangerous approach
and sacked for a second offense.
Pilots are now reduced to take careful measures when approaching an airport while
being low on fuel, asking for “priority landing” on grounds that it was running low on fuel.
Such behaviors prove to be unfair competition and infuriate other airlines. This was clearly
185
€ 839.9 million of the company’s € 2 586 million annual operating expenses. Source: Ryanair,
Annual Report 2010, p.8, found at
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
186
Official Journal of the European Union, Commission Regulation No 859/2008 of 20 August
2008, found at http://eur-
69
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:254:0001:0238:EN:PDF
187
Ryanair Pilot Memo, “Re: Fuel”, found at http://extras.timesonline.co.uk/ryanair.pdf
Page
188
http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article4641399.ece
189
http://www.timesonline.co.uk/tol/travel/news/article1343517.ece
www.air-scoop.com
illustrated in 2009 incident190 at Barajas, Spain, when a Ryanair pilot requested the control
tower authorization to land in priority because it was low on fuel. An Iberia pilot, picking
on the frequency hinted that the pilot could be understood as saying he was calling for an
emergency landing for fuel shortage – which would have led to a posterior inquiry. Upon
denegation from Ryanair’s pilot, Iberia’s pilot spoke to the control tower stating that if
priority landing was to be given he would denounce the airport and Ryanair. Following
that statement, Ryanair’s pilot abandoned his landing approach and rerouted to
Salamanca, the closest airport around.
As a consequence, Ryanair has come under heavy criticism for the pressure it puts on
its employees and resources. Planes, pilots and crews are pushed to do the maximum with
the strict minimum at their disposal and this in turn generates high-risk comportments.
As reaction, in September 2008, the SEPLA (Syndicate of Spanish Airline Pilots) published
a document191 on Ryanair’s fuel rationing practices192 and, a few days later, sent a joint
complaint193, signed by the major employers in the sector, to the Ministry of Development.
Reactions like this one are starting to multiply in Europe, as consumers and professionals
grow concerned of safety issues aboard Ryanair planes.
Care process
Aircraft maintenance obeys to very strict norms. In Europe, the European Aviation
Safety Agency (EASA) establishes these norms194. They are regulatory standards for aircraft
maintenance all airlines operating over European soil must respect. Maintenance
conditions are defined in commission regulation No 2042/2003 195 and in decision
no.2003/19/RM, Part 145 of 28 November 2003 and all maintenance procedures carried out
are supposed to be done according to these guidelines to be EASA standards compliant.
Ryanair, owning and operating exclusively Boeing 737-800 aircraft also performs
maintenance checks in accordance with the U.S. Federal Aviation Administration (FAA)
guidelines. These norms define conditions of acceptable maintenance checks and required
personnel qualifications196.
190
http://www.lasextanoticias.com/noticias/ver/rebelion_aerea_contra_ryanair/188232 and
http://airobserver.wordpress.com/2009/11/18/spanish-pilots-complain-about-ryanair-fuel-saving-
practices/
191
http://www.sepla.es/website/seplacms/index2.php?option=com_content&do_pdf=1&id=281
192
http://lowcostaccidents.wordpress.com/aircraft-fuel-rationing/
193
http://www.elconfidencialdigital.com/images/HTMLText/Carta_Sindicatos-Ryanair.pdf or
http://www.scribd.com/doc/22704829/ryanair-spain-unions-EN-SP
194
http://www.easa.europa.eu/
70
195
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:315:0001:0165:EN:PDF
http://easa.europa.eu/ws_prod/g/doc/Agency_Mesures/Certification_Spec/decision_ED_2003_19_R
Page
M.pdf
196
Ryanair, Annual Report 2010,
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
www.air-scoop.com
Maintenance checks necessary to ensure continued airworthiness can be understood
as a five-step ladder.
Turnaround checks
Every take-off / landing cycle
A - Check
Every 500-800 flights hours
Performed overnight
B - Checks
Every 3 months
Performed overnight
C - Checks
Every 12-18 months
Several days
D - Checks
Every 4-5 years
Can take up to two months
These checks are performed to ensure the continued airworthiness of the aircraft and
their depth spans over a wide scale from the simple safety checks performed during
turnaround to D checks during which the aircraft is almost completely taken apart a
brought back to an almost brand-new state.
www.air-scoop.com
other providers for engine and rotable repairs. These providers are generally serving a wide
range of airlines across the industry.197
197
Ibid, p. 56
198
http://www.aerobuzz.fr/spip.php?breve174
www.air-scoop.com
pilot training grounds. Recently, the company entered a tenancy agreement with Hahn
airport in Germany, where it plans to occupy a two-bay hangar and storage facilities
dedicated to line maintenance.
All of Ryanair’s planes return each evening to Ryanair’s bases where they are examined
by Ryanair’s engineers, except for several bases (Charleroi, Skavsta, Ciampino, Hahn,
Bergamo, Marseille199, Girona, Madrid, Alicante, Weeze, Kaunas, Bristol, Brindisi, Bari,
Pescara, Trapini, Bologna, and Cagliari) where external contractors perform examinations.
This arrangement allows Ryanair to carry out most of all the routine maintenance
procedures its aircraft need. Yet, the company is still unable to perform some of its heavy
maintenance needs in-house and relies on external contractors with which it enters into
short-term contracts. Concerning heavy maintenance, the new three-bay hangar built in
Prestwick should allow the company to start accommodating the maintenance
requirements expected to arise as soon as winter 2010 due to the aging of a part of its fleet.
Engine overhaul services have been contractually offloaded to General Electric Engine
Services200. Since June 2008 the contract covers all the aircraft bought under the different
Boeing orders. Pursuant to the contract, General Electric Engine Services ensures repair
and overhaul of every engine at its own facilities.201
Litigations
When time came to increase maintenance capacity, Ryanair sought to expand on what
it had already by looking first at its Irish base in Dublin airport. Trying to secure more
space for line maintenance, in February 2010, Ryanair made an announcement it was
willing to invest over £ 8 million in a maintenance hangar at Dublin’s airport. The hangar
in question, hangar 6, had been formerly used by SR Technics, a maintenance contractor,
had been sold by SRT to the Dublin Airport Authority (DAA). Following this acquisition
the DAA signed a 20 years lease for the hangar with Aer Lingus. Claiming that Aer Lingus
was not using the hangar at all, Ryanair demanded the Irish Government cancel the lease
and gave it control of the hangar.202
Upon encountering resistance from the government and the DAA, the company
launched of the media offensives203 it is used to, defending that it would create 500 jobs by
turning the hangar into a maintenance facility and accusing the government of
incompetency for refusing to support its offer. When the Minister responded by asking
why Ryanair wouldn’t build a new hangar airport land or accommodate its facilities in
other hanger, Ryanair’s management avoided response, insisting on job losses. But the
promised job creations were far from certain as Aer Lingus, the hangar’s new user had
planned on hiring 250 new employees for maintenance and as Ryanair rarely hire locally.
Eventually, the Irish Government refused to bulge and Ryanair chose to construct new
facilities at Hahn airport204.
199
Until January 2011, at which date Ryanair will close its base at the airport, see
http://www.ryanair.com/en/news/ryanair-announces-closure-of-marseille-base
200
http://www.geae.com/aboutgeae/presscenter/services/services_20041101.html
73
201
Ibid, p. 64
202
http://www.finfacts.ie/irishfinancenews/article_1019060.shtml
Page
203
http://www.ryanair.com/en/news/o-leary-invites-tanaiste-to-meet-on-300-jobs
204
http://www.ryanair.com/en/news/ireland-loses-ryanair-hangar-and-up-to-200-jobs-to-
germany-and-frankfurt-hahn-airport
www.air-scoop.com
Maintenance workforce management
As exposed before, Ryanair handles a large part of its line maintenance itself.
Employees are all certified under European regulation and competent in there relevant
field of duty. Declaration that maintenance operators are employed in-house can be found
in Ryanair Holdings’ Annual Reports205, but the situation is actually a bit more complex.
The company states that it employs, at present, 180 maintenance personnel, a number
which – considering the number of dedicated maintenance hangar Ryanair has around
Europe – doesn’t quite correlate the 300 job creations it claimed had it been given use of
Dublin’s hangar 6.
In fact, at most of its maintenance bases, Ryanair’s planes are overhauled by dedicated
maintenance companies whose single client is Ryanair. Contrary to what the company
states, some of its maintenance facilities don’t actually provide “in-house” maintenance;
technicians are employed by a third-party provider belonging to Ryanair. Such is the case
at Prestwick Airport where maintenance executed on Ryanair’s plane is provided by
Prestwick Aircraft Maintenance Ltd 206 a registered and Part-145 approved Scottish
company – for which Ryanair publicizes hiring announcements on its website207. At first,
the purpose for adding an extra layer between Ryanair and Prestwick’s hangar
management could seem rather obscure. Upon close examination it seems that Ryanair’s
installation in Prestwick has benefited from generous public grants and subsidies, covering
up to £ 1,5 million of the total £ 8 million invested in the hangar208. These subsidies were
distributed under Scottish Executive’s Regional Selective Assistance programs, due to the
fact that Prestwick Airport is part of the Tier 2 Scottish assisted Areas 209 . Though,
companies eligible under Regional Selective Assistance criterion do not need to be
Scottish, the amount of help granted is dependent on the company’s size210. Thus, it seems
that creating a new, local, company to manage Prestwick’s hangar could actually be of
some interest to Ryanair.
Even though such a maneuver is entirely legal, it can be interpreted as quite an
elaborate scheme to bring down the total cost of creating a new maintenance hangar at
Prestwick. Ryanair is quite supple in its management and very able when it comes to
adapting to different rules and local legal contexts, creating subsidiary aircraft
maintenance services does not seem to be the case at all time.
A similar arrangement can be found at Stansted airport where all maintenance
accomplished for Ryanair is operated by a company called Stansted Aircraft Maintenance
Systems Ltd211. The company is British but positions are advertised and filled through
Ryanair212, reasons for such a structure in Stansted remain obscure. At other airports such
as Bremen, Hahn, or Skavsta, line maintenance is provided by medium to large external
contractors such as Boston Air213 or Priority Aero Maintenance214 for Ryanair. The only
205
See, Ryanair, Annual Report 2010,
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
206
http://apps.scottish-
enterprise.com/SupplierDirectory/ViewSupplierInContext.aspx?SupplierGuid=5214793C-2FE5-
47A0-B55F-3CBBE4161269&displayID=104925
207
http://www.ryanair.com/en/careers/job/FREO309
208
http://news.bbc.co.uk/2/hi/uk_news/scotland/glasgow_and_west/8508429.stm
209
http://www.scottishbusinessgrants.gov.uk/rsa/files/AA%20Map%20-%20Extended.jpg
210
http://www.scottishbusinessgrants.gov.uk/rsa/189.166.167.html
74
211
http://www.companiesintheuk.co.uk/ltd/stansted-aircraft-maintenance-systems
212
http://www.ryanair.com/en/careers/job/FRESTNB2
Page
213
http://www.bostonair.co.uk/news/ Boston Air also provides maintenance for Ryanair at
other airports than Ryanair’s bases.
214
http://www.aerospace-technology.com/contractors/maintenance/priority/
www.air-scoop.com
maintenance base where Ryanair seems to operate maintenance directly under its name is
in Dublin Airport215.
For turnaround check and rotable repairs Ryanair relies exclusively on external
contractors. It is a part of its strategy to minimize the number of in-house employees. The
only part of maintenance it operates in-house is heavy revision and airframe maintenance
at its main bases. Any maintenance performed at other airports is done through external
contractors.216
When it comes to handling maintenance contractors, it has been reported that Ryanair
forces external contractors to lower their costs for the company. Allegedly, the company
coerces contracted companies into creating Ryanair-dedicated subsidiaries employing
lower-paid employees. As a result, engineers taking care of Ryanair planes on the ground
are often found to be less experienced, less skilled and less paid than any others217. This
comes down to lighter aircraft handling costs for Ryanair but could also lead to major
safety and security issues surrounding planes overtime.
Safety Issues
When it comes to safety issues Ryanair makes no secret that it has an almost spotless
record of fatalities onboard any of its plane. However that information needs to be
contextualized as it would be rather unfair to compare 25 years old Ryanair with any
traditional carrier twice that age. Aircraft safety and flying procedures have drastically
improved over the past decades and airplane accidents. Consequently, it is actually much
more difficult, and perhaps less flattering, to compare Ryanair to any legacy airline when it
comes to safety onboard.
While Ryanair isn’t responsible for any case of crash or passenger fatality, the company
has a generous track record of incidents with its planes. Generally these incidents fit a
pattern, which allows outlining several categories of incidents likely to happen on Ryanair:
- Birdstrikes: More than a dozen bird strikes on Ryanair’s plane have been
recorded since 2006218. However, the problem of bird strikes is not unique to
Ryanair. Bird strikes have an industry-wide impact 219 for air travel and
215
As shown by its recruitment offers http://www.ryanair.com/en/careers/job/FREO409
216
Ryanair Annual Report 2009, Op. Cit., p.51
217
Page 3, http://www.elconfidencialdigital.com/images/HTMLText/Carta_Sindicatos-
Ryanair.pdf
218
http://www.avherald.com/h?article=43003b61&opt=0
http://www.avherald.com/h?article=42ebd12e&opt=0
http://www.avherald.com/h?article=42de866f&opt=0
http://www.avherald.com/h?article=420a0c73&opt=0
http://www.avherald.com/h?article=4248b55b&opt=0
http://www.avherald.com/h?article=4246ef45&opt=0
http://www.avherald.com/h?article=41db42e3&opt=0
http://www.avherald.com/h?article=41d94059&opt=0
http://www.avherald.com/h?article=40d0d4c8&opt=0
http://www.avherald.com/h?article=40cbe676&opt=0
http://www.avherald.com/h?article=4062df9c&opt=0
75
http://www.avherald.com/h?article=3f9668cc&opt=0
219
See J.R Allan, “The Cost of Bird Strikes and Bird Strike Prevention” (found at
Page
http://www.detect-
inc.com/downloads/Paper%20John%20Allan%20The%20Costs%20of%20Bird%20Strikes%20and%2
0Bird%20Strike%20Prevention%207p%20BSC%202002.pdf ) and J.R Allan and A.P Orosz “The Cost
www.air-scoop.com
represent a strenuous cost to airlines and passengers as well as a cause for
concern safety-wise. While Ryanair is not the only company affected by such a
problem it remains to be determined if using small, remote, airports increases
the company’s exposure to such events. As a matter of fact, one could think
that smaller airports do not have the same means as large hubs to repel birds, it
is also possible that there remoteness from large cities exposes them to more
birds flying around airports. Bird strikes on Ryanair have generally been
followed by a complete revision of the engine affected. Perhaps one of the most
iconic incidents of that type took place on Ryanair plane flying to Ciampino on
November 10, 2008, the loss of power on the engine led to an emergency
landing220. Damage on the engines was sufficient to have the aircraft written
off. Over the years there have been many incidents linked to bird strike. Most
of the time, the plane is actually salvageable and, expect when engine capacity
is hampered in such a way that the aircraft may have trouble landing properly,
usually passenger are not injured.
- Passenger related incidents: This type of incidents can be fairly common on
Ryanair flights. They are mainly related to two causes, either passenger
suffering of a major health problem and requiring immediate medical
attention221, or, on the other side, unruly passengers refusing to comply with
airline policies222. While unruly passengers can be found on all flights, it seems
that, thanks to its low price policy, Ryanair is a favorite for stag parties and
students binge weekends 223, while this is not routine, recurring events of
drunken passengers disrupting procedures onboard have been reported.
However these events, generally do not translate into any damages for other
passengers.
- Insufficient maintenance: A consequent number of incidents have hinted
towards insufficiencies in maintenance levels on Ryanair’s aircraft. While a
consequent part of reported incidents where linked to faulty sensors and alarm
signals, the fact that these are faulty are in themselves a sign of bad
maintenance. Other occurrences are more worrying, revealing weaknesses in
of Birdstrikes to Commercial Aviation”, Bird Strike Committee Proceedings, 2001 Bird Strike
Committee-USA/Canada, Third Annual Joint Meeting, Calgary, AB, 2001, University of Calgary,
Lincoln (found at
http://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1001&context=birdstrike2001 )
220
http://www.flightglobal.com/articles/2008/12/11/320045/detail-emerges-on-ryanair-
birdstrike-accident-at-rome.html
221
http://www.avherald.com/h?article=430a14c9&opt=0
http://www.avherald.com/h?article=4305d0e7&opt=0
http://www.avherald.com/h?article=423f2b09&opt=0
http://www.avherald.com/h?article=4225d58e&opt=0
http://www.avherald.com/h?article=421bdc7d&opt=0
http://www.avherald.com/h?article=41c9cd89&opt=0
http://www.avherald.com/h?article=4071dff5&opt=0
222
http://www.avherald.com/h?article=42e99ae7&opt=0
http://www.avherald.com/h?article=425d1899&opt=0
http://www.avherald.com/h?article=4206e01e&opt=0
http://www.avherald.com/h?article=41dd4e83&opt=0
http://www.avherald.com/h?article=41d1f1ab&opt=0
76
http://www.avherald.com/h?article=41adbccd&opt=0
http://www.avherald.com/h?article=407c0505&opt=0
Page
223
As illustrated by the way dedicated companies recommend the airline,
http://www.activeholidays.lt/Stag_Weekends/Stag_Weekends_in_Vilnius/For_Ryanair_arrivals/ ,
http://www.thedogsbaltics.co.uk/flights.aspx
www.air-scoop.com
maintenance and the general state of planes224. Several incidents related to
misaligned flaps225 , engine malfunction226 and landing gear227 troubles have
occurred over the past five years, leaving doubts whereas Ryanair’s
maintenance process is adequate.
- Poor pilot training: Several incidents have revealed limits related to Ryanair’s
pilots skills228. Since 2007, four tail strikes were recorded229, as well as a couple
of cases in which planes ran off runaway230 for fault of properly landing and a
case when a Boeing 737-800 struck a building with one of its winglets231. It
appears that some of Ryanair’s pilots are not always fully capable of managing
their aircraft in difficult situations such as bad weather or abnormal conditions.
This can also be explained by the fact that pilots are under very heavy pressure
from Ryanair’s management to meet turnaround timings, leading to a number
of high-energy approach and dangerous maneuvers at low altitude232233.
- Fuel shortage emergencies: As stated earlier, Ryanair’s aircraft fly with marginal
fuel reserves lower than industry’s average. While these are not always listed,
for lack of being declared proper emergencies through a “mayday”, various
sources report Ryanair planes requesting priority landing suggesting that they
were short on fuel234. Nevertheless, up to now, no major problem has emerged
224
http://www.avherald.com/h?article=40ccbcdf&opt=0
http://www.avherald.com/h?article=42c733bc&opt=0
http://www.avherald.com/h?article=428000b0&opt=0
http://www.avherald.com/h?article=4254223e&opt=0
http://www.avherald.com/h?article=41e82a2c&opt=0
http://www.avherald.com/h?article=4076d98d&opt=0
http://www.avherald.com/h?article=403e7b48&opt=0
http://www.avherald.com/h?article=3f46fa68&opt=0
225
http://www.avherald.com/h?article=4298ba22&opt=0
http://www.avherald.com/h?article=420ed3da&opt=0
http://www.avherald.com/h?article=404654b6&opt=0
http://www.avherald.com/h?article=40209d86&opt=0
226
http://www.avherald.com/h?article=43000a34&opt=0
http://www.avherald.com/h?article=42b5b926&opt=0
http://www.avherald.com/h?article=42599bc5&opt=0
http://www.avherald.com/h?article=417b21c7&opt=0
http://www.avherald.com/h?article=416626d3&opt=0
227
http://www.avherald.com/h?article=4308bcd4&opt=0
http://www.avherald.com/h?article=40fc7579/0001&opt=0
http://www.avherald.com/h?article=40be6ef0&opt=0
http://www.avherald.com/h?article=3f9668cc&opt=0
228
http://www.avherald.com/h?article=42b6f973&opt=0
229
http://www.avherald.com/h?article=4242e490&opt=0
http://www.avherald.com/h?article=4027cb83/0000&opt=0
http://www.avherald.com/h?article=3f16e226&opt=0
230
http://www.avherald.com/h?article=40fc7579/0001&opt=0
http://www.avherald.com/h?article=424a22c6&opt=0
http://www.avherald.com/h?article=40c98251&opt=0
http://www.avherald.com/h?article=405edac5/0000&opt=0
http://www.avherald.com/h?article=403dfde8/0001&opt=0
231
http://www.avherald.com/h?article=406ddbca&opt=0
77
232
http://www.guardian.co.uk/business/2007/feb/20/theairlineindustry.travel
233
http://www.avherald.com/h?article=422ad01c&opt=0
Page
http://www.avherald.com/h?article=41a5f274&opt=0
http://www.avherald.com/h?article=3d8c079e&opt=0
234
http://www.avherald.com/h?article=42bf38c3&opt=0
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from these situations of very low fuel reserves. It remains to be seen if such a
policy stands the test of time.
78
Page
http://www.timesonline.co.uk/tol/travel/news/article1343517.ece
http://www.tetracom.ca/transtalk/?p=1497
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Personnel
As usual in its approach of airline business, when it comes to human resources,
Ryanair strikes a fine balance between cost-cutting and profit maximizing. Costs are
driven down, compared to industry’s average, by relying on fewer employees, paying them
less, and diminishing exposure to taxes. On the other hand, profit is maximized through
increased pressure for results, more tasks per employee, and fewer disruptions in workflow
thanks to tight control of unionization. A fine-grained approach of Ryanair’s human
resources necessitates separate focus on cabin crew and pilots as well as close cross-
examination of each aspect of their duties and contracts.
Cabin crew
Ryanair’s cabin crews are one of a kind in the airline industry. Aside from sporadic
passenger critics regarding the fact that crews seem to be coming from all over Europe,
have a dubious command of English and may be rude towards passengers235, it is generally
recognized that employment at Ryanair’s is markedly different than in any other
company236. There are many reasons for that fact, from the way flight attendants are
recruited to their terms of employments and general management at Ryanair’s.
Recruitment
Ryanair’s recruitment strategy is quite unique in the airline industry. In order to keep
cost low, allow for supple adaptations and increase profits, the company has resorted to a
variety of innovative tactics in its recruitment process, outsourcing training and
employment and looking far and wide for aspiring flight attendants.
Geographical origins
Ryanair has made a reputation for employing cabin crews coming from a variety of
countries all over Europe. While the geographical origins of flight attendants and pilots, in
an age of ever increasing globalization, shouldn’t be a problem per se, it is worth noting
than in recruiting such an eclectic sample of employees, Ryanair has very efficiently taken
advantage of difference in resources and incomes across Europe. Indeed, when taking into
account average wage and incomes between Western and Eastern Europe, Ryanair’s
motives for its recruitment policy appear crystal clear.
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235
http://www.pprune.org/archive/index.php/t-230262.html or
http://www.airlinequality.com/Forum/ryan.htm
236
http://www.itfglobal.org/campaigns/conditions.cfm
www.air-scoop.com
Figure 13: Differences in national minimum wage across Europe
It has been widely reported that a lot of Ryanair’s cabin crew came from Eastern
Europe. While this is not true for all of Ryanair’s flight attendants, it appears that a
consequent part of them do not come from Ireland or even the United Kingdom but rather
from remote places across Europe. It certainly adds to multiculturalism of the company
and does help an airline that flies intensively all over Europe. But these may not be the
primary reasons for Ryanair’s recruitment policy; an in-depth analysis hints towards a
more down-to-earth answer: enlarging the geographical scope of employees recruited
allows the company to enforce a low-wage, high-demand, management style while still
having a wide choice of applicants.
In effect, differences in minimal wages between Western and Eastern Europe only
highlight how attractive Ryanair’s promised salaries may be for aspiring flight attendants
80
coming from – comparatively – poorer countries. Indeed, the company advertises alleged237
Page
first-year salaries ranging between € 1100 and € 1400 per month after tax. While this is just
237
Subsequent analysis will reveal that actual figures might not be so bright.
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on par or below minimum wage in Western European countries such as Ireland, Belgium,
France or the Netherlands, it is vastly superior – by an order of magnitude of three to four
times higher – to minimum wage in Eastern European countries such as Poland, Slovakia,
Hungary or the Czech Republic.
This recruitment strategy has proven very effective for Ryanair. Its entry standards are
sufficiently low so that many people may apply and its wage sufficiently attractive for
certain nationalities to ensure that the company is able to maintain a high turnover if it
needs to, while demanding the most for the lowest possible cost.
Outsourcing
Another part of Ryanair’s human resources strategy is its choice to outsource the
integrality of its recruitment to dedicated companies. Currently there are four recruitment
agencies working under direct contract with Ryanair and providing the airline with the
cabin crew it needs. While this peculiar arrangement may seem a bit odd at first, it has
proven really efficient and lucrative for the airline, providing it with a wealth of trained
employees without the hassle of having to ensure their training, hire and the
administrative task related to directly employing somebody.
The four companies currently ensuring recruitment for Ryanair are Crewlink 238 ,
Dalmac239, St. James Management240 and Cavok241. It is worth noting that relying on four
contractors to do the same thing can be profitable for Ryanair, as multiplying contractors
allows the company to maintain a certain level of competition among them and drive
down costs. Another major point of interest in subcontracting flight attendants through
these companies resides, of course, is the fact that Ryanair is better covered, legally, in case
of litigation.
St. James
Crewlink Dalmac
Management
Cavok
81
238
http://www.crewlink.ie/
Page
239
http://www.dalmac.ie/
240
http://www.stjames.gb.com/ryanair
241
http://www.cavok.cat/
www.air-scoop.com
Recruitment process
Invitation to
Online Successful
attend an
application interview
assement day
Training
Beginning of Successfull
course
work Training
registration
Selections
Crewlink, Dalmac, St. James Management and Cavok recruit all over Europe, generally
focusing on large cities such as Dublin, London, Riga, Bratislava or Budapest, or on
Ryanair’s bases such as Hahn or Bergamo. The companies heavily promote working for
Ryanair on their website. Applicants are warned they have to
Cavok’s minimum requirements:
meet a number of specific criteria regarding height and 01. Experienced in dealing with the public &
comfortable in a selling role.
weight as well as ability to swim, speak foreign languages 02. Physically fit with a good attendance record in
and legal requirements like being in possession of a valid EU your current position
03. Hard working, flexible & willing to operate on a
passport. Applicants then have to provide some information shift roster.
04. Over 18 years of age.
about them, send in a resume as well as a couple passport 05. Over 1.57m (5.2') in height with weight in
pictures and pick a date for an assessment day. proportion.
06. Of normal vision (contact lenses acceptable).
On a typical assessment day the recruiting company 07. Able to swim well.
08. You must be in possession of a valid European
gathers applicants and gives an hour-long lecture about the Union passport and have the right to work in all
company and the type of work expected at Ryanair. European Union member countries.
09. Fluent in English (both written and spoken).
Afterward, applicants are to wait until their name is called 10. Prepared to be placed at any of the 44 RYANAIR
bases.
for an interview. Interviews are generally executed in the 11. Prepared to live within one hour's travelling
time of any Ryanair base.
presence of a Ryanair cabin crew member and/or an agency 12. Ready to meet the challenge of dealing with
employee. The applicant may be tested on his mastery of people and demanding situations.
13. Friendly and outgoing with a lively personality.
English. Interviews usually last for about ten minutes as the
recruiting company has to accommodate a fixed schedule a large number of applicants.
Applicants successful at the interview are offered to complete the training course.
Though recruitment is processed any of these four companies, training takes place on
Ryanair’s bases, under supervision by Ryanair’s employee. A multitude of the airline’s
bases are suitable for training to take place and wannabe flight attendants are offered to
pick one of them – allegedly with no consequences for their future base choice – to
complete their training. At this state of the process applicants are required to pay a non-
82
This barrier to entry constitute a tool to ensure that applicants are less likely to quit once
www.air-scoop.com
the training – and thus the real cost for the recruitment company – has started by forcing
them to invest not only time but money into their formation.
Formations
Training Practical
Theoretical
location Training (2
training
selection days)
Supernumeries Exam
Training courses to become a cabin crew with Ryanair are usually given by the
recruiting agency, in conjunction with Ryanair staff members. Depending on the
recruitment agency, the complete training course may last from four to six weeks242. Prices
are also dependent on the recruiting agency.
Locations
Applicants are allegedly able to choose among a sample of Ryanair’s bases the location
of their training. But, at any time, only a restricted number of locations may be available to
choose from. As an example, as of September 2010, wannabe flight attendants applying
through Dalmac may only complete their training in Dublin243, Crewlink only offers
training in Frankfurt Hahn244. Though they have paid for the training, applicants have to
pay for their own food and accommodation for the duration of the training process.
Theoretical training
Thanks to its mono-aircraft fleet policy, Ryanair’s cabin crew theoretical training is
relatively short and sparse. Would-be flight attendants only need to know about the
Boeing 737-800 and no time is wasted on anything beyond that. Classes take place from
Monday to Friday, and costs cover teaching and instruction material. Depending on the
company transfer and transports to training locations may be covered as well as
administrative fees such as medical examinations, airport security passes and tax set-up. It
is worth noting that not all recruitment agencies share the same “all-inclusive” policy
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242
http://www.dalmac.ie/zips/Training_Agreement_General-_REV8_2009.pdf
243
http://www.dalmac.ie/training-dates.php
244
http://www.crewlink.ie/step4.asp?ID=8
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towards miscellaneous expenses, and some may expect trainees to pay for their medical
examinations and airport security passes245.
Practical training
By the end of the training, every recruitment agencies take their trainees to Dublin
where they follow a short fire and safety training in Ryanair’s dedicated training center.
Outfitted with custom made Boeing 737-800 structures, they are trained in taking care of a
fire onboard the plane and emergency exit procedures.
Final examination
At the end of their training, aspiring Ryanair cabin crew have to take on an
examination validating the whole of their training and granting them official qualifications
to become Ryanair flight attendants. Though most recruitment agencies claim a 95%
success rate for their trainees it is quite doubtful whether the stat is a compliment to the
quality of the training or the sign of a poor examination. As shown by an insider’s look into
the company’s training process, rules are not always strictly followed during the exam. To
the point where the teacher in charge may grant students the right to have their books
with them, and has been seen blatantly helping students246.
Supernumeries
A few – usually around four – weeks after the end of their training, new flight
attendants begin working with Ryanair. Though they have completed all the required steps
and acquired the necessary qualifications they are not granted official Ryanair cabin crew
status for their first two days on the job. Instead they begin working as “supernumeries” on
Ryanair flights, being taken as an addition to an already complete crew. If and only if they
perform adequately during those first two days, then they are granted full cabin crew
status. But, as we will see further down, they are not to become official Ryanair employees
for quite some time.
Cost
Ryanair is not the only company in the airline industry to have its cabin crew pay for
their training, many other low-cost companies resort to the same practice. However, the
four recruitment agencies it employs work exclusively with Ryanair. Interestingly, training
prices vary widely – between € 2000 and € 3000 overall – between agencies. This can be
explained by a cost-differentiation strategy to attract wannabe flight attendants. It is also
worth noting that depending on the recruitment agency, aspiring cabin crew may be
exposed to additional fees – such as paying for medical examinations, security passes and
transportations or even swimming tests247 – which often show up at the last minute and
add to the bill.
Many agencies advertise the fact that the training need not be paid for until the
student passes the exams. It is often alleged that not passing will incur no cost for the
student. This appears to not be entirely true as all of the recruiting agencies require a
minimum deposit covering between 10% and 20% of the total cost of the formation. It is
84
245
http://www.airliners.net/aviation-forums/trip_reports/read.main/98394/ It is worth noting
that this may not be true will all agencies, see http://www.dalmac.ie/complete_job_info.html
Page
246
See Channel 4 Broadcast, “Ryanair Caught Napping” as a part of the Dispatches series, first
broadcast on 13 February 2006, accessible at http://www.youtube.com/watch?v=ZkKPirksymQ
247
http://www.airliners.net/aviation-forums/trip_reports/read.main/98394/
www.air-scoop.com
also worth noting that some agencies will advertise a lower total price if training is paid
upfront and in full248.
In order to avoid aspiring flight attendants being put off by elevated training costs,
recruitment agencies have put in place a wide range of strategies. Many of them insist on
the fact that students only have to pay once they’ve finished the training – while offering
lower overall costs in training is paid upfront and in full – they also insist on the fact that
students can choose to have their training expenses deducted from their first year salary
on a monthly basis. A major argument put forward to entice aspiring flight attendants is
the advertised € 1200 “New Joiner’s Allowance” students have access to once they’re done
with their training249. Lastly, some recruitment agencies offer custom-made loans through
special partnerships with Irish Banks250
Employment
Working for Ryanair is an experience like no other in the airline industry. Though the
company clams to be extremely friendly towards its employees, the many steps it has
taken in the opposite direction render that first statement rather doubtful. The airline
seems intent on avoiding at all cost unionization of its employees and maintaining the
highest latitude as to what it does with them. To the extent where it has resorted to a
multiplication of contracts instead of the standardization that could have been expected
from the company and it has multiplied intermediates in the hope of avoiding taxes and
litigations.
248
http://www.crewlink.ie/step4.asp?ID=8
249
Distributed as follow: € 300 the first month, € 300 the second month, € 600 after six month,
source: http://www.dalmac.ie/the-benefits.php ; http://stjames.gb.com/ryanair/recruitment-
process.html ; http://www.cavok.cat/web/offer.htm ; http://www.crewlink.ie/step4.asp?ID=8
250
http://www.dalmac.ie/help-with-course-fees.php
251
See Ryanair, Annual Report 2010, p. 175, found at
85
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
252
In its 2009 Annual Report (p.8), Ryanair claims 9 195 passengers per employee compared to
Page
Air France/KLM’s 691 passengers, Lufthansa’s 652 and British Airways’ 736. Such claims have been
largely challenged as the company seems to not account for contracted cabin crews onboard
http://www.indymedia.ie/article/79421
www.air-scoop.com
This situation also participates in the high turnover of flight attendants. Aspiring cabin
crew are dragged in by an advertised € 1200 “New Joiner’s Allowance” during their first
year253. However the reality is not as rosy as this gratuitous bonus might make it seem. The
reason it was put in place was to help aspiring flight attendants overcome the worrying
cost of their training. But it is worth noting that getting the allowance is not automatic,
new joiner’s have to ask for it otherwise it is not distributed to them. It is also worth
mentioning that, though the new cabin crew might receive money from their allowance
during their first year, this one is conditional, meaning that if they are to quit or be fired
before the end of that first year, they will have to pay back the entire amount of the
allowance254. Such a huge amount of contracted debt combined with what little is left of
their salary – for those who chose to pay-back their training on it – pushes cabin crew to
not ask for the allowance or puts them under enormous pressure to not fail there first year
evaluation.
Salaries
The airline industry is a tough place for flight attendants; ever increasing competition
and a strong drive towards lower-cost have translated into longer hours and lower wages.
Cabin crews at Ryanair are no exception to this rule. Although the company claims
relatively high average annual pay, the reality is bleaker for flight attendants. First of all –
and as stated earlier – most of them aren’t even in contract with Ryanair but with one of
the recruitment agencies working with the airline. This means lower job security, as they
253
Distributed as follow: € 300 the first month, € 300 the second month, € 600 after six month,
source: http://www.dalmac.ie/the-benefits.php ; http://stjames.gb.com/ryanair/recruitment-
process.html ; http://www.cavok.cat/web/offer.htm ; http://www.crewlink.ie/step4.asp?ID=8
86
254
http://www.pprune.org/cabin-crew-wannabes/272993-ryanair-wannabes-recruitment-
10.html
Page
255
http://www.indymedia.ie/article/79421
256
http://ryanairdontcare.blogspot.com/2010/09/ryanair-cabin-crew-contact.html
257
http://www.workforceintl.com/
www.air-scoop.com
have a whole year of trial before they can hope for a direct Ryanair contract – and that’s
not even guaranteed. Second, the average pay for a flight attendant during that time varies
between € 1000 and € 1400 a month258. That includes commissions on onboard sales, which
have an upward limit and can be widely variable. Taking into account that the average
reported working hours go up to 70 hours per week – taking into account total time at
work, whereas the only paid hours are in-flight hours – it doesn’t make for such high
wages. Third, a lot of newly appointed flight attendants choose to have the cost of their
training withdrawn from their salary during their first year, which lowers their pay by, on
average, € 150 a month259, to that may be added the cost monthly cost of renting uniforms
from Ryanair260. Lastly, Ryanair is based in Ireland and even though it has bases all around
Europe, every one of its employees is paid in Ireland under Irish law. That goes to cut
many of them off from the benefits of social security or retirement systems available in the
country they actually work261.
On the other hand, Ryanair employees, as is almost customary in the airline industry,
benefit from a variety of advantages related to their field of work. The most prominent
being “staff travel” advantages, granting cabin crew the opportunity to travel free on
Ryanair flights. Such advantages are largely limited by the fact that the marginal gain is
rather limited, considering Ryanair’s average fare and the fact that it doesn’t have
agreements with other companies.
Terms of employment
Base affectations
Base affectation is determined at the end of the training. It is supposedly not related to
training location. Although Ryanair claims that every newcomers get to choose their final
working base, in practice things can get a bit more complicated. As Ryanair has chosen to
fly to relatively remote locations, many bases only offer very little attraction to flight
attendants as they can be quite isolated from large cities. By way of consequences a large
majority of newcomers will ask for the same bases – namely, Madrid, Girona or Charleroi –
the airline has resorted to having them come up with a list of wishes. Sometimes, cabin
crew won’t even get one of their wishes and arbitrary mutations have been reported262.
Duties
Ryanair’s cabin crews are more than just the average cabin crew. Indeed, flight
attendant duties extend far beyond what is commonly thought of their job. In order to
minimize costs and maximize profits, the airline has extended crew duties to cover what
would normally be the work of other dedicated professionals. Furthermore, taking into
account the fact that every product is on sale in the plane, flight attendants are held
258
http://www.dalmac.ie/the-contract.php ; http://www.cavok.cat/web/offer.htm ;
http://www.crewlink.ie/faqs.asp ; http://stjames.gb.com/ryanair/recruitment-process.html
259
http://stjames.gb.com/ryanair/recruitment-process.html ; http://www.dalmac.ie/help-with-
course-fees.php
260
Even though that last part as now been covered through and added yearly bonus accessible
after one year of continuous work for the company, see http://www.pprune.org/cabin-crew-
87
wannabes/272993-ryanair-wannabes-recruitment.html
261
http://www.libeorleans.fr/libe/2010/09/chistpohe-rossignol-les-verts-ryanair-pratique-le-
Page
dumping-social-et-le-chantage-%C3%A0-la-subvention.html
262
http://ryanairdontcare.blogspot.com/2010/08/important-look-at-these-comments-
before.html
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accountable for any missing object or incorrect till, further increasing pressure on them.
Typical daily duties for flight attendants with the airline are as such:
Pre-flight Rubbish
Deplaning
briefing collection
- Pre-flight briefing: is done at the airport, at the beginning of the day, cabin crew
are introduced to each other and asked routine security questions before they
can start their day.
- Boarding: As is common in the airline industry, crews are split between the
boarding gate and the actual door of the plane, to gather and orientate
passengers. Cabin crews at the boarding gate also have the ultimate task of
checking passenger’s luggage fit the correct size and weight restriction. It is
worth noting that, contrary to most other airlines, because of the quick turn-
around goals, the boarding process can prove very stressful and hurried up263.
- Safety demonstration: These are common operating procedures in the airline
industry and do not differ for Ryanair.
- PA announcements: Contrary to other airlines, during a Ryanair flights,
announcements are not only used to indicate a change in flight situation but
are also – and mainly – used to broadcast commercial announcements about
products sold onboard.
- Service: Because of the nature of the low-cost industry, goods available onboard
the plane are all for sale and it is a major part of flight attendant’s duties to sell
these. Cabin crews are partially paid on commissions from their sales and are
constantly pushed to sell more to customers.
- Deplaning: This procedure, though it would seem pretty straightforward, is
actually a bit different for Ryanair as cabin crews often have to rush passengers
out of the plane as fast as possible so as to have enough time to clean the cabin
88
of detritus before.
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263
See Channel 4 Broadcast, “Ryanair Caught Napping” as a part of the Dispatches series, first
broadcast on 13 February 2006, accessible at http://www.youtube.com/watch?v=ZkKPirksymQ
www.air-scoop.com
- Rubbish collection: One of the very visible features of cabin crew work with
Ryanair, flight attendants are to collect trash leftover by passengers and quickly
clean the cabin between each landing and take-off. The aircraft isn’t completely
cleaned by an agency of specialized workers until the end of the day. This has
allowed Ryanair to save both precious money and time on its turnaround
routine.
- Recount: Because everything offered onboard the plane is for-sale, any item
embarked in the galley represents a certain amount of cash and the airline is
very keen on avoiding thief and miscounts. For that reason, at the end of each
day, cabin crews have to recount everything they had at their disposal at the
beginning of the shift and check if their till is correct.
- End of the day report: The recount is also used towards the final report at the
end of each day when flight attendants have to end in their in-flight report
before they can leave.
Pilots at Ryanair’s
Pilots’ situation at Ryanair is very similar to that of flight attendants. They tend to be
generally overworked, underpaid, and many complain of irregularities and inequalities in
the way they are treated. However, pilots have always had a very particular status in the
airline industry. Like captains on a ship, in flight, they are chief on their plane. For that
reason, pilot’s situation deserves to be seen by itself to assess the extent to which the
airline has changed the rule when it came to dealing with its pilots.
In effect Ryanair uses both directly employed and contract pilots to operate its aircraft.
The company’s interest in doing so is that it allows both increased flexibility and
augmented fragmentation of the workforce. Because the company can always rely on its
contractors, directly employed pilots are put off from unionizing.
89
While directly employed pilots officially work for Ryanair, contractors are employed by
Brookfield Aviation International264, this gives Ryanair more flexibility. First because it can
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264
http://www.brookfieldav.com/Client-List.asp
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vary the number of pilots in use according to traffic needs and second because the
company can move its pilots from direct employment to Brookfield contracts at any time,
thus avoiding the need and the cost of employee termination265.
Hiring
Contrary to other legacy carrier Ryanair has no preference in terms of nationality or
educational background when it comes to choosing its pilots. Rather, pilots are picked
from a wide range of nationalities and background. However requirements and standards
to reach pilot grades are the same as applied across the industry.
Recruitment
General requirement for all pilot positions open at Ryanair are to speak fluent English,
be in possession of a valid EU passport without any travel restrictions within the EU.
However, vacancies have a number of position specific requirements. These depend widely
on the level of experience demanded:
Cadets: have no particular experience demanded but they are required to have a valid
JAR commercial Pilot License, have completed the theoretical knowledge for the Airline
Transport Pilot license, hold a certificate of satisfactory completion of an MCC course and
have a valid multi-engine instrument rating.
737 rated captains applying for direct entry: are required to have at least flown 3 500 hours
total with a minimum of 2 000 hours on a multi-crew, multi-engine aircraft – over 20 000
90
265
http://www.timesonline.co.uk/tol/news/world/ireland/article4188626.ece
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medium jet aircraft – weighting over 20 000 kg – and 500 hours as Pilot In Command on
the Boeing 737 (300 to 900), as well as a valid JAR-FCL or a EU National License266.
Training
Ryanair’s needs in terms of knowledge and experience from its pilots vary across a
wide range, for that reasons there are many ways to enter the company. The most
straightforward remains direct employment with Ryanair but it is reserved to the most
experienced and qualified pilots. Direct recruitment is done through a form accessible on
Ryanair’s website 267 . Less experienced pilots and Cadets have to undergo additional
training. This training is sub-contracted to two agencies, CAE268 and Oxford Aviation
Academy269 – a part of Scandinavian Aviation Academy.
Before cadets apply for the training it is required by both companies that they:
- Have a valid multi-engine instrument rating
- Hold a certificate of satisfactory completion of multi-crew co-operation (MCC)
- Have a minimum of 100 hours (PIC) (Modular Training)
- Have a flight crew license (theoretical ATPL with valid JAA CPL)
- Have a valid JAR-FCL 3 Class 1 Medical
- Must have a flight school report. This applies to both Integrated and Modular
students
- Be prepared to fly from any Ryanair base in Europe
- Have the right to work freely within the European Union
- Be prepared to obtain an Irish JAA license after successful conclusion of the
training program
Pilots who are yet to have a valid MCC certificate, both agencies offer dedicated MCC
courses for wannabe Ryanair pilots270. These provide adequate Type qualifications for
flying a Boeing 737-800, a must-have to become a pilot with Ryanair.
Depending on the company, selections take place either at Stansted Training Centre,
East Midland Training Centre (near Derby) or in Dublin. The selection process is as follow:
266
http://www.ryanair.com/en/careers/job/10002
91
267
https://frd.ie/pilot/pilot.html
268
https://pilot.cae.com/Programs/Ryanair.aspx?prog=6
Page
269
http://www.bfsaa.se/
270
https://pilot.cae.com/Programs/RyanAir2.aspx or
http://www.bfsaa.se/default.asp?m=5&u=17
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Simulator
Briefing Simulator
debriefing
English
Personnel Technical
language
interview assessment
assessment
All applicants are subsequently contacted within the next weeks and given their
results. Successful applicants are then allowed to enroll in the type rating course. The type
rating course takes approximately seven weeks to complete, excluding base and line
training. During that time, aspiring pilots undergo ground training and simulator training.
After successful completion of the Type-qualification course, students are to begin
base and line training. During that time they fly circuits on a Boeing 737-800. Line training
is provided directly by Ryanair from one of its many bases. Depending on the pilot’s
experience the number of sector flown may vary between 120 and 30, at a rate of 50 sectors
per month.
Overall cost
Training to become a qualified pilot for Ryanair can be extremely costly. Yet, the
company remains attractive for new and old pilots as it is one of Europe’s largest
companies and is intensively recruiting at a time when legacy carriers are struggling to
keep their own pilots. Training costs for CAE and Oxford Aviation Academy are as follow:
These values only reflect the cost of training as of 2010 and it is widely reported that
92
these have varied throughout time, depending on the job market and Ryanair’s own
development. Some pilots have had to pay for their Boeing 737-200 type rating and almost
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immediately after that were forced to re-enter training and type rating on Boeing 737-800,
almost doubling the costs of training. Pilots coming in a bit later – when Ryanair was
www.air-scoop.com
starting to receive the first shipments of its large order of Boeing 737-800 – underwent
training for very little cost.
Employment
Salary
Ryanair regularly claims that its pilots are the best paid across in Europe. That claim is
almost entirely false, though the company has never tried to correct it. Pilots pay, by
sector flown is average, if not low. But, because the company will do its best to make the
most of its pilot’s time, they are driven to fly up to their 900 hours maximum legal flying
time, this adds up to a great number of sectors-flown thereby translating in a consequent
pay at the end of the year. However, that number should not hide the fact that pilots
working for Ryanair don’t have any benefits such as pension provisions. To this must be
added that they also – and contrary to pilots working for most other companies - have to
pay for their own security passes and uniforms.
Contractors certainly do not have the same regularity, in terms of yearly working
schedule, as Ryanair employed pilots but, by all account, they are the highest paid pilots at
Ryanair’s271. All in all it appears that Ryanair’s management efforts to fragment the
workforce have translated into widely variable terms of employment between pilots.
Because everything is negotiated on a direct negotiation base, pilot’s salary depend mostly
on both market conditions and their own negotiating skills. For that reason it is extremely
difficult to trace exact salaries and conditions for pilots working at Ryanair, giving room to
contradictory reports of pilots being honorably well paid and others being blatantly
exploited.
However it is known that, just as flight attendants, pilots at Ryanair are being paid by
the number of hours they’ve flown on their aircraft. Payscale is also dependent on the
pilot’s qualification and its status with the company – contract agencies may pay more
than Ryanair itself. In accordance to legal limits, commercial pilots must not fly more than
900 hours per year, which puts an upward limit on maximum salary receivable272. As many
other low costs, Ryanair has been known for pushing its pilots ever closer to that limit, and
this might explain contradictory reports on earnings among pilots.
Salary schemes
On the other side, the company is known for its capacity to ensure that pilots who do
not represent a significant gain for the company are being paid in accordance. Seizing the
fact that the pilot might still lack a qualification or that bottlenecks in the training process
have prevented its completion the company won’t pay full salary.
Ryanair is known to dislike unions and dealing with its employees as a collective body.
Rather, the company has a very market-driven take on its employees and would rather
with its pilots on a one-to-one base, or in “direct negotiation” as management calls it. In
that context, contractors play the role of lubricant, they have the highest turnover and the
least security but they’re also the first ones called when a gap needs filling.
93
271
http://www.pprune.org/terms-endearment/214074-ryanair-guide-prospective-pilot-
employees.html
Page
272
http://invenzyme.com/Documents/UK%20Airline%20Pilot%20Productivity%20Monitor%20-
%20No%201%20Jan%202009.pdf
www.air-scoop.com
Terms of employment
Locations
Ryanair, through the use of multiple status and contract system, has managed to
maintain quite a bit of leverage over its employees. Moreover, as most pilots don’t even
have a copy of their own contracts and the company doesn’t seem keen on handing them
out, it has been able to implement rather advantageous clauses. For example, at times
when the airline is expanding its bases throughout Europe, pilots have been forewarned
that they may be asked to move to another base at any time and without any
compensation.273
In spite of differences in status and legal employer, contractors and directly employed
pilots are all regularly moved between bases. Reasons may differ but, in general, the
company seems to like to maintain (except for Stansted and Dublin) on average 30 to 40
pilots around. In terms of general well-being in the workplace, it appears that, the furthest
pilots are from Stansted, the better things to be for them. Be it for pilots or cabin crew, it
seems that large number of employees combined with high turnover rates and a rather
assertive management make for a horrendous ambiance at Stansted. It also seems that a
particularly high number of contractors are located in Stansted; differences in their
employment scheme as well as their higher-than-average turnover might contribute to
feelings of uneasiness in that base.
Duties
As is the case for cabin crew, pilot’s terms of employment can be rather shady. In
effect, the airline doesn’t seem to see the point in providing them with a copy of their
contract as it states that its pilots and employees are fully aware of their terms of
employment. Thus pilots have been reported to have found out through internal memos
that clauses on their contracts had been changed as they, allegedly, contained errors274.
Otherwise Ryanair’s pilot’s duties are fairly straightforward and perhaps less
surprising, compared to other airlines, than that of flight attendants. However, it should
be highlighted that flying for Ryanair is generally reported to be extremely demanding. To
make the most of what it has, the company pushes its pilots to the legal limit of their
working hours – 900 hours per year.
Unions
As stated in its annual reports “Ryanair considers its relations with its employees to be
good” 275 . However the company is not particularly renowned for the quality of its
employee-management relationship or for the amount personal implication employees
feel towards or the company or, inversely, the company displays towards its employees. As
a matter of fact, the company has a very difficult relationship with unions. It has strived to
avoid any formal recognition of unions or unionization of its employee.
Although Ryanair does claim to negotiate with groups of employees – including cabin
crews and pilots – these negotiations happen through “Employee Representation
Committees” (ERCs) and cover matters such as pay, work practices and conditions of
273
http://www.pprune.org/terms-endearment/214074-ryanair-guide-prospective-pilot-
94
employees.html
274
http://www.pprune.org/terms-endearment/214074-ryanair-guide-prospective-pilot-
Page
employees.html
275
Ryanair Annual Report 2009, p.100, found at
http://www.ryanair.com/en/investor/download/2009
www.air-scoop.com
employment. Meetings between ERCs and Ryanair’s senior management are scheduled
quarterly. Annual reports state that, after an unsuccessful attempt at obtaining formal
recognition, BALPA (the U.K. pilot union) had been precluded from seeking a recognition
agreement with Ryanair for a period of three years. When the organization sought again
recognition in 2009, Ryanair rejected it. As of now the union is still petitioning to obtain
recognition276. While, following Ryanair statements, it seems that BALPA was in all
fairness rejected in 2001 from representing its pilots, it shouldn’t be interpreted as a sign of
plain satisfaction from their situation by Ryanair’s pilots. Indeed, the sole existence of an
online forum such as Ryanair European Pilots Associations (REPA), whose purpose is “to
provide an effective pan-European voice and source of support and organization for
Ryanair pilots” in a “confidential and reliable manner” is proof that there are problems
among Ryanair’s pilots that the company is not properly addressing277.
Further than simply targeting pilots, online campaigns such as ryanaircampaign.org278
or Ryanair-be-fair279 have been advocating a better recognition of Ryanairs’ employees and
an integration of unions into Ryanair’s negotiations with employees. The airline doesn’t
seem to enjoy such bad press and has repetitively taken steps to discourage employees
from taking part in such movements. It did so, first by intimidating pilots who would share
their grudge through REPA280, then by actually trying to legally force the website to
disclose the identity of registered pilots281.
Regarding ERCs, it is worth noting that, although the company claims their fairly
represent its workforce; none of the representatives have been democratically elected.
Instead it seems that Ryanair has a system in place whereupon it appoints representatives
with or without their consent – it has been reported that some pilots wouldn’t even
acknowledge they were ERC representatives282. In a 2007 judgment, the Dublin Labour
Court ruled that while ERCs are legally instituted means of providing employees
representation, they are not independent negotiating entities 283. From which can be
derived that Ryanair does not provide its employees with proper instances of collective
bargaining and representation.
276
https://www.balpa.org/RyanairPetition.aspx
277
http://www.repaweb.org/mission.html
278
http://www.ryanaircampaign.org/
279
http://www.itfglobal.org/campaigns/appeal2.cfm/formbuilder/57/p/ryan-be-fair.cfm
280
http://www.guardian.co.uk/business/2005/mar/30/theairlineindustry.newmedia
281
http://www.rte.ie/news/2006/0712/ryanair.html
95
282
http://www.pprune.org/terms-endearment/214074-ryanair-guide-prospective-pilot-
employees.html
Page
283
http://www.eurofound.europa.eu/eiro/2007/02/articles/ie0702019i.htm
284
http://nothuffington.wordpress.com/2010/10/20/michael-oleary-owner-of-ryanair-steals-
papers-from-norwegian-journalist/
www.air-scoop.com
external agency – be them beginning flight attendants working with WFI or
pilot contractors under Brookfield contract. Even if Ryanair has been the sole
decision taker in the termination, employees cannot turn their backs on it.
- Second because of Ryanair’s routine attitude towards contestation. Be it with
customers or employees, the airline seems to believe in legal over-escalation as
a rule of thumb. The case of its millionth passenger285 is quite illustrative of the
company’s assertiveness and in many cases it has displayed an amazing
willingness to go to extreme length with whichever litigation it was involved in.
The point of such assertiveness is to dissuade employees from taking direct
legal action against the company.
This intimidation strategy has borne its fruits as very few pilots have stepped up
against the company’s practices. Even when their contracts were arbitrarily modified or
their locations abruptly changed, few pilots have stood up against the company. And even
in cases when they did, the company has shown a determination in retaliating with full
legal force that has translated into artificially elongated and costly legal processes, rarely
proving to be fully advantageous for pilots286.
The reason such a state of affairs persist lays in two facts. First, it seems that Ryanair
makes conscious efforts toward maintaining that situation, as it is to its advantage.
Second, the lack of reaction from pilots and cabin crews can be explained by the legal
barriers the airline has laid against any legal recourse or common action and the
widespread idea among them that this is but an airline of transition before moving on to a
better, more secure, position with another airline.
285
http://www.rte.ie/news/2002/0619/ryanair.html
286
http://www.timesonline.co.uk/tol/news/world/ireland/article4188626.ece
Page
287
http://www.laprovence.com/article/region/chez-ryanair-pour-recuperer-sa-retraite-il-faut-
aller-en-irlande
288
http://www.ryanair.com/en/news/ryanair-announces-closure-of-marseille-base
www.air-scoop.com
engaged, the company would close its Marseille base289. Following the beginning of the
legal battle, Ryanair put its menace to execution and announced, in October 2010, that it
would close its Marseille base and thirteen routes from that base290. The company has
announced that it would plead against the decree, declared that it was behaving in
accordance with European law and would take the case to a European court.
This announce has been received in France with mixed feelings and upon declarations
by French government officials that contradictions between French and European law
were proving a bit costly it remains highly doubtful whether the case will turn out against
Ryanair291. However, recent evolutions of the case seem to indicate that the airline is now
at risk of losing that battle. After a French deputy asked, in an open question to the
European parliament, whether Ryanair employee’s situation at Marseille was legal, the
deputies answered by stating that airline employees based in a foreign country are not
covered by European directive 96/71/CE and should pay social contributions and taxes in
the country they live and work292.
289
http://www.libemarseille.fr/henry/2010/09/ryanair-mise-en-examen.html
290
http://www.ryanair.com/en/news/ryanair-announces-closure-of-marseille-base
291
http://www.europe1.fr/Politique/Ryanair-Lagarde-n-est-pas-scandalisee-288984/
97
292
http://infos.lagazettedescommunes.com/49058/ryanair-mouchee-par-bruxelles-air-france-
contre-attaque/
Page
293
http://www.elconfidencialdigital.com/images/HTMLText/Carta_Sindicatos-Ryanair.pdf
294
http://www.capitalmadrid.info/ficheros/RESPUESTA-RYANAIR.pdf
295
http://www.tecnicosdemantenimientoaeronautico.com/foro/showthread.php?p=2192
www.air-scoop.com
under Italian taxation. The Italian Tax Police is still currently trying to determine in what
extent can Ryanair’s implantations in the country, and particularly its number of
employees working year long from Italy, be legally considered “a permanent
establishment” which would entail Ryanair paying full taxes for the business it makes in
the country296.
Indeed, individual labor contracts inside the European Union are regulated both by
the Convention “Rome I”298 (signed in 1980) and regulations 593/2008 EC299 (regarding
contracts signed after December, 17th 2009). These two are quasi identical except for the
fact that the most recent includes the possibility for the employee to be subject to
contractual specification releving to the law of another member State. While this could in
Ryanair’s direction, it should be noted that for both legal texts the employee should enjoy
social benefits he would have enjoyed in the country he resides.
Another regulation, 96/71/EC300, covers the the case of workers travelling temporarily
abroad to ensure the provision of a service. While it was originally meant to cover the,
relatively, specific case of construction workers, it can be conceived as the other side of
regulation 593/2008 EC regarding “temporary” situations for workers. However, it leaves
ample room for States to impose their own reglementations as long as these are extended
across the territory to all concerned parties.
Regarding the conflicting interpretations that could be made from these numerous
regulations, the European Commission (in SEC(2010) 503 final)301 expressed its opinions
on the matter of airline employees and, more precisely, pilots and flight attendants.
Stating that these should benefit from the generous contributions added to their status by
regulations 593/2008 EC, it recognized that it the task of determining the exact situation
and working location of airline workers could be complex. As a consequence, the
Commission settled, for now, that precise determination of rules and regulations to apply
should be determined after a case-by-case analysis.
296
http://www.avionews.com/index.php?corpo=see_news_home.php&news_id=1119694&pagina
_chiamante=index.php
297
http://www.ryanair.com/ie/news/ryanair-takes-france-to-the-european-court-of-human-
rights
98
298
http://europa.eu/legislation_summaries/justice_freedom_security/judicial_cooperation_in_ci
vil_matters/l33109_en.htm
Page
299
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:177:0006:0016:EN:PDF
300
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31996L0071:EN:HTML
301
http://ec.europa.eu/transport/air/internal_market/doc/sec_2010_503_en.pdf
www.air-scoop.com
This is not all great news for Ryanair as it might lead to an over-complexification of its
situation. Indeed, following the European Commission’s point of view, Ryanair is not only
in trouble with its Marseille base but, most certainly, in all of its bases acress Europe.
Considering that European law leaves ample room for member-States law to be applied on
this matter, it could put Ryanair in trouble. In fact, and as already stated, declaring its
workers in Ireland has been extremely advantageous for the company considering that
social contributions and employer charges are far lower than in the majority of continental
Europe.
As a consequence, Ryanair could find itself liable to paying social contributions in the
countries it has its bases. Something that could greatly hampers the company’s capacity to
develop and expand. Furthermore, it is worth noting that, being obliged to pay, even a
small part of the social contributions it has, until now, managed to avoid, would greatly
jeopardize Ryanair’s profitability.
99
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Airports
Ryanair’s approach to its routes and airports network forms a large part of the novelty
of its approach. Ryanair, and it is one of its most recognizable characteristics, has funded a
large part of its international development on targeting small airports to build its network.
The reasons and manifestations of such a strategy are multiple:
- A Point-to-point route system: It is one of the traditional constituent of the low-
cost airline business model. Instead of focusing on being able to offer the
widest choice of journey possible through combined tickets and a hub-and-
spoke network of airports, low-cost companies drawing on Southwest’s model
have instead opted for a point-to-point route system. This translates in the sale
of one-way, one-flight, tickets from one airport to the other, nothing else.
Passengers needing to go further will have to book another flight, perhaps with
another company, but the airline’s work stops at transporting passengers from
point to point. This has changed airline’s functioning from that of almost travel
agencies to a model similar to public transportation systems in large cities
around the world. It has also spared airline companies major cost linked with
elaborate baggage handling and forwarding systems, flight time adjustments
and potential delays.
- Flying to cheaper, minor airports: Whereas the choice of a hub-and-spoke system by
legacy carriers had contributed in reinforcing a few large airports to the
detriment of others, low-cost carriers, spearheaded by Ryanair, choose to fly to
smaller airports. It was the logical conclusion of years of starving smaller
airports by refusing to fly to them. When low-costs started to look for
affordable, uncongested place to land their planes, they quickly went for the
smaller airports surrounding large cities that could still accommodate their
fleets. This how Ryanair got the reputation of flying from “nowhere to
nowhere”. Although one could wonder who would choose to fly a remote
airport sometime more than a hundred kilometers away from the closest city
center, there are many advantages to this system for low-cost carriers. First,
they spare a lot of costs by being able to choose inexpensive airports towards
which they have sufficient relative bargaining power to ensure that that
situation is maintained. Second, they escape slot systems and their planes have
fewer chances of being delayed. Last, they avoid head-to-head competition
with larger airlines and are to keep their clients captive.
- Abusing subvention systems: The biggest interest of flying to smaller airports for
Ryanair. Indeed, as the company grew, its volume of passenger carried became
in incredible bargaining advantage when faced with small airports. Pleading for
lower-costs, the company has had the opportunity to demand funding for it to
come. What could have been easily labeled as extortion was passed as
“marketing subsidies” and led to a peculiar situation whereby Ryanair would
pay airport charges to land its planes and airports would hand out money to
Ryanair so it would fly its planes there, thus masking the real price of the
service. In effect this has led to situation where airports are actually paying
Ryanair more than the company brings money by flying there. These practices
have been disguised by various systems – varying on a case to case basis - of
fake or shadow companies and twisted relationship between public authorities
100
302
http://www.irishtimes.com/newspaper/weekend/2010/0501/1224269451828.html
www.air-scoop.com
Ryanair’s general relationship with Airports
The relationship Ryanair entertains with airports in Europe is rather uncanny in the
airline industry. The airline has managed to actually reverse the common paradigm
according to which airports provide and charge a service to airlines who, in turn, pay for it.
On the contrary, Ryanair has quickly grasped that smaller airports would see such a large
company as their savior and that the airline would have wide margins to negotiate very
advantageous conditions.
Indeed, Ryanair has managed to create an entirely new situation whereupon airports
will come to it, outlining the concessions they’re ready to make and the conditions they
offer. After that, it is up to Ryanair’s management to decide whether it will develop a new
route towards that airport303.
Interestingly, and as has been widely underlined305, such amount of state-aid represent
a large part of Ryanair’s operating revenue, and, from an accounting point of view, would
jeopardize Ryanair’s yearly revenue.
101
303
See http://verite-
lowcost.com/index.php?option=com_content&view=article&id=9&Itemid=13
304
Ryanair, Annual Report 2010, p.3,
Page
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
305
http://www.lefigaro.fr/societes/2010/03/11/04015-20100311ARTFIG00389-air-france-veut-
porter-plainte-contre-ryanair-.php
www.air-scoop.com
Estimated airport Part of net profit
subsidies as part of in total
Ryanair's total operating
Operating Revenue revenue
22,25 %
€ 305,3
Operating
Revenue Operating
Revenue
Estimated
Subsidies Net Profit
after tax
306
http://avui.elpunt.cat/noticia/article/4-economia/18-economia/165321-les-administracions-
shauran-gastat-uns-25-milions-en-deu-anys-per-tenir-ryanair-a-
102
reus.html?piwik_campaign=rss&piwik_kwd=portada&utm_source=rss&utm_medium=portada&utm
_campaign=rss
307
http://www.air-journal.fr/2010-10-10-barcelone-ryanair-de-nouveau-subventionnee-
Page
513491.html
308
http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article7058373.ece
www.air-scoop.com
wasn’t forced to reimburse perceived aids, cutting it from anymore subsidies would suffice
to durably jeopardize its ability to put out a profit.
Another problem has been hovering above Ryanair’s strategy. The reason it flies routes
only between smaller airports is because they are less expensive and more likely to
subsidize the route. But even with smaller, less bargaining-capable airports, nothing
ensures that the deals won’t come to an end. Most contracts still have a clause 309
stipulating that the company needs to ensure that at least a certain amount of passengers
actually use the route. If it isn’t the case, then the airport can put an end to the contract or
deny payment of subsidies. This isn’t a problem with highly frequented airports such as
Nice or Marseille, but more remote, less attractive, destinations like Angoulème and
Clermont-Ferrand have been confronted to this problem, generally leading to a quick
withdrawal from the contract with Ryanair310.
In other cases, and as Ryanair tends to ask for more money every year public
authorities will decide against a partnership with the company and demand a diminution
of subsidies or an end to them. It is not in the habit of Ryanair to bulge before anyone and
in cases such as Angoulème311, Friedrichshafen or Altenburg312, the airline will quickly
withdraw.
Taking a step back, the situation may not be so advantageous for Ryanair. As of now it
has followed a “grasshopper” strategy, jumping from small airports to small airports
depending on their ability to offer attractive subsidies. When it has left an airport it has
rarely done so in good terms, and one may wonder whether Ryanair will one day be
confronted to the limits of its strategy. Whether one it will be limited in its ability to
extract more subsidies from airports because it simply won’t have the option to go
anywhere else.
As the company grows bigger, adding more routes and passengers every year, it gains
in relative weight but looses margins for action, and may come a day when it won’t be able
to rely on small airports anymore, were it will have to fly to larger airports – with whom it
certainly won’t have as much bargaining power when it comes to negotiating subsidies and
landing fees – and that day, Ryanair will either have to raise its wages or cease to declare
profits.
Case-by-case approach
France
The case of airports subsidies to Ryanair is perhaps best documented in France. Yet
lapses remain and data can be uncertain at times – particularly regarding total amount of
subsidies handed to the airline – as it had to be calculated from the contracts. However
these calculations were made directly from contracts signed between Ryanair and the
airports targeted. The complexity of calculations spawns from the fact that Ryanair has
displayed in important efforts in fragmenting the money it received under different titles.
Money has been handed from airports to Ryanair under various pretenses:
309
http://www.verite-
lowcost.com/index.php?option=com_content&view=article&id=9&Itemid=13
103
310
http://www.guide2poitoucharentes.com/news/295/Ryanair-quits-Angouleme-Cognac-
airport-in-Charente and http://www.ccomptes.fr/fr/CRC03/documents/ROD/AUR200804.pdf
311
http://airobserver.wordpress.com/2009/12/15/new-ryanair%E2%80%99s-blackmail-at-
Page
angouleme-airport/
312
http://presse.lufthansa.com/fileadmin/downloads/en/policy-brief/03_2010/LH-Policy-Brief-
March-2010-Ryanair.pdf
www.air-scoop.com
o Direct yearly fees
o Baseline concessions on landing fees
o Marketing aids (for new routes)
o Per-passenger concessions on landing fees
o Per-passenger concessions on airport assistance
o Per-passenger landed subsidy
Details from these contracts were revealed after a 2008 state-wide inquiry by the
French national and regional Cours des Comptes, courts of audit depending on the French
government into the accounts and management of local and regional Chambres de
Commerce (CCI - Chambers of Commerce). These organizations, whose mission was to
help develop and sustain local economic activity, had been found to directly finance
airport’s deals with Ryanair, thus fueling Ryanair’s international development on French
taxpayers’ money. Following these inquiries, all of them finding irregularities in the
financing of the CCIs, recommendations were issued but to no avail. The total amount of
aids distributed in 2008 was estimated to be of € 35 millions313.
313
http://www.aerobuzz.fr/spip.php?article636
314
http://www.air-journal.fr/2010-04-16-ryanair-tente-un-coup-de-poker-en-ouvrant-une-ligne-
Page
www.air-scoop.com
Airport Amount Per passenger Period Public authority
Montpellier € 4,5 M €9 2002 -2006 CCI de Montpellier
Biarritz € 3,7 M €9 2000 -2006 CCI de Bayonne – Pays
Basque
Brest € 1,09 M €23 2003 -2006 CCI de Brest
Bergerac € 2,3 M €9 2003 -2006 CCI de Dordogne
Beauvais € 28,6 M €9 2001 -2006 CCI de l’Oise
Nantes € 0,5M € 10 2006 CCI de Nantes et Saint
Nazaire
Toulon € 0,5 M € 13 2006 CCI du Var
Marseille € 2,7 M € 10 2006 -2007 CCI de Marseille Provence
La Rochelle € 2,2 M € 12 2006 CCI de La Rochelle316
Spain
Enquiries have shown that Ryanair has had airports pay for its services as well.
Although, contrary to France, no nation-wide investigations have been led, information
about deals between airports and Ryanair has surfaced whenever the company decided to
cease service to those airports. It appears that financing systems were even more complex
than in France though money generally spawns from public funds too through the Camara
de Comercio (Chambers of Commerce).
316
http://www.whichbudget.com/blog/market-analysis/49-airlines/405-low-cost-carriers-
european-subsidies-alghero-airport-case-study
105
317
http://www.granadahoy.com/article/granada/645792/quotlo/ha/hecho/ryanair/es/chantajear/las/in
stituciones/y/empresarios/la/ciudadquot.html
Page
318
http://www.hosteltur.com/fdb/191/lowcost.pdf
319
http://www.travelweekly.co.uk/Articles/2010/04/01/33390/thomas-cook-threatens-canaries-
cuts-over-ryanair-subsidy.html
www.air-scoop.com
Portugal
Airports Amount Per passenger Period Public Authority
Faro €3M n/a 2010 onward Portugese government320
Italy
Airports Amount Per passenger Period Public Authority
Alghero € 3 M / year € 6 2010 onward Autonomous Region of
€8M Sardinia, Chamber of
between Commerce of Sassari, Town
2002 -2006 of Alghero, Town of Sassari,
Regional Public Financial of
Sardinia, Province of
Sassari321
Belgium
Airports Amount Per passenger Period Public Authority
Ostende € 1,148 M n/a 2005 Flemish Government, Town
onwards of Bruges, Town of Gand,
Town of Ostende
Charleroi €3M €6 1997 Walloon Region322
Germany
Airports Amount Per passenger Period Public Authority
Lübeck € 10 M € 13 As early as Kiel state government323
2005
Althenburg € 700 000 n/a n/a State of Thuringia324
per annum
Malta
Airports Amount Per passenger Period Public Authority
Malta € 1,2 M n/a 2010 onward Maltese Government325
320
http://economico.sapo.pt/noticias/ryanair-quer-transportar-17-milhoes-de-passageiros-para-
faro_85168.html
321
http://www.whichbudget.com/blog/market-analysis/49-airlines/405-low-cost-carriers-
european-subsidies-alghero-airport-case-study , http://lanuovasardegna.gelocal.it/dettaglio/la-
sogeaal-senza-soldi-br-aumento-di-capitale-in-vista/1756426
322
106
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/04/157&format=HTML&aged=1&langu
age=FR&guiLanguage=en
323
http://www.neurope.eu/articles/Ryanair-faces-new-subsidies-claim/42273.php
Page
324
http://presse.lufthansa.com/fileadmin/downloads/en/policy-brief/03_2010/LH-Policy-Brief-
March-2010-Ryanair.pdf
325
http://archive.maltatoday.com.mt/2010/04/04/t8.html
www.air-scoop.com
Slovakia
Airports Amount Per passenger Period Public Authority
Bratislava € 1,2 M n/a 2010 onward Slovak Government326
326
http://www.eubusiness.com/news-eu/ireland-slovakia.2fr/
327
http://www.liberation.fr/economie/0101465289-subsidies-annulees-pour-ryanair-a-
strasbourg
Page
328
http://www.liberation.fr/economie/0101452891-ryanair-strasbourg-rappelle-air-france-a-la-
rescousse
329
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32004D0393:EN:NOT
www.air-scoop.com
restricted. However, following an appeal by Ryanair330, a European Court of first Instance
found that technicalities in the inquiry invalidated the judgment. The CFI especially
pointed out the Commission reluctance to apply the private market investor principle.
Following that ruling, the Commission decided not to appeal, leaving the case in a legal
grey and giving full margins for Ryanair to demand subsidies from airports331.
Later cases
In January 2010, the European Commission formally closed an investigation into
Ryanair’s deal with Bratislava airport. The inquiry had lasted two years and examined the
legality of state-aids received by Ryanair from airport. Consistent with its liberalization of
European airspace logic, the Commission concluded that Ryanair’s agreement with
airports could be justified by a cost-benefit analysis332. In sum, the Commission estimated
that public airports had acted like market economy investors – thus legitimizing the fact
that public airports could operate like private airports – because it was rational to consider
the deal as potentially beneficial for the management of the airport333.
Other cases are still open regarding airports in Lubeck, Schonfeld, Tampere, Aarhus,
Alghero, Po-Bern and Hahn but it could be speculated that the Bratislava decision will
serve as a precedent on which the Commission will make further judgments.
330
http://www.independent.co.uk/news/business/news/new-fees-deal-with-charleroi-airport-
gives-ryanair-shares-a-lift-559923.html
108
331
http://www.air-scoop.com/pdf/Airports-report_low-cost-airlines.pdf ;
http://192.124.238.248/fbpdf/dp-052.pdf
332
Page
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/56&format=HTML&aged=0&langu
age=EN
333
http://www.irishtimes.com/newspaper/finance/2010/0128/1224263291710.html
www.air-scoop.com
External structure
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Financial construction
Ryanair has a widespread reputation of coming up with elaborate tricks to cut costs
and maximize profits. The most profitable of these tricks are largely hidden in the
financial structure of the company. As a matter of fact, as it grew, Ryanair seems to have
gone out of its ways to avoid taxes and unnecessary expenses.
Unfolding the many layers of Ryanair’s structure is a complex task. The company has
no interest in advertising the many ramification of its financial system and relying solely
on information given by the airline is of little to no use. Indeed, annual reports provide
little to no relevant information as to how the holding – under which all of its different
branches are consolidated – is structured.
Getting more insight into Ryanair’s actual financial structure has to be done the hard
way, by looking into shareholder’s interest. However reconstituting Ryanair’s structure is
not always easy and information and linked established might not always seem obvious or
reliable. While some links between subsidiary companies and Ryanair are rather direct, by
way of shareholding and direct investment, others are less visible. They can either be
found through obvious interest links between two companies or hidden in a remote tax-
haven. For these reasons, information provided here are presented with the confidence
that they are true and up to date as of this writing, however they should not be taken as an
exhaustive report of Ryanair’s financial structure.
“hidden” items
Relative to personnel
Ryanair’s relationship to its employees has already been explored in-depth, but it’s
worth looking at from a financial perspective. The relationship Ryanair entertains with its
cabin crews and pilots is largely subordinated to the various structures it has put in place
to manage its human resources. The constellation of contracted external companies
gravitating around Ryanair only highlights how reluctant the airline can be with being too
directly and strongly tied to its employees. Direct financial ownership between external
structures and Ryanair remain to be proven. However, that fact does not restrain Ryanair
from extracting money from its employees.
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Cabin crew
It is worth noting that although there are four major recruiting and training agencies
working for Ryanair only two of these serve as external contractors, the other two
redirecting their trainees to them. Even more significant is the fact that both external
contractors’ agencies are headquartered in Ireland possibly allowing for more consistency
with directly employed Ryanair crew. Indeed, the company fiercely defends that it only
employs crew under Irish contracts and Irish law making, legitimating the fact that
employees based outside Ireland are not liable to pay taxes in the country in which they
reside334.
Another feature worth highlighting in that structure is the close relationship Ryanair
entertains with Bank or Ireland. Not only does the airline require that all of its employees
open bank accounts with that particular bank to receive their pay but most recruitment
agencies only offer loans through that same bank. This means that anyone willing to work
for Ryanair will have to go through the bank at some point or another. Reasons for that
particular set up remain to be fully explored.
111
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334
http://www.typicallyspanish.com/news/publish/article_27755.shtml
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Pilots
Ryanair relationship with pilots, strained as it may be at times, isn’t as complex as the
one it entertains with cabin crews. The company as no problem directly recruiting skilled
and experienced pilots and – in keeping with a well established tradition of making the
most of whatever situation it may have some power one – it consistently avoids directly
hiring freshly trained cadets and older pilots. Instead, it has outsourced most of the
training process,
112
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Relative to aircraft
An in-depth analysis of possession structure for the aircraft in use by Ryanair reveals
that the company actually owns very few of its aircrafts. Instead, those are placed under
finance leases under the property of other companies. While this does not mean that
Ryanair is not liable for payment of its aircraft, it might allow the company to not declare
these aircraft as taxable assets.
The internal financial structure of companies actually owning the plane can be rather
obscure. They’re generally positioned outside Europe, often in fiscally advantageous places
113
such as the state of Delaware in the U.S.A – such is the case for King Leasing or RIL
Aviation.
Page
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Relative to airports
Subsidies recuperation
Ryanair is renowned for the way it has taken advantage of regional airport’s need for
ever growing passenger volume. In that extent the company has often been accused of
abusing taxpayer’s money by requiring payments from heavily subsidized airports. While,
in the end Ryanair does profit from money that came from local taxpayers, the company
never explicitly request it and all the choice is left in the hands of airports: either they pay,
with whatever money they have, or Ryanair is not opening routes to their location.
In order to avoid airports being pinned down for direct abuse of public money in an
unfair situation – because of the constant aids handed to Ryanair over the years – a
scheme has been repeated between airports. A scheme whereby the airport will create an
association dedicated to the promotion of regional touristic assets, and while being heavily
subsidized by the airport will pay marketing fees for promotional actions to an offshore
subsidiary belonging to Ryanair. The subsidiary is generally, if not always, in the Channel
Islands, and allows Ryanair to both escape taxes on marketing fees it receives and blur the
amount of monetary transfers between the airline and airports.
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Reconstructing Ryanair’s financial structure: a global overview
115
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Adding it all up: driving cost down through tax avoidance
period. It seemed that through constant increase in capital expenditures – mostly through
Page
335
http://airobserver.wordpress.com/2010/08/04/spotlight-on-ryanairs-tax-evading-strategy/
336
http://www.independent.ie/business/irish/ryanair-pays-less-tax-than-boss-oleary-
1062025.html
www.air-scoop.com
investment in new airplanes – Ryanair managed to avoid large taxes as Irish corporate law
allows for plant and machineries to be written off taxes. It appears that this technique
combined with the fact that a large part of existing aircrafts are legally owned by offshore
companies located in tax heavens allows Ryanair to further provide from capital
allowances.
Although very little information can be found about it, the article contends that
Ryanair has also delegated ticket sales to a subsidiary company located in the Channel
Islands. Real profits would then be redistributed by way of commissions on ticket sales,
allowing the largest part of them to escape taxation. Evidently, these conclusions are not
corroborated by Ryanair’s statements relative to taxes in the company’s annual report;
however they would participate in explaining the company’s outstanding financial results,
year after year.
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Communication
Vocabulary
Cheap air fares and poor vocabulary might not seem like the most straightforward
association, yet Ryanair has managed to play that card with great success. It seems that
Michael O’Leary’s rather colorful vocabulary and extensive usage of familiar vocabulary is
actually an efficient tool of building customer’s confidence. The CEO is indeed renowned
for its politically incorrect outbursts337, equally lashing out at public figures, competing
companies and sometimes customer themselves with no sense of self-control or politeness.
In a context where most other airlines engage with customers and other institutional
partners through thoroughly crafted public relations announcements and careful usage of
politically correct terms, Michael O’Leary’s diatribes stand as rather odd. However they
seem to hit the spot, verbally detaching Ryanair from other competing airlines while
forcing the perception that the airline is of a different breed.
Another interpretation that could be made, somewhat more controversially, is that
Ryanair’s boss, in speaking in such ways, is trying to appeal to less-educated fringe of the
population, a demographic group which seems to overlap with its targeted consumers. By
“telling it like it is”, Michael O’Leary projects an image of his company has “close to the
people”. In a world were relationship between consumers and corporations is ruled by the
dialectics of inclusion/exclusion338 – embodied by an “us versus them” logic” – Michael
O’Leary clearly wants its company to be a part of “us” for consumers.
118
337
See http://www.allgreatquotes.com/michael_oleary_quotes.shtml , the British Telegraph
even ran a four-part best-of of “Michael O’Leary’s funniest quotes”
http://www.telegraph.co.uk/travel/weird-wide-world/7861374/Ryanair-boss-Michael-OLearys-
Page
funniest-quotes-part-one.html
338
See B. Anderson, Imagined Communities : Reflections on the origins and spread of
nationalism, London: Verso, 1991
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Visual and furniture
The same logic can be found in any visual contact consumers have with the company.
Apart from shiny new planes – a mandatory requisite to maintain the idea that the airline
is safe to fly – anything that the company gives to see shouts out cheapness. Even its
website has been repeatedly criticized for lacking any visible attempt at being appealing.
The company has no hesitation in mixing very high contrast blue and yellow in any
leaflets, commercial and banner it displays. Even its typeface of preference, Comic Sans, is
widely criticized as one of the cheapest looking available for free339.
By the same token, Ryanair’s ads are generally set in black and white, crudely designed
and based on controversial jokes and dubious innuendos340. The airline may seem to care
very little about the success of its ads. On the contrary, but making its ads is only a small
part of its strategy. By, seemingly, putting only the smallest financial efforts into their
design the company actually hammers its main message: it looks cheap because everything
is geared towards minimizing costs and fares. Judging by the number of passengers, it
seems to hit the target.
This logic echoes Ryanair management of its furniture. Employees are encouraged to
bring their own pens, or find them somewhere else, planes barely have any decoration, the
interior is stripped down to the minimum and even the color scheme is the most
aggressive possible. This arrangement of aircraft plays a double role, Ryanair is not trying
to provide any comfort to its passengers, it is plunging them in a hostile environment, an
environment as remote as possible from the idea of luxury, where the idea of cheapness is
drilled down while general disorientation and lack of comfort while push passengers to try
to acquire anything that can counteract this situation. In sum, Ryanair may have a direct
commercial interest in making its flight the least comfortable possible.
it on a small scale is generally sufficient to create controversy, this will later ensure that
339
http://online.wsj.com/article/SB123992364819927171.html?mod=googlenews_wsj
Page
340
http://www.ryanair.com/en/about
341
http://www.independent.ie/national-news/membership-of-milehigh-club-goes-on-offer-
1414650.html
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other news outlets will rerun the ad when they cover the controversy. The cost of running
one ad for the company then translates into it being rerun multiple times in blogs,
newspapers and TV newscasts in Europe and around the world. Even when the company is
actually forbidden from displaying an ad, the act of censoring it is generally sufficient to
ensure it will be widely relayed by the media342. Publicity doesn’t always come free for the
company, past examples, in which it has tried to use public figures’ image for commercial
purposes has led it to court and hefty fines343. But the benefits of – almost – free publicity
seem to largely outweigh the costs as Ryanair appears to have no intention of ceasing
controversial announcements and publicities as recent events have shown344.
342
http://news.bbc.co.uk/2/hi/business/7216926.stm
343
http://www.telegraph.co.uk/news/uknews/1577810/Carla-Bruni-awarded-damages-from-
Ryanair.html
344
http://www.guardian.co.uk/money/2010/sep/08/ryanair-axe-unnecessary-co-pilots
345
See http://www.ryanair.com/en/news/ryanair-condemns-useless-aviation-regulator-2 ;
120
http://www.ryanair.com/en/news/vote-for-dublin-airport-s-new-name
346
See http://www.ryanair.com/en/news/ryanair-apologises-to-sir-stelios ;
http://theairlineblog.blogspot.com/2009/06/buying-airplanes-ryanair-way.html
Page
347
http://www.independent.co.uk/news/people/profiles/michael-oleary-plane-crazy-
419044.html ; http://www.deathandtaxesmag.com/28169/ryanair-and-michael-oleary-hell-in-the-
friendly-skies/
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Rhetorical virtuosity: never be wrong
Despite being blatantly insulting and striving for controversy, it would be overly
simplistic to dismiss Ryanair as a raging bully desperately lacking any finesse. Indeed, the
company’s most efficient communicative weapon – if not its most salient – is the rhetorical
skills it displays in its communication.
348
Even when such mention would seem rather untimely
121
http://www.ryanair.com/en/news/ryanair-apologises-to-sir-stelios
349
http://www.ryanair.com/en/news/ryanair-apologises-to-sir-stelios
350
http://www.forbes.com/feeds/afx/2007/01/30/afx3376002.html
Page
351
For instance credit card fees during payment of the ticket.
352
In the case of Ryanair’s feud with Manchester airport in 2009, the company stated 100 jobs
per every 100 000 passengers at an airport; see
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taking into account different social and economic realities, rigidities in job market or even
the fact that these jobs might not spawn in the region surrounding the airport.
122
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http://www.guardian.co.uk/business/2009/aug/17/ryanair-closes-manchester-airport-routes and
http://www.asap.co.uk/news/ryanair-set-to-cut-500-dublin-based-jobs-5633218.html
www.air-scoop.com
Legal
Ryanair’s legal doings are a key of the airline’s business. The company’s soaring
success, its controversial statements and innovative practices haven’t always attired praises
and many inquiries and trials have been launched at it. However, more often than not, it
has managed to avoid further costly outcomes thanks to a very efficient management of
litigations. On the other side of the coin, the company has proven tremendously efficient
at interpreting laws and regulations and playing around them to best fit its needs.
353
See Ryanair’s job offers, http://www.ryanair.com/en/careers/job/FRLRAAEU01 ;
http://www.ryanair.com/en/careers/job/FRLRAA01
354
See Ryanair Annual Report 2010, p. 108
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The European Commission had failed to provide adequate
reasons for its decision
The European Commission had misapplied the Market
Economy Investor Principle and that a public entity should be
treated as a private entity when its ground for investing were
the same as a private entity
355
For that reason it has kept inquiring into other Airport aids cases across Europe
124
356
http://www.lefigaro.fr/societes/2010/09/28/04015-20100928ARTFIG00501-ryanair-mise-en-
examen-pour-travail-dissimule.php
357
http://www.ryanair.com/en/news/ryanair-announces-closure-of-marseille-base
Page
358
See the £ 1336 passenger Rob Ross received
http://www.guardian.co.uk/society/2004/dec/22/disability.theairlineindustry or the € 67 500
awarded to its millionth passenger http://www.rte.ie/news/2002/0619/ryanair.html
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government tax paid by passengers if they demand it. This is the case in the UK
where airlines have to refund paid Air Passenger Duty tax on cancelled tickets.
Ryanair has found a legal remedy against that, while staying on the right side of
the law; the airline has upped administration charges to the point where an
average passenger would actually have to pay more than he would be refunded
if he asked for a tax return359. In fact, Ryanair charges a £ 17 administration fee
for a £ 11 refund thus making any attempt at a refund economically
uninteresting while going against the law 360 . Although this practice is
widespread across the industry, the UK Air Passenger Duty tax being distance
dependent and Ryanair only flying short-haul routes, it has effectively created a
loophole that should avoid it paying any refund.
359
http://www.metro.co.uk/money/41423-ryanair-says-no-to-tax-refunds
360
http://www.bbc.co.uk/news/10583101
361
Ryanair, Annual Report 2010, p. 109 found at
125
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
362
At the end of 2009, Air France announced it would take Ryanair to court over allegedly
unlawful subsidization of the company y regional airports,
Page
http://www.lefigaro.fr/societes/2010/03/11/04015-20100311ARTFIG00389-air-france-veut-porter-
plainte-contre-ryanair-.php and http://www.euractiv.com/en/regional-policy/air-france-ryanair-
spat-over-aid-local-airports-news-332553
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receiving, Ryanair took preemptive action and deposited complaints against rivaling
companies for similar cases of illegal reception of State aids363.
About a year later, it initiated proceedings to the Court of First Instance against the
European Commission for absence of action on these cases. The European Commission
was pushed to investigate the cases and subsequently found evidences of illegal reception
of State aids in some of them (namely, Air France and Olympic Airways). Targeted
companies were Air France, Lufthansa, Alitalia, Volare and Olympic Airways.
Ryanair’s strategy here relies on the fact that, since 2002 and an inquiry by its own
ombudsman364, the European Commission has indicated that when it received a valid365
complaint, it undertook to consider it within twelve months following the reception 366,
after which it would be liable to legal proceedings for disregarding said complaint.
Consequently, Ryanair appears to be exploiting EU Law so it can overload European
experts with cases similar to its own.
The exact goal of that strategy is not certain but it seems as if it is serving a dual
purpose. First, it serves as a deterrent for competitors; by displaying Ryanair’s retaliation
capacity. Second, it may also serve as a way to overload European expert with cases similar
to Ryanair’s. This could buy time for the company in its struggle to keep its subsidies; this
could also serve to push the political agenda further in Ryanair’s direction.
Similarly, in November 2008, Ryanair initiated proceedings in the Court of First
Instance against the European Commission for refusing to grant the airline access to
documents relating to the Commission’s investigation of state aids in several airports. The
cases were heard on July 7th, 2010 and – at time of this writing – a judgment was still
pending. In March 2009, Ryanair appealed two decisions issued by the European
Commission a year before that and related to financial links between and Alitalia and the
Italian government367.
It appears that this legal hyper-activity and rather aggressive stance towards the
European Commission, is part of Ryanair’s strategy to drown the Commission with
complaints and complexify further developments in State-aids related rulings.
YQ6AEwBQ#v=onepage&q=european%20commission%20has%20to%20treat%20complaints&f=fals
e
366
European Commission, Official Journal 244 , 10/10/2002 P. 0005 – 0008, http://eur-
Page
lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52002DC0141:EN:HTML
367
Ryanair, Annual Report 2010, p. 109 found at
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
www.air-scoop.com
airports have been consistently set too high with respect to what levels may be reached in
a more competitive environment368.
In the legal battle against the British Airport Authority monopoly, Ryanair has sided
with the British Competition Commission. While the Commission’s preliminary findings
declared, in April 2008, that the monopolistic situation of the British Airport Authority
was having adverse effects on the competition and later concluded in its 2009 final report
that the British Airport Authority’s monopoly should be broken, a 2010 ruling by the
Competition Appeal Tribunal nullified this decision. Ryanair has supported the
Competition Commission in a counter appeal which led to a new ruling, favorable for the
airline, in October 2010369. However, barely a month later, the British Airport Authority
declared it would appeal this new ruling once again370.
Ryanair’s position against Dublin airport is similar, yet the situation is slightly
different. The city has only one major airport and the airline has actively lobbied for
increased competition at the airport by splitting management of the two terminals. As
with the BAA371 and London airports, Ryanair has been extremely virulent in its campaign
against the actual management of Dublin airport372 and, beyond, the Irish minister of
transport373. In December 2009, Ryanair appealed a decision which set maximum charges
at the airport for the next five years. The next year, a court of appeal ruled in favor of
Ryanair regarding different pricing for Terminal 1 and 2 at Dublin airport. However, the
court’s decision is not binding and whether the decision will be applied remains to be
seen374.
368
Ryanair, Annual Report 2010, p. 110, found at
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
369
http://www.ryanair.com/ie/news/ryanair-welcomes-court-of-appeal-ruling
370
http://www.ryanair.com/ie/news/ryanair-condemns-baa-monopoly-s-latest-appeal-against-
ruling-to-break-up-london-and-scottish-airports
371
http://www.ryanair.com/ie/news/baa-s-may-traffic-highlights-urgent-need-to-sell-stansted-
and-either-edinburgh-or-glasgow
127
372
http://www.ryanair.com/ie/news/ryanair-condemns-useless-aviation-regulator-2 ;
http://www.ryanair.com/ie/news/dublin-airport-to-be-renamed-the-jedward
373
http://www.ryanair.com/ie/news/minister-dempsey-must-explain-why-he-refused-binding-
Page
arbitration
374
Ryanair, Annual Report 2010, p. 110, found at
http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf
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Some perspectives on Ryanair
The arrival and subsequent take-off of Ryanair in the European skies has blown away
many pre-conceptions and widely accepted facts about the airline industry. While it is true
that many companies are always striving to change and adapt their business model, rarely
does a new player enter an existing market with a radically different formula and succeed.
Yet the Irish low-cost airline’s success is undeniable and while it grew by drawing heavily
on existing successful low-cost business models, its merits at creating its own recipe for
success are undeniable.
Among the many achievements the airline can claim for its own are the paradigmatic
changes it has brought to the relationship between airports and carriers, moving from a
model whereupon a wealth of airlines were competing for slots and paying a high price for
them to a situation in which airports are actually competing to be on the airline’s
roadmap. It has deeply challenged – for better or for worse – the traditional conception
that air travel was a luxury running on complimentary drinks, single serving meals and
expensive class-system seating.
Taking a step back, it has become evident that Ryanair has opened the way to a wealth
of other players to follow its steps and make the most of the liberalization of European
skies. Indeed, the airline has put tremendous efforts into taking advantage of that
liberalization and pushing for more steps in that same direction.
However, it would be unwise to consider the airline’s success without taking into
account the dynamics, which it is a part of. Describing and analyzing the airline’s business
model is pretty much similar to taking a snapshot of that company and analyzing it. But
crystallizing the airline in such a way wouldn’t make it a favor, and it would lack necessary
insights. In fact, and contrary to the repeated “just ask our XX millions passengers”
statement favored by its CEO, the success of Ryanair’s business model can only be
measured by the success its followers will have. Just as Ryanair’s choice to imitate
Southwest Airline only highlighted the quality of that airline’s business model – however
how many had failed in doing so before it – the eventual success of Ryanair’s model will
depend on the success of its imitators. And when it comes to this, nothing is certain.
As a matter of fact, it seems that the Irish airline’s accomplishments have been so
grounded in its ability to market its passengers to airports, aircraft manufacturers,
governments and other consumers alike, that it would support with great difficulty a
competitor with identical offerings. Indeed, its closest rival, low-cost airline EasyJet, has
already taken sufficiently different strategic options – flying to large airports, charging, on
average, higher fares, targeting business consumers – that it is not competing heads to
heads with Ryanair. But another airline, managing – probably through a similar mix of
highly differentiated revenues – to offer similarly priced fares while targeting the same
consumers and airports, would jeopardize the growth – if not the continuity – of Ryanair.
All the more if, in the words of Southwest Airline’s founder Herb Keller, it managed to be
the same, but with better service.
In fact, it seems that Ryanair’s communication is a double edged sword: it has put the
airline in all the mouths and ears, has leveraged enormous publicity with minimum
budget and firmly rooted in all the minds that Ryanair was the cheapest; but it has spread
a general idea of rudeness around the airline and antagonized powerful actors. So much
that it appears that the biggest threat to Ryanair nowadays, but also the only vulnerability
that could force it to change, lays in the interest governments and supranational
128
contractors. Losing any of the two could cause durable damage, by depriving the airline of
the easy cost-reduction that represent the declaration of foreign-based pilots and crews in
www.air-scoop.com
fiscally advantageous Ireland or by forcing it to reconsider a number of airport subsidies it
has been receiving – forcing it into a grasshopper behavior, moving in and out of airports
every few year so as not to lose time-limited marketing aids. Losing any would most
probably cause a great deal of damage to the airline as, as of now, it wouldn’t actually be
financially profitable without any one of them. But losing both would be catastrophic.
Because, if diversification from pure passenger transport may have been key to Ryanair’s
success, being forced to focus its income on that single source would mean the end of its
business model if not the end of the airline itself.
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Appendices
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Appendix 1: Cumulative and outstanding order from Boeing
09-Mar- 19-Mar-
737-800 CF 338 276 62
1998 1999
Customer
338 276 62
Total
Customer Order
Country Region Model Engine Total
Name Date
09-Mar-
Ryanair IRELAND Europe 737-800 CF 25
1998
131
26-Sep-
Ryanair IRELAND Europe 737-800 CF 3
2000
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24-Jan-
Ryanair IRELAND Europe 737-800 CF 100
2002
21-Aug-
Ryanair IRELAND Europe 737-800 CF 3
2002
31-Jan-
Ryanair IRELAND Europe 737-800 CF 22
2003
23-Dec-
Ryanair IRELAND Europe 737-800 CF 2
2003
12-May-
Ryanair IRELAND Europe 737-800 CF 70
2005
13-Jun-
Ryanair IRELAND Europe 737-800 CF 5
2005
04-Oct-
Ryanair IRELAND Europe 737-800 CF 9
2005
16-Jun-
Ryanair IRELAND Europe 737-800 CF 10
2006
28-Sep-
Ryanair IRELAND Europe 737-800 CF 32
2006
27-Apr-
Ryanair IRELAND Europe 737-800 CF 27
2007
132
03-Jun-
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2008
02-Sep-
Ryanair IRELAND Europe 737-800 CF 4
2008
14-Oct-
Ryanair IRELAND Europe 737-800 CF 10
2008
05-Jan-
Ryanair IRELAND Europe 737-800 CF 13
2009
Total 338
Customer Order
Country Region Model Engine Total
Name Date
Customer: RYR
Model: All Models
Sorted by: Date
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Appendix 2: List of all aircraft owned then sold by Ryanair
Aviation LLC
Leasing LLC
EI-CSA 29916 210 Boeing 737-8AS(WL) 19/03/1999 PR-VBA Varig 05/10/2007
www.air-scoop.com
EI-CSB 29917 298 Boeing 737-8AS(WL) 16/06/1999 PR-VBB Varig 26/10/2007
EI-CSJ 29925 588 Boeing 737-8AS(WL) 20/06/2000 YR-BIA Blue Air 04/07/2008
EI-CSM 29926 722 Boeing 737-8AS(WL) 07/12/2000 YR-BIB Blue Air 19/12/2008
Soyuz Airlines
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EI-CTA 29936 1236 Boeing 737-8AS(WL) 18/11/2002 VQ-BDU Atlant- 13/05/2010
Soyuz Airlines
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Appendix 3: List and legal owners of aircraft leased by Ryanair
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Aircraft Currently operated by Ryanair (September 12th 2010)
EI-DCP King Leasing V LLC operated by Ryanair a lease agreement a subject to lien
in favour of First Security Bank National Association
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Aircraft Currently operated by Ryanair (September 12th 2010)
EI-DCR King Leasing V LLC
EI-DCS Owned by RBS Aerospace
EI-DCT Owned by RBS Aerospace
EI-DCV Owned by RBS Aerospace
EI-DCW Owned by King Leasing V LLC subject to a lien in favour of Wells Fargo Bank
North West National Association
EI-DCX Owned by King Leasing VI LLC
EI-DCY Owned by King Leasing VI LLC
EI-DCZ Owned by King Leasing VI LLC
EI-DHA Owned by King Leasing VI LLC
EI-DHB Owned by King Leasing VI LLC subject to a lien in favour of Wells Fargo Bank
North West National Association
EI-DHC King Leasing VI LLC(Wells Fargo Bank North West)
EI-DHD King Leasing VI LLC (VII??)
EI-DHE Owned by Barrow Aircraft Ltd. Subject to 1st priority mortgage in favour of
Calyon (as security agent)
EI-DHF Owned by Suir Aircraft Leasing Ltd., subject to a first priority mortgage in
favour of BNP Paribas (as security agent).
EI-DHH Owned by Nore Aircraft Leasing Ltd., subject to a first priority mortgage in
favour of BNP Paribas (as security agent).
EI-DHG Owned by Blackwater Aircraft Leasing Ltd., subject to a first priority
mortgage in favour of Calyon (as security agent).
EI-DHI Owned by RBS Aerospace Ltd leased to Ryanair
EI-DHJ Owned by RBS Areospace Ltd leased to Ryanair
EI-DHK Owned by RBS Aerospace leased to Ryanair
EI-DHM Owned by RBS Areospace Ltd and is leased to Ryanair
EI-DHN King Leasing VII LLC lease First Security Bank Nat Ass as a security trustee
for certain secured parties
EI-DHP King Leasing VII LLC (lien)
EI-DHR King Leasing VII LLC ( lienWells Fargo Bank North West)
EI-DHS RL Leasing VII
EI-DHT King Leasing VII LLC (lien Wells Fargo Bank North West National Association)
EI-DHV King Leasing VII LLC (lien)
EI-DHW King Leasing VII LLC
EI-DHY King Leasing VII LLC
EI-DHZ King Leasing VII LLC. (VIII?)
EI-DLB King Leasing VIII LLC.
EI-DLC King Leasing VIII LLC. (lien)
139
EI-DLD King Leasing VIII LLC (lien Wells Fargo Bank North West National
Association)
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Aircraft Currently operated by Ryanair (September 12th 2010)
EI-DLG Owned by King Leasing IX LLC (Wells Fargo Bank North West)
EI-DLH Owned by King Leasing X LLC (Wells Fargo Bank North West)
EI-DLI King Leasing X LLC (Wells Fargo Bank North West)
EI-DLJ King Leasing X LLC operated under lease agreement subject to a lien in
favour of Well Fargo Bank Northwest National Ass. As security trustee
EI-DLK Owned by King Leasing X LLC
EI-DLL Owned by RBS Aerospace leased to Ryanair 29/10/09 Baker & Spice
Aviation Ltd Ist priorty mortgage in favour of Bank of Scotland
EI-DLM Owned by RBS Aerospace leased to Ryanair
EI-DLN Owned by RIL Aviation EI-DLN PTY Ltd.
EI-DLO Owned by RIL Aviation EI-DLO PTY Ltd Mortgaged to JP Morgan Institutional
Services Australia Ltd.
EI-DLR Owned by RIL Aviation EI-DLR PTY Ltd Mortgaged to JP Morgan Institutional
Services Australia Ltd.
EI-DLS Owned by RBS Aerospace leased to Ryanair
EI-DLT Owned by RBS Aerospace leased to Ryanair
EI-DLV Owned by Aran Airfinance Ltd subject to 1st priority mortgage in favour of
Calyon (as security agent)
EI-DLW Owned by Blasket Airfinance Ltd (subject to a first priority mortgage in
favour of BNP Paribas)
EI-DLX Owned by Gola Airfinance Ltd subject to 1st priority mortgage in favour of
Calyon (as security agent)
EI-DLY Owned by Rathlin Airfinance Ltd (subject to a first priority mortgage in
favour of BNP Paribas)
EI-DLZ Owned by RBS Aerospace Ltd.
EI-DPA Owned by RBS Aerospace Ltd.
EI-DPB Owned by RIL Aviation EI-DPB PTY Ltd and Mortgaged to BTA Institution
Services Australia Ltd.
EI-DPC Owned by RIL Aviation EI-DPC PTY Ltd
EI-DPE Owned by RBS Aerospace Ltd.
EI-DPF Owned by King Leasing XI LLC (lien in favour Well Fargo NW National Ass as
security agent for certain secured parties.)
EI-DPI Owned by King Leasing XI LLC (lien in favour Well Fargo NW National Ass as
security agent for certain secured parties.)
EI-DPJ Owned by King Leasing XI LLC (lien in favour Well Fargo NW National Ass as
security agent for certain secured parties.)
EI-DPL Owned by King Leasing XI LLC (lien in favour Well Fargo NW National Ass as
security agent for certain secured parties.)
EI-DPM Owned by King Leasing XI LLC (lien in favour Well Fargo NW National Ass as
security agent for certain secured parties.)
140
EI-DPN Owned by King Leasing XI LLC (lien in favour Well Fargo NW National Ass as
security agent for certain secured parties.)
Page
EI-DPO Owned by RIL Aviation EI-DPO PTY Ltd mortgaged to BTA Institutional
Services Australia Ltd.
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Aircraft Currently operated by Ryanair (September 12th 2010)
EI-DPR Owned by Ryanair Ltd subject to a first priority mortgage in favour of ING
Bank NV acting a security agent.
EI-DPS Owned by RBS Aerospace Ltd.
EI-DPT Owned by EI-DPT PTY Ltd mortgaged to BTA Institutional Services Australia.
(RIL Aviation EI-DPT)
EI-DPV Owned by Ryanair Ltd subject to a first priority mortgage in favour of ING
Bank NV acting a security agent.
EI-DPW Owned by RIL Aviation EI-DPW PTY Ltd & mortgaged to BTA Institutional
Services Australia Ltd.
EI-DPX Owned by RIL Aviation EI-DPX PTY Ltd & mortgaged to BTA Institutional
Services Australia Ltd.
EI-DPZ Owned by King Leasing XII LLC
EI-DWA Owned by King Leasing XII LLC
EI-DWB Owned by King Leasing XII LLC (lien in favour Well Fargo NW National Ass as
security agent for certain secured parties.)
EI-DWC King Leasing XII LLC lease agreement and subject to lien in favour of Wells
Fargo Bank Northwest Nat Ass as security trustee on behalf of certain secured
parties
EI-DWD Owned by King Leasing XII LLC
EI-DWE Owned by King Leasing XII LLC
EI-DWF Owned by King Leasing XII LLC (Lien)
EI-DWG Owned by king Leasing XII LLC
EI-DWH Owned by king Leasing XII LLC (lease agreement subject to lien Well Fargo
Bank Nth West Nat Ass as agent for certain secured parties)
EI-DWK Owned by Yamasa Sangyo Aircraft FR1 Kumiai as Lessor as rep. by its mng
prtnr Yamasa Sangyo Co Ltd (subject to 1st priority mortgage in favour of ING
Bank NV as security agent
EI-DWM Owned by Yamasa Sangyo Aircraft FR3 Kumiai as Lessor as rep. by its mng
prtnr Yamasa Sangyo Co Ltd (subject to 1st priority mortgage in favour of Calyon
as security agent.
EI-DWP Owned by Ryanair and subject to a 1st priority mortgage in favour of ING
bank NV.
EI-DWS Owned by Yamasa Sangyo Aircraft FR5 Kumiai as Lessor as rep. by its mng
prtnr Yamasa Sangyo Co Ltd (subject to 1st priority mortgage in favour of BNP
Paribas as security agent.)
EI-DWT Owned by Yamasa Sangyo Aircraft FR6 Kumiai as Lessor as rep. by its mng
prtnr Yamasa Sangyo Co Ltd (subject to 1st priority mortgage in favour of ING
Bank NV as security Trustee.)
EI-DWV Owned by Ryanair Ltd and is subject to a first priority mortgage in favour of
ING Bank N.V.(as mortgagee)
EI-DYA Owned by King Leasing XII LLC (lien)
141
EI-DYB Owned by King Leasing XIII LLC Operated by FR under a lease agr & subject
to lien in favour Well Fargo Bank NW Nat Ass as security agent on behalf of
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Aircraft Currently operated by Ryanair (September 12th 2010)
EI-DYF Owned by King Leasing VIII LLC
EI-DYG Owned by King Leasing XIII LLC Operated by FR under a lease agr & subject
to lien in favour Well Fargo Bank NW Nat Ass as security agent on behalf of
certain secured parties
EI-DYI RBS Aerospace
EI-DYK Owned by RBS Aerospace
EI-DYL Owned by King Leasing XIV LLC
EI-DYN Owned by King Leasing XIV LLC
EI-DYS Owned by RBS Aerospace Ltd.
EI-DYT Owned by RBS Aerospace Ltd.
EI-DYV Yamasa Aircraft Ryanair Kumiai
EI-DYY Yamasa Aircraft Ryanair 4 Kumiai as lessor represented by its mnging
partner Yamasa Co. Ltd & subj 1st pri mortgage in favour of Calyon
EI-EBB Owned by Afex Leasing LLC mortgage to Well Fargo and is leased by RBS
Aerospace to Ryanair
EI-EBE Owned by King Leasing XV LLC and subject to a lien
EI-EBD Owned by King Leasing XV LLC (Arr. 6/2/09)
EI-EBG Owned by King Leasing XV LLC (lien)
EI-EBI Owned by King Leasing XV LLC
EI-EBK Owned by King Leasing XV LLC
EI-EBM Owned by King Leasing XV LLC
EI-EBN Owned by Barna Leasing LLC operated by Ryanair under a lease agrmnt &
sbjt to a lien in favour of Wells Fargo bank NW national association
EI-EBP Owned by Barna Leasing LLC operated by Ryanair under a lease agrmnt &
sbjt to a lien in favour of Wells Fargo bank NW national association
EI-EBW Owned by Barna Leasing LLC operated by Ryanair under a lease agrmnt &
sbjt to a lien in favour of Wells Fargo bank NW national association
EI-EBZ Owned by Barna Leasing LLC operated by Ryanair under a lease agrmnt &
sbjt to a lien in favour of Wells Fargo bank NW national association
EI-EFA Owned by AFEX Leasing LLC mortgage to Wells Fargo as trustee and is
leased by RBS Aerospace Ltd to Ryanair
EI-EFD Owned by King Leasing XV LLC
EI-EFF Owned by King Leasing XV LLC
EI-EFG Owned by King Leasing XV LLC
EI-EFI Owned by King Leasing XV LLC
EI-EFM Owned by RBS Aerospace Ltd
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Aircraft Currently operated by Ryanair (September 12th 2010)
EI-EKB Owned by King Leasing XV LLC
EI-EKE Owned by Strandhill Leasing LLC
EI-EKC Owned by Carton Leasing LLC
EI-EKD Owned by Carton Leasing LLC
EI-EKL Owned by Carton Leasing LLC
EI-EKR Owned by Carlton Leasing LLC (Lien)
EI-EKV Owned by Barna Leasing III LLC (Lien)
EI-EKX Owned by Barna Leasing III LLC operated by Ryanair under a lease agrmnt &
sbjt to a lien in favour of Wells Fargo bank NW national association
EI-EML Owned by Barna Leasing III LLC (lien)
EI-EMM Owned by Strandhill Leasing LLC (lien in favour of Wells Fargo)
EI-EMP Owned by Barna Leasing III LLC (lien)
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