Aer Lingus – BABack to Forum
SimonS1 – 20/02/2016 08:00 GMT
Congrats for spotting the error, I had taken BT’s article as accurate and only looked at the schedule in May. I agree with your summary of the numbers.
I’ve edited my post above to replace ‘capacity’ with ‘schedule’.
Nonetheless, it would appear that Ryanair are charging approximately 50% of EI in May and that suggests to me it is likely that they have decided to stop the new schedule, before it establishes itself (as it would be possible to upgauge back to A320, if the traffic demanded it.)20 Feb 2016
I honestly don’t see a story here.
Aer Lingus have cut seat capacity by almost a quarter but spread the flights more evenly through the day to enable connections in Dublin onto various transatlantic destinations. If people are buying a through Liverpool/New York or Orlando flight (less than £450 in May) maybe they won’t be bothered that they could saver a tenner on Ryanair.
Having bought Aer Lingus I would imagine IAG will be looking for other ways to make use of the Dublin hub attractive as an alternative to London (particularly with pre-clearance available).
Ryanair I see as a different market, point to point, mainly used by people travelling for business in Dublin, weekends, football etc. I guess that’s how IAG see it as well or presumably they wouldn’t have made the changes.20 Feb 2016
SimonS1 – 20/02/2016 09:39 GMT
There is a story here, but it is probably not very interesting you in the South of England.
I agree about the relative (lack of) price sensitivity for those buying through tickets to the US, but as someone with many years of strategy experience in competitive markets, I also believe that Ryanair will see this as a potential thin end of the wedge and be aware that EI could also attract O&D traffic on the route, thus potentially building up their competitive position. Schedule frequency is a potentially powerful tool on a short route where people may do day trips or weekends etc..
If you’d been sitting in legacy airlines HQ in 1990, watching Ryanair introduce a number of flights on turbo prop equipment and then increasing them, would you have said ‘okay, no threat, nothing to worry about?’20 Feb 2016
Maybe Ryanair will see it as a threat, maybe they won’t. That’s competition for you. Personally I wouldn’t see a competitor cutting seat miles by 25% as a particularly threatening move but who knows.
If I was going point to point I would probably chose the cheapest provider. If I was connecting I would buy a single ticket to retain the relevant protections.
It just sounds like an every day competition issue to me.
You’re right that it isn’t really relevant to me in the South East. The only reason I posted was to point out that notwithstanding your many years of strategy experience there was some fairly basic confusion between capacity (which is going down) and frequencies (which were going up). The BT article talks about frequencies (so is correct). Only the bit about current flights operated by Stobart is wrong.
Beyond that I’ll leave you to debate it out with the usual suspects.20 Feb 2016
“The only reason I posted was to point out that notwithstanding your many years of strategy experience there was some fairly basic confusion between capacity (which is going down) and frequencies (which were going up). The BT article talks about frequencies (so is correct). Only the bit about current flights operated by Stobart is wrong.”
Basic confusion arises when capacity = seats available x frequency and the incorrect number of seats is implied 😉
A320 v ATR is quite a difference!
It is an everyday competition issue – that is the very heart of competitve strategy. If you view strategy from the positioning school perspective, then there is room for both, if you view it from the learning school, it can be very dangerous to tolerate an increase in competition (which frequency is, even though seats will reduce in the short term), when you could eliminate it.
The legacy airlines in Europe let Ryanair come from nowhere to #1 (by pax carried) in less than 25 years – it all started in a very limited way.20 Feb 2016
Most of Ryanairs business is from place A to place B where no one else imagined people would want to go to/from. What Ryanair has managed to do is not actually to satisfy a demand but to create it……like Apple and the smartphone. A highly risky strategy, but if you get it right big bucks.
I am not sure Ryanair are too hot with competition, they don’t like it, and they don’t like anyone getting same or better airframe or airport deals than them. I bet a dollar that Ryanair have a better deal at Liverpool than IAG, and if they don’t they will walk. So although OLeary (who I admire greatly) states he welcomes competition, he hates it. He will battle for a short period, threaten the airport for a better deal etc, but if he doesn’t think he can win he is gone like the wind looking for easier pickings……and he will blame it on the airport rather than admit defeat.20 Feb 2016
MrMichael – 20/02/2016 13:14 GMT
I agree with your points, but also think that the amount of organic growth that Ryanair can generate is probably limited compared to the past (100m pax a year is huge), thus their kite flying comments about becoming a feeder for scheduled airlines. Another option would be to enter long haul directly, but I tend to believe that they know that would be a lot harder area (little low hanging fruit on efficiencies) and so will happily settle for becoming a short haul surrogate for others, to tap this potential market.
No sane strategist likes competition (I know I don’t.) Competition is bad for your wallet/bonus/job tenure etc. – delete as appropriate! Of course, plc leaders cannot say that in public.20 Feb 2016
I don’t think Aer Lingus will have any problems here. Ireland to Liverpool is hugely popular. From Belfast Intl there are up to 7 daily easyJet flights and up to 5 daily on flybe from the City airport.
Would be interesting to know just how many passengers connect at DUB to/from the US, not just Liverpool but other UK airports.20 Feb 2016
I agree FDOS, I don’t think Ryanair will go on to long haul, to my knowledge it has not even dipped a toe in the waters of medium haul unlike Easyjet (flights of 5 hours and over). Nor can I see Ryanair going the way of others by stepping outside its comfort zone of Europe. I think while oil prices are low it can make routes pay by driving traffic on to its point to point traffic, but like you can see that at some point oil prices will rise and thus its business model to some degree will have to change to maintain any growth. That growth could well come by feeding traffic from regions with no or few long haul flights to hubs that do. The problem for Ryanair there is it will have to pay more for those airport charges than it likes.
Regarding competition, bang on the money. The problem with a lot of businesses is they don’t actually see who/what the competition is. I have to do an interview with the press next week about competition in the Rail Industry. The fact is the competition is rarely another train operating company (Toc) it is driving, bussing, flying, walking, cycling,phoning, skyping etc etc. The problem for me is that a couple of Tocs just don’t get it.20 Feb 2016
” The fact is the competition is rarely another train operating company (Toc) it is driving, bussing, flying, walking, cycling,phoning, skyping etc etc. “
I was working with a couple of peeps from Southwest Airlines in 2014 (one senior) and they reiterated something very similar to your words , above, they had a far broader definition of competition, than some.
Edited to add: I sometimes think that the reassuringly elegant rigour of positioning strategy techniques (BCG, Porter etc.) drives people to think of their strategy too narrowly, rather than realising that the competitive world is often rather messy, chaotic and driven to, some degree, by fortune (or probability, if you prefer).20 Feb 2016
A simple.straightforward question. Why build your model on continuous growth?
Once FR reaches what it believes is saturation point I’d advise not to risk what you’ve got but consolidate loyalty with what you’ve got…. Learn from others mistakes…20 Feb 2016
Let me answer generally, not in the context of Ryanair.
Sometimes the core competencies, mindset/culture, finance model, people, skills etc that are required for a growth based model are very different to those required to hold share. Edited to add the wishes of the owners may also drive choices.
Successful transition from one mode to the other is not assured and the chaos/confusion of the transformation can leave the formerly dominant player open to attack from more agile competitors.20 Feb 2016
I too can answer generally. Nearly all business will have shareholders or stakeholders.
Shareholders are more fickle than stakeholders.
Shareholders are in it for short/medium term rather than a long term stake. Shareholders above all want a business that rises in value to be cashed in later. Thus they want growth and demand of the CEO that growth. For the CEO to get that growth they need one of or a combination of lowering costs, increasing margins, higher prices, growth of the business. For that reason the vast majority of shareholders will be after a CEO that can get that growth.
A stakeholder on the other hand is in it for the medium to long term and is interested in the dividend. A stakeholder may well be interested in consolidation, low gearing and bigger dividends.
As I get older I will undoubtedly change from the traditional shareholder to being the stakeholder, interested in the dividends for my retirement rather than the risks of the share price.
The whole things boils down however to the corporate shareholders, the funds and pensions, and they want growth, and will not tolerate anything else for very long. The dividends are of no real use to them, they offer little value or bragging rights.
O,Leary does not strike me as the stakeholder type, he is more likely to walk away and start again ( like Stelios with Fastjet) than sit down and let Ryanair drift.20 Feb 2016
“O,Leary does not strike me as the stakeholder type, he is more likely to walk away and start again ( like Stelios with Fastjet) than sit down and let Ryanair drift.”
Very interesting point – he’s had an amazing run*, sustained and successful and I wonder how he would cope if Ryanair started to struggle?
*The only direct comparison I can think of (although it is not so accurate) is Sir Alex Ferguson at Man Utd.20 Feb 2016