Ryanair have the last laugh

Last week Ryanair said that the Board had given agreement to start flights to the US within four years. Then, a few days later, Michael O’Leary stepped in and said it was all a mistake and the airline had no such plans.

Cue a long list of articles in travel business publications claiming that the airline had made fools of themselves.

Actually, the people who had made fools of themselves were these supposedly serious publications that had immediately followed Ryanair’s initial announcement with long, pontificating articles about how Ryanair would be able to shake up transatlantic flights and – even – threaten the future of current major airlines.

As we said when Ryanair made its original “announcement”, there was really very little that was new – just a vague remark that the airline could start flights within a few years. There was no commitment and, as we added, the airline did not have any current orders for suitable aircraft. Ryanair have tossed around this idea so many times. We are quite sure they have many thick files on the subject and periodically set feasibility teams to work. One day, they might well give it a go but there was nothing to suggest that a launch was in any way imminent or even that it was being planned.

As Michael O’Leary once said, you should never believe anything Ryanair say in public. All the so-called experts who broke that rule should feel suitably embarrassed.

Of course, there is one way that Ryanair might start transatlantic flights quite soon. There are vague whispers that they might make a bid for the struggling Norwegian. Ironically, part of the reason for that airline’s problems is its new longhaul network. Ryanair do not normally buy airlines – it is cheaper to watch them disappear and then pick up the routes they want – so we would not place much credence on these rumours. But you never know.

If that happened, the assembled mass of travel business journalists would probably hyperventilate. 


The Norwegian experience

All airlines have their quirks – low-cost carriers perhaps more than most. EasyJet’s carry-on bags policy is, for instance, generous to a T on the weight front but rather brutal in terms of their insistence of “One item only” – leading to many a Pret A Manger sandwich being squelched between an iPad and a change of underwear in a frenzy at the gate. And we all know about Ryanair’s financially motivated gate staff’s enforcement of the airline’s particularly stringent weight and size restrictions of carry-on items.

Compared to these competitors, the Norwegian experience is refreshing. On the one hand, their weight allowances are more generous than Ryanair and are not strictly enforced, and a practical approach to additional items means that there is no anxiety over whether or not you will have room for airport purchases when you board.

However, one thing that Norwegian may need to look at as it expands out from its Scandinavian heartland is its onboard pricelist. How does a cup of tea or instant coffee at €3.50 grab you? Or a “Little Grazing Snack Box” containing (small) bags of crackers and nuts at €7.50? Fine perhaps for the bergers of Oslo or Stavanger, but a little eye-watering for the rest of us.

The lesson is to buy before you board. Obvious perhaps when leaving the UK from airports that have outlets (such as Pret A Manger) that charge no more than high street prices, but less so overseas, where air-side prices seem often to be unreasonably inflated. No one said airline food was ever going to cheap, but against that, your onboard catering requirements don’t need to end up costing as much as your flight, or more.

Low-cost versus traditional is not so simple

Finnair made a small profit in 2007 and then produced losses for a number of years until 2012 when they managed to produce a slim profit of €11.8million. They expect to make a slightly improved return for 2013.

They have just sold a historic holding they had of 4.7% in the budget airline, Norwegian for a total of €53million. This will allow them to book a profit of about €34million.

A cynic might say they would have been better off closing down their own operation and just buying shares in Norwegian.

It is true enough that the traditional airlines from medium to small countries such as Finnair, LOT, Malev, Austrian and SAS have all struggled terribly whilst a handful of budget airlines, notably Ryanair, easyJet and Norwegian, seem to have swept the market (and profits) away with them.

But it is easy to be wise after the event and make generalisations.

Finnair could just as easily have invested in Air Berlin or flybe (shares floated at 295p and  now worth 44p). And don’t even ask Singapore Airlines about what they think about their purchase of 48% of Virgin Atlantic.

Finnair might not be able to match the recent high-speed growth of Norwegian but they should survive – and they will be better working on their own business rather than relying on other companies to produce profit for them.