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Last Updated: Wednesday, 9 June, 2004, 09:35 GMT 10:35 UK
Ryanair's route to riches
With profits of 100 million last year Ryanair, the low budget airline, has become one of the most successful airlines in Europe. What is the truth behind their success story? The Money Programme investigates.

The airline industry is in big trouble, yet one carrier is raking in the cash. Ryanair has done it by giving away millions of seats for free.

But what is the truth behind those free seats? New research for the Money Programme shows that it's about more than just getting lots of bums on seats. Ryanair has adopted a cost-cutting and revenue generation approach that is the envy of the industry.

The company dreams up its own advertising, free of the expense of a costly agency. It has no problem coming up with controversial slogans or images - if they create waves, that's deemed good, free publicity.

ticket-less travel

It also bypasses travel agents by asking passengers to book online, cuts the costs at check in by introducing ticket-less travel so customers need only produce a passport and booking reference number to get a seat.

Other initiatives include doing without an air bridge, instead getting passengers to walk across the airport tarmac to the aircraft, placing adverts on the side of the aircraft, doing away with free in-flight catering and using out-of-the-way airports, many of which are some way from the destination cities that they ostensibly serve. It even takes a cut from bus and car rental operators used by its passengers at these airports.

Most significantly, however, the company is believed to have obtained whopping discounts from Boeing, which supplies the 737 aircraft that are the mainstay of the Ryanair fleet.

Ryanair boss Michael O'Leary won't say what sort of discount he is getting. But he admits it's a big one. Thanks to the Iraq crisis, SARS and the threat of terrorism, the airline manufacturers are happy to cut prices just to keep the market going. O'Leary skips over the issue with a generous helping of his self-effacing Irish charm:

"You know, it probably comes back to our Irish heritage of Ryanair, we are all cattle dealers at heart."

questions looming

O'Leary's Irish charm disguises a sharp business mind. He has built the carrier from a one-plane company to one of the most profitable airlines in Europe in just 15 years. It's not hard to see all the ways he has done this. But some of them have attracted criticism - and there are questions as to how the big carriers' decision to get into the cut-price market may affect airlines like Ryanair.

A Money Programme investigation found that of the out-of-the-way airports which Ryanair frequents depend on the carrier and its other low-cost rivals for their business. One airport loves Ryanair so much that it offered the carrier a 50% discount on landing charges. It even paid Ryanair over 100,000 for every new route it added.

Ryanair passengers may be happy about the cheap flights and the no-frills service, even if the carrier's complaints department is smaller by far than, say, British Airways' customer service team.

But the regulators aren't quite as happy. There have been suggestions of illegal subsidy payments. The European Commission's Transport Directorate is investing Charleroi airport and the six-figure sums it's contributed to Ryanair to use the airport.

EU investigation

The Commission wants to ensure that there is no public authority which is using taxpayers' money in a way that will be illegal. If the commission does find against Charleroi, Ryanair might even have to reimburse them.

A Commission decision to outlaw what some would see as sweetheart deals could pose a clear risk to Ryanair's business. First it's got to prove that the deals breach European law, of course.

A greater threat might come from long-established airlines, competing directly with the no-frills carriers such as Ryanair, Easyjet or others. British Airways thinks its quality offering will win the day.

But O'Leary is his usual ebullient self: "We want to have competition every day. there has to be a reason to get out of bed and the best reason to get out of bed is to go and compete with somebody."

Will Ryanair triumph? It may yet see off the European regulators. It may also see off its aviation industry competitors. But the airline business itself has seen plenty of low-cost operators come and go over the years. Time will tell if Ryanair can win through and beat the big boys at their own game.

This programme was first transmitted on Wednesday 4 June 2003.




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