Ryanair to USA

Michael O’Leary the CEO of Ryanair likes to startle people with announcements. Who can forget his infamous promise to charge to use the lavatory in-flight? Or the news in March that the airline was buying 175 Boeing 737-800s for almost $US16 billion.

On one of the takeover attempts of rival Irish airline Aer Lingus, last October, he promised $US150 fares on US to Ireland flights if the deal succeeded. He promised that the Aer Lingus brand would be kept: “We need a two-airline brand strategy,”. The takeover bid was thwarted but Ryanair owns 30 percent of its rival and intends to fight to keep it. Etihad owns three per cent and has announced they will up that stake.

In March, O’Leary announced plans to start Europe to US flights with prices starting from $US15. Of course that won’t include booking fee, airport taxes, credit card fees and boarding pass charges which will no doubt add several more dollars to the price. The Ryanair one class model is notorious for extracting cash from passengers with 20 percent of revenues coming from non fare sources.

Then Ryanair deputy chief executive Michael Cawley seemed to contradict his boss weeks later saying “I don’t think it is ever envisaged that Ryanair would get into the long-haul market… Long haul for us is flying to the Canaries…”

O’Leary revisited the US idea in April saying it is four or five years away.

At the Paris Air Show he flagged it again repeating his low fares promise but saying that there would be a premium cabin (similar to the Air Asia model). He suggested that the new service would begin with 30 to 50 aircraft flying from 15 US cities on day one.

The continued repetition of the idea suggests that it is percolating. The options for its execution would be:
1. Taking over Aer Lingus. The Irish flag carrier carrier would drop all of its European flights handing them over to Ryanair. It could easily keep its premium service with lounge access and frequent flyer points while downgrading its coach offerings and adopting more low cost carrier strategies. The Irish government, European regulators and Etihad would oppose the model but it would guarantee the survival of Aer Lingus.

2. Start up a separate long haul division Ryanair X or Ryanair Atlantic based on the Air Asia/Air Asia X model. The carrier would share website, marketing and catering.

3. Establish a completely new airline. This would be a reversal of the trend for full service carriers to start low cost carriers. The new airline would operate its own website, marketing and sales channels.

Whatever method, O’Leary has the cash and the gumption to do it.

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