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Need I say Moores

20:20 hindsight

Europe’s oldest low-cost carrier, Ryanair, has just celebrated its 30th birthday in strong health and with many bright years ahead, but things could have played out very differently.

Three decades ago, Ryanair operated its first flight between Waterford and London Gatwick. On that day - July 8, 1985 – few people could have predicted it would grow to become one of Europe’s greatest airline success stories. Today Ryanair’s network spans 74 bases and 1,600 routes, operated by 315 aircraft with another 380 on order.

This made me think back to 1999, when Ryanair was still an awkward teenager, adjusting to its new low-cost identity*. Back then, I did some original research on the rise of low-cost carriers. This involved an interview with a budget airline executive, who told me that the whole of the European low-cost carrier industry was hovering on the brink.

If just one of these new airlines had a fatal accident, he said, it would have spelled disaster for the whole segment. Fortunately, that pivotal European low-cost carrier crash never happened.

Looking out across the thriving segment in 2015 with 20:20 hindsight this may sound rather dramatic, but my passenger surveys backed his comments up. Back then, people were very wary of budget airlines.

The business travelers that I interviewed were suspicious of how LCCs were able to offer such cheap fares and were worried that corners were being cut. Remember, this was fairly soon after 110 people were killed in the 1996 ValuJet Everglades crash, an accident which was linked with maintenance shortcomings.

Several million departures later, low-cost carriers still have a glowing track record. As easyJet founder Stelios Haji-Iannou said in a 2010 interview, “if you think safety is expensive, try an accident”. 

In the inevitable game of odds that is air transport, this positive run came to an end with the dramatic loss of Germanwings flight 9525 in March 2015. Europe reeled as it came to terms with the shock of its first major fatal low-cost carrier accident, but the Germanwings crash was not budget-airline specific; it could have happened to any airline.

Crucially, it came after the European low-cost segment had established a proven pedigree. One major accident in 25 years* of high-intensity operations is an impressive achievement.

Those same business travelers, who were hesitant to step onto a low-cost carrier because of safety concerns and restrictive network airline corporate travel deals back then, are now flocking to fill up their aircraft, helping them achieve annual load factors of around 90% – a figure unheard of for any carrier in 1999.

Liberalization was a huge part of the magic formula that created the right place and time for the low-cost model to work and - with that initial corporate reluctance - budget carriers were forced to focus on the price-sensitive leisure market.

Those leisure passengers – largely ignored by the network carriers because of their low yield and high seasonality, compared with the lucrative year-round business market - became the low-costs’ bread and butter, laying the foundations for the goliaths of the European short-haul industry that we see today.

The bad news for the network airlines is that business travelers are no longer afraid.

 

*Technically Ryanair only reinvented itself as a low-cost carrier in 1990, so the European LCC industry is only 25 years’ old.

 

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Need I say Moores

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