Low-cost airline to expand into lucrative transatlantic market
The Irish airline’s board has approved outline plans to fly between up to 14 European cities and the same number of US cities. Destinations will include New York, Boston, Chicago and Miami from London Stansted, Dublin and Berlin in Europe. The services could start in four or five years’ time if the company can secure a deal to buy long-haul aircraft.
Ryanair said it was already in talks with manufacturers about purchasing long-haul aircraft but declined to provide further details.
“European consumers want lower-cost travel to the USA and the same for Americans coming to Europe. We see it as a logical development in the European market,” the company said in a statement. A Ryanair spokesman said the airline’s proposals included one-way transatlantic fares beginning at £10.
Michael O’Leary, Ryanair’s chief executive, has long hoped to set up a low-cost transatlantic service. The company has, until now, held off as a series of predecessors have tried and failed to make such an idea pay. Zoom Airlines, a Canadian operation linking Gatwick and North America, had a brief existence in the last decade, while Sir Freddie Laker’s Skytrain famously went bust trying to pursue cheap flights to the US in the 1980s.
More recently, Oslo-based low-cost airline Norwegian Air Shuttle began a transatlantic service in 2013 with a return ticket from London’s Gatwick airport to New York starting at £389, although the cheapest flights can be few and far between. Gatwick boss Stewart Wingate described Norwegian’s long-haul launch as a “game-changing event”. But the costs of expanding into the US have plunged Norwegian into the red for the first time in eight years.
Ryanair’s head of marketing, Kenny Jacobs, told the Financial Times that the Irish carrier was a bigger brand and business than Norwegian and so would be able to build more traffic and a more efficient cost model.
Ryanair has recently seen an uplift in profit hopes after performance improved largely because of its discovery of the benefits of customer service. The airline has allowed more carry-on baggage, started allocating seating and cut punitive charges. It has also improved its website and launched a service for business customers.
The transatlantic route is one of the most profitable in the world, but it is dominated by long-established airlines, led by British Airways, American Airlines and Virgin Atlantic.
Gert Zonneveld, an analyst at Panmure Gordon, said Ryanair’s service would be aimed at a different market to the traditional carriers.
“It would generate new demand. If you can fly people across the Atlantic for a relatively small sum, a lot of people would fly out [to the States] for a long weekend.”
Ryanair would also need to attract business customers paying premium fares to make the flights economical, he added.
“There are a lot of questions, but I think it can probably happen. They have an incredibly strong record in their short-haul business on costs. From a unit-cost point of view they are they the lowest around.”
John Strickland, an independent aviation consultant, said the success of Ryanair’s transatlantic venture would depend on the airline getting a good deal on the purchase or lease of planes: “It is not just any aircraft, it is about getting efficient and cost-effective aircraft, otherwise you could lose your shirt.”
A low-cost transatlantic service would also need to attract a mix of customers, he said, both cost-conscious tourists and business travellers prepared to pay more. “If you have got people travelling for business, you have got a better chance of spreading your risk.”
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