Having been chained, day and night, to a computer in Mallorca for the last seven years, a recent flight seemed like something of an adventure. Unfamiliarity had bred a lack of contempt. Not that I ever had any contempt for Ryanair, easyJet or indeed any other airline.
One's contempt monitor threatened to be activated by the hour spent in the aircraft on the tarmac in Palma. If it had to be any airline, then it was of course Ryanair, although in the inefficiency stakes it should really have been Vueling. One was prepared to take the pilot at his word that the slot with air-traffic control was missed because of the delay to the incoming flight.
The hour's wait wasn't, to be fair, overtaxing or uncomfortable. There again, I was well armed with liquid (water). Not everyone was by any means. Many was the complaint that they should have been giving out free bottles rather than charging three euros a pop. From my perspective, it wasn't a reason to be contemptuous, though it did make me think that I hadn't been missing anything since 2010.
Prior to the unfortunate announcement by the pilot, there had been the episode with actually getting onto the plane. I certainly couldn't recall it ever having taken so long (which must have been a contributory factor where air-traffic control was concerned). Why was the queue so long and slow? This became clearer the nearer the plane got. Passengers' luggage was being taken from them, tagged and deposited outside to be placed in the hold.
I, who had checked in a modest-sized suitcase, was both curious and baffled. In the airport departures it had become evident that there were all these people with suitcases. Not huge ones, but suitcases nonetheless. They had these cases, only for some of them (not all of them) to be divested of them.
I had of course totally overlooked the fact that one can take luggage on board, so long - in theory - that is no more than ten kilos. This is all part of what Ryanair's Neil Sorahan (chief financial officer) describes as the airline's niceness. Even had I been aware of this generosity, I wouldn't have availed myself of it. Dragging a case (even of modest size) around departures? You must be kidding. To hell with that: here, charge the credit card for the hold luggage.
What one presumes happened was that someone had calculated just how much luggage was destined to go on board. I say presume; I have no idea. But having not paid for hold luggage, a whole bunch of passengers still had to put up with waiting at the reclaim. What was I saying about inefficiency?
Despite the niceness, Ryanair's Sorahan has been less nice where some passengers are concerned. The airline's niceness has rebounded on it. Passengers, in his words, "are taking the piss". On-board luggage can and does exceed ten kilos. People coming with the "kitchen sink" could make the airline change its policy. Then, he adds, there are two-year-olds wheeling a bag onto the plane. Really? Two-year-olds manoeuvring ten kilos, even if they are on wheels?
But it does seem as if the niceness policy has got out of hand, while the nonsense of transferring luggage just as people are about to enter the plane is, well, nonsense.
In this era of low-cost travel, what do people want from an airline? Everything it appears. Cheapness creates demand for ever more cheapness, be it lugging oversize cases onto the plane or free water. The mass-production nature of the low-cost operation brings its downsides; inevitably, it does. The exercise is fundamentally about getting from A to B in the least expensive way possible: expense to both passenger and airline. Accordingly, not everything can be had. A one hundred per cent satisfaction rate, and certainly on a consistent basis, is not achievable.
Such satisfaction becomes ever more difficult to attain when one factors in the sheer scale of low-cost flights. The UK provides over a third of all low-cost passengers in and out of Spain: getting on for eight million of them who vastly exceed the numbers anywhere else. The Spanish bridle somewhat at the knowledge that a) there is so much low-cost travel, b) Ryanair, easyjet and Vueling (part of IAG) account for more than 60% of it, c) these three airlines account for a third of all international passengers.
This is condemned for contributing to "low-cost tourists". It may well do, but it also contributes to a highly buoyant tourism economy, and about the only Spanish-owned airline of any note that has been left standing - Air Europa - is now trying to play low-cost catch-up.
It is mass-production, commodity travel. It's nice because it's cheap. There would be way more complaints if it weren't.
Showing posts with label Ryanair. Show all posts
Showing posts with label Ryanair. Show all posts
Thursday, July 27, 2017
Saturday, February 11, 2017
Price Reductions: Ryanair And Market Dominance
The national minister for development, Íñigo de la Serna, has asked airlines to reduce their prices because of the cut to airport taxes that will come into effect on 1 March and which will be repeated each year until 2021. Although, as he has said, the government has no legal power to demand that they do cut prices, it does have some authority. The airlines are likely to play ball; it's wise to keep the minister sweet.
The first airline to say that it will reduce prices was Air Europa, the Mallorca-headquartered operation that flies the flag for Spanish aviation, a flag that has been progressively lowered to the point that it's almost sharing space with airport ground crews. Other significant airlines are either foreign or foreign-owned. For Juan José Hidalgo, the boss of Globalia, of which Air Europa is a part, a positive response to De la Serna's request was to have been expected: a patriotic statement of aviation intent.
Less patriotic and purely hardnosed was Ryanair's announcement that it will pass on the tax cut. Again, it was to have been expected. Michael O'Leary has constantly called for lower airport charges; they are all part of the low-cost mix. With Ryanair, though, how can anyone be certain that the reduction is being directly or partially applied? This is to not say that it won't be, but is to say that the airline's prices are flexible, and it has demonstrated its willingness to cut prices in order to guarantee occupancy.
In the final quarter of last year, Ryanair achieved 95% seat occupancy. That was some achievement. By coincidence, it also turned in a 95 million profit for the quarter. While this was down - it was attributed to the fall in the value of the pound - it was still a healthy return, given that its prices overall were 17% lower. Taking account of a reduction in airport tax shouldn't pose Ryanair any business difficulty.
The point with Ryanair, and indeed other airlines, is that price fluctuation reflects the application of science and in particular the technology of Big Data. Prices aren't determined on a whim or purely marketing speculation; there is knowledge to back it up. And this information has been gained over years through the analysis of purchasing behaviour and demand. You don't become a highly successful airline just by taking a punt.
By contrast, there is the case of Iberia, which now also has its low-cost brand. Its president, Luis Gallego, has said this week that 2017 is going to be a difficult year. IATA, the International Air Transport Association, is forecasting a fall in profits of the order of 16% because of a slowdown in global economic activity and rising costs. Iberia has yet to say if it will accede to the minister's request, but it was perhaps no coincidence that Gallego was sounding a warning about lower profits at the same time as the request was being made. There are, so it seems, some airlines, such as Ryanair, which have little problem adjusting to altered pricing mechanisms, while there are others which do.
It is the ability of Ryanair to sell places that leaves other airlines, especially Air Europa and Vueling, gasping to keep up. It has been suggested that additional flights in winter between Palma and both Barcelona and Madrid could cause "havoc" with competitors. Moreover, there is increased service between Ibiza and Madrid and Barcelona, to say nothing of other increases to, for instance, Gran Canaria. It's a full-frontal battle with Vueling, Norwegian and others, and one that Ryanair is well-positioned to win. It can get the occupancy, while competitors struggle to fill their planes. Price reductions? Bring 'em on.
The first airline to say that it will reduce prices was Air Europa, the Mallorca-headquartered operation that flies the flag for Spanish aviation, a flag that has been progressively lowered to the point that it's almost sharing space with airport ground crews. Other significant airlines are either foreign or foreign-owned. For Juan José Hidalgo, the boss of Globalia, of which Air Europa is a part, a positive response to De la Serna's request was to have been expected: a patriotic statement of aviation intent.
Less patriotic and purely hardnosed was Ryanair's announcement that it will pass on the tax cut. Again, it was to have been expected. Michael O'Leary has constantly called for lower airport charges; they are all part of the low-cost mix. With Ryanair, though, how can anyone be certain that the reduction is being directly or partially applied? This is to not say that it won't be, but is to say that the airline's prices are flexible, and it has demonstrated its willingness to cut prices in order to guarantee occupancy.
In the final quarter of last year, Ryanair achieved 95% seat occupancy. That was some achievement. By coincidence, it also turned in a 95 million profit for the quarter. While this was down - it was attributed to the fall in the value of the pound - it was still a healthy return, given that its prices overall were 17% lower. Taking account of a reduction in airport tax shouldn't pose Ryanair any business difficulty.
The point with Ryanair, and indeed other airlines, is that price fluctuation reflects the application of science and in particular the technology of Big Data. Prices aren't determined on a whim or purely marketing speculation; there is knowledge to back it up. And this information has been gained over years through the analysis of purchasing behaviour and demand. You don't become a highly successful airline just by taking a punt.
By contrast, there is the case of Iberia, which now also has its low-cost brand. Its president, Luis Gallego, has said this week that 2017 is going to be a difficult year. IATA, the International Air Transport Association, is forecasting a fall in profits of the order of 16% because of a slowdown in global economic activity and rising costs. Iberia has yet to say if it will accede to the minister's request, but it was perhaps no coincidence that Gallego was sounding a warning about lower profits at the same time as the request was being made. There are, so it seems, some airlines, such as Ryanair, which have little problem adjusting to altered pricing mechanisms, while there are others which do.
It is the ability of Ryanair to sell places that leaves other airlines, especially Air Europa and Vueling, gasping to keep up. It has been suggested that additional flights in winter between Palma and both Barcelona and Madrid could cause "havoc" with competitors. Moreover, there is increased service between Ibiza and Madrid and Barcelona, to say nothing of other increases to, for instance, Gran Canaria. It's a full-frontal battle with Vueling, Norwegian and others, and one that Ryanair is well-positioned to win. It can get the occupancy, while competitors struggle to fill their planes. Price reductions? Bring 'em on.
Friday, January 23, 2015
Talk, Talk: Airlines
There has been talk, you may be aware, of the Balearics forming its own airline. Talk is likely to be all it ever is, whether such a venture might be viable or not, whatever routes such an airline might serve or not. One established airline that would probably be against the idea is Ryanair, whose commercial director David O'Brien, you will recall, was doing the rounds last week in the Balearics and the Canaries, celebrating thirty years of the airline. The Balearic Islands are not unique in there being talk of an airline. They're talking in much the same manner in the Canaries, and Mr O'Brien has added to the talk. It would not be a good idea, he said the other day. Not a good idea to open the market, which in a sense is a rather odd thing for a representative of an airline that has long trumpeted the need for open markets to say. He was, after all and on a different subject, raising an objection last week to the monopoly that AENA has on Spanish airports. But when it comes to the Canaries having their own airline, he is against the idea. He went on to say that Ryanair do what others claim they will do, inferring that such an airline wouldn't work, and then to highlight ways in which Ryanair has been successful: "the key to success is in treating the passenger well, and this is what we have been doing for thirty years".
Mr O'Brien's comments haven't been greeted with universal support. A contributor to "Preferente" magazine, for example, referred to the "hypocrisy" of the "Anglo-Saxons" when talking about customer service (the Irish, it might be said, are more Anglo-Celtic, but be this as it may) and to the Spanish air industry being "in the hands of villains". So, not a lot of sympathy for the Ryanair position there, but the same contributor went on to imply that he didn't have a great deal of sympathy for Spanish airlines either: "Im not going to defend the Spanish air industry". And this industry has seen its position whittled away to the point that it has lost any previous domination of the market and is mostly owned by foreign companies (those villainous Anglo-Saxons, or Anglo-Celts in the case of Willie Walsh).
Because it remains a significant, Spanish-owned player, Air Europa does stand out, and it has reinforced its position in the Balearics by announcing that it will start operating inter-island flights from May, so creating competition to Air Nostrum. Fares should therefore come down, though they are already subject to a form of capping because they are considered to be flights that are a "public service obligation". There had been a great deal of huffing and puffing by Air Europa, which at one point appeared to be going to pull out of any future inter-island service, but presumably the arguments it had with the national ministry for development regarding scheduling have been resolved.
Over on the mainland, Air Nostrum was helping to make history by providing the first flight to take off from the white elephant airport of Castellón in the Valencia region. It was a flight with 88 passengers, all of them supporters of Villarreal football club who were off to the match against Real Sociedad. The club expects to use the airport, as it will save time and money to do so. Whether Castellón does now become a fully operational airport, we will have to wait and see. Ryanair might take note. The airport fees will probably be very favourable.
Mr O'Brien's comments haven't been greeted with universal support. A contributor to "Preferente" magazine, for example, referred to the "hypocrisy" of the "Anglo-Saxons" when talking about customer service (the Irish, it might be said, are more Anglo-Celtic, but be this as it may) and to the Spanish air industry being "in the hands of villains". So, not a lot of sympathy for the Ryanair position there, but the same contributor went on to imply that he didn't have a great deal of sympathy for Spanish airlines either: "Im not going to defend the Spanish air industry". And this industry has seen its position whittled away to the point that it has lost any previous domination of the market and is mostly owned by foreign companies (those villainous Anglo-Saxons, or Anglo-Celts in the case of Willie Walsh).
Because it remains a significant, Spanish-owned player, Air Europa does stand out, and it has reinforced its position in the Balearics by announcing that it will start operating inter-island flights from May, so creating competition to Air Nostrum. Fares should therefore come down, though they are already subject to a form of capping because they are considered to be flights that are a "public service obligation". There had been a great deal of huffing and puffing by Air Europa, which at one point appeared to be going to pull out of any future inter-island service, but presumably the arguments it had with the national ministry for development regarding scheduling have been resolved.
Over on the mainland, Air Nostrum was helping to make history by providing the first flight to take off from the white elephant airport of Castellón in the Valencia region. It was a flight with 88 passengers, all of them supporters of Villarreal football club who were off to the match against Real Sociedad. The club expects to use the airport, as it will save time and money to do so. Whether Castellón does now become a fully operational airport, we will have to wait and see. Ryanair might take note. The airport fees will probably be very favourable.
Friday, January 16, 2015
The Cost Of AENA Privatisation
Ryanair has been on tour in Spain this week. In Mallorca, the press was able to report the thoughts of commercial director David O'Brien. They were similar to those he had spoken in Tenerife. Ryanair, the largest airline operator in Spain in terms of passenger numbers, does things for a reason. It uses its presence to make its feelings known. In Mallorca there was all the stuff about winter flights. Yes, were landing fees and airport charges to be reduced in the off-season, then Ryanair would put on more flights from the UK and Ireland. Yes, AENA should apply differential rates for summer and winter. Yes, the Balearics should have ownership of the local airports, as decisions taken in Madrid are too distant. Ryanair said everything the local press would have wanted to hear, but Ryanair knows that none of this will happen.
In Tenerife, and so before coming to Mallorca, O'Brien had expressed his concerns about the privatisation of AENA. He said that it was likely to lead to higher airport charges, not lower. He noted that the privatisation was simply a case of swapping a publicly owned monopoly for a privately owned monopoly, which is only partly true, as the Spanish Government will keep 51%. It is true, however, as O'Brien suggested, that the privatisation process has been something of a shambles. The three key institutional shareholders, including Mallorca's Banca March, have been known for some time. They are in for 21%. The remaining 28% of shares may now finally go out for public subscription in February; there is now an auditor in place, which there hadn't been when the public sale was meant to have occurred last year.
Though the government will retain a majority of AENA shares, it will now have to take into account the requirements of its shareholders. A suggestion here that the government could simply call for a lowering of airport fees in the hope that these would bring more flights in the off-season and so more tourists, more hotels open etc. is fanciful. The development ministry, which oversees the airport infrastructure, will know that even more than before that the airports have to perform. Most of them don't. Palma airport does. Along with Barcelona, it turns in a profit way in excess of other airports in the AENA network, most of which run at a loss. The ministry is therefore interested solely in optimising airport performance and realising shareholder value; wider economic considerations are secondary.
Airport fees may indeed increase and not just because of privatisation. The Spanish airports seem likely to be operated according to the principle of the dual till in the not too distant future. This refers to the two revenue streams at an airport: those for direct airline activities and those for non-airline activities, such as car parking and retailing. Dual till would mean that the latter no longer in effect subsidise the former, and the non-airline activities are more profitable; investors are generally more interested in their value generation and not the actual airline operations.
AENA rightly point out that increasing passenger numbers (2014 has seen another record set in this regard) should offset the need for increased airport charges because of the added profit these passengers will bring, but the possibility exists that because of the shift to dual till and because of shareholder needs for a return, the charges will rise, thus dealing a blow to any potential lowering in the off-season, and especially at Palma, which is so important in the business mix of the AENA network.
What O'Brien had to say does of course make a lot of sense. The Balearics should have ownership of the airports, but this will not happen. There was a time when co-management by local government was a possibility; it surely can no longer be, thanks to privatisation. The Ryanair tour has been mainly about publicising the risk of those higher charges through a privatisation it considers to have been a mess (rightly so). It fears they will come, so as the largest operator in Spain it has been seeking to use its muscle to impress upon the government a need for restraint. As for lower charges in winter for Palma airport, they must remain highly unlikely.
In Tenerife, and so before coming to Mallorca, O'Brien had expressed his concerns about the privatisation of AENA. He said that it was likely to lead to higher airport charges, not lower. He noted that the privatisation was simply a case of swapping a publicly owned monopoly for a privately owned monopoly, which is only partly true, as the Spanish Government will keep 51%. It is true, however, as O'Brien suggested, that the privatisation process has been something of a shambles. The three key institutional shareholders, including Mallorca's Banca March, have been known for some time. They are in for 21%. The remaining 28% of shares may now finally go out for public subscription in February; there is now an auditor in place, which there hadn't been when the public sale was meant to have occurred last year.
Though the government will retain a majority of AENA shares, it will now have to take into account the requirements of its shareholders. A suggestion here that the government could simply call for a lowering of airport fees in the hope that these would bring more flights in the off-season and so more tourists, more hotels open etc. is fanciful. The development ministry, which oversees the airport infrastructure, will know that even more than before that the airports have to perform. Most of them don't. Palma airport does. Along with Barcelona, it turns in a profit way in excess of other airports in the AENA network, most of which run at a loss. The ministry is therefore interested solely in optimising airport performance and realising shareholder value; wider economic considerations are secondary.
Airport fees may indeed increase and not just because of privatisation. The Spanish airports seem likely to be operated according to the principle of the dual till in the not too distant future. This refers to the two revenue streams at an airport: those for direct airline activities and those for non-airline activities, such as car parking and retailing. Dual till would mean that the latter no longer in effect subsidise the former, and the non-airline activities are more profitable; investors are generally more interested in their value generation and not the actual airline operations.
AENA rightly point out that increasing passenger numbers (2014 has seen another record set in this regard) should offset the need for increased airport charges because of the added profit these passengers will bring, but the possibility exists that because of the shift to dual till and because of shareholder needs for a return, the charges will rise, thus dealing a blow to any potential lowering in the off-season, and especially at Palma, which is so important in the business mix of the AENA network.
What O'Brien had to say does of course make a lot of sense. The Balearics should have ownership of the airports, but this will not happen. There was a time when co-management by local government was a possibility; it surely can no longer be, thanks to privatisation. The Ryanair tour has been mainly about publicising the risk of those higher charges through a privatisation it considers to have been a mess (rightly so). It fears they will come, so as the largest operator in Spain it has been seeking to use its muscle to impress upon the government a need for restraint. As for lower charges in winter for Palma airport, they must remain highly unlikely.
Friday, June 14, 2013
MALLORCA TODAY - Ryanair charges to take ensaïmadas on board
Ryanair is to charge passengers at Palam airport who take on as hand luggage ensaïmadas which exceed the maximum permissible dimensions (55x40x20). The cost will be eight euros. It is a common to see passengers taking ensaïmadas onto planes, as they are typical gifts for friends and family on the mainland. There is a fear that the move could have a negative effect on ensaïmada production and retailing.
See more: Diario de Mallorca
See more: Diario de Mallorca
Friday, November 30, 2012
MALLORCA TODAY - Hoteliers concerned by Ryanair reductions
The announcement by Ryanair that it is to reduce flights from Madrid and Barcelona in protest against taxes concerns the Mallorca hoteliers federation, as flights to Palma will be affected.
See more: Diario de Mallorca
See more: Diario de Mallorca
Thursday, February 09, 2012
Flying High: Ryanair in Spain
Which airline takes more passengers to Spain than any other? It isn't Iberia, it isn't Vueling, it wasn't Spanair. It is Ryanair. The Irish airline doesn't simply carry more passengers than other airlines, it does so by a staggering margin of five million over its closest rival (Iberia). Over 17 million travellers used Ryanair in 2011. And the airline still manages to get it in the neck.
To the let's-give-O'Leary-a-lashing tedium that emanates from the UK now comes a strain of Spanish xenophobia. O'Leary, and it is as well, possesses a thick skin. He seems not to give a toss, and nor should he. Take away the passengers that Ryanair carries, and there would soon be howls of complaint way more vocal than any directed at the Irish airline.
There are all sorts of reasons why Ryanair is reviled and they boil down to an impression (if not always a reality) of playing fast and loose with rules, be they to do with subsidies, charges or industrial relations. Whatever the truth of the accusations that are constantly levelled at the airline, the fact is that it works, and works well. And it's this that many people can't stomach.
Former Spanair workers who gave O'Leary a hostile reception in Bilbao, one which, in true O'Leary fashion, he turned to his advantage, were protesting at a perception that their loss of employment is all down to Ryanair. It is a perception that has been whipped up from various sources, not just Spanish, but the whiff of xenophobia is unmistakable, and O'Leary's triumphalism hardly did anything to make it go away.
Attempts to somehow implicate Ryanair in Spanair's collapse are fallacious. Yes, it represented competition that Spanair found difficult to counter, but Spanair's fall was, as I have said before, the consequence of weak financing. It was also a consequence of having failed to apply an adequate strategy to take on Ryanair, unlike Vueling, which has. O'Leary didn't need to do anything, other than just wait in the wings for Spanair to go belly-up and then come to the rescue by adding ever more wings of his own flying around Spanish air space.
Spanair's demise was indicative of two issues which go wider than the airline industry, as they are indicative of Spain as a whole. One was industrial relations and the role of the unions; the other, a lack of competitiveness.
Ryanair has not exactly won a lot of friends with its fiercely anti-union stance. It is known, of course, that there is discontent among some Ryanair personnel, but the fact is that the airline has not been diverted by industrial action, which is more than can be said for some Spanish airlines.
There is uncertainty surrounding at least two of these airlines. Air Europa has been caught up in strikes. It would like to shift to a low-cost operation, but it is struggling to do so. Air Nostrum, taken head-on by Ryanair on some routes, simply can't compete on price. And then there's Iberia, which has had its share of unrest, brought about by what will be the launch of the low-cost Iberia Express at the end of March and by another hint of xenophobia directed at a supposed devil from the Emerald Isle, Willie Walsh, the boss of IAG, Iberia and British Airways' parent company.
The Spanish air industry needs more of a shake-up. O'Leary's comments about Spanair not deserving to survive because its prices were too high again didn't go down too well with some, but he was not wrong. As he has also not been wrong in pointing the finger, along with other airlines, at AENA's airport charges. It is encouraging, therefore, that Ryanair is in discussion with the Balearic Government and Palma airport over charges in winter and what actually constitutes the winter.
Whether this would result in more UK flights in winter is anybody's guess. For now, Ryanair, together with Vueling, are gobbling up what was left over from Spanair.
But with Spanair's disappearance comes the possibility of new players whose business models will be more attuned to the low-cost era. They will have to be in order to compete, and there is one existing airline which in 2011 flew under a third the number of passengers to Spain than Ryanair that might make a move and grow its traffic. And that's Easyjet. If it does though, watch out for a few more outbursts of xenophobia - the Spanish air industry is becoming less and less Spanish, which may be no bad thing.
Any comments to andrew@thealcudiaguide.com please.
To the let's-give-O'Leary-a-lashing tedium that emanates from the UK now comes a strain of Spanish xenophobia. O'Leary, and it is as well, possesses a thick skin. He seems not to give a toss, and nor should he. Take away the passengers that Ryanair carries, and there would soon be howls of complaint way more vocal than any directed at the Irish airline.
There are all sorts of reasons why Ryanair is reviled and they boil down to an impression (if not always a reality) of playing fast and loose with rules, be they to do with subsidies, charges or industrial relations. Whatever the truth of the accusations that are constantly levelled at the airline, the fact is that it works, and works well. And it's this that many people can't stomach.
Former Spanair workers who gave O'Leary a hostile reception in Bilbao, one which, in true O'Leary fashion, he turned to his advantage, were protesting at a perception that their loss of employment is all down to Ryanair. It is a perception that has been whipped up from various sources, not just Spanish, but the whiff of xenophobia is unmistakable, and O'Leary's triumphalism hardly did anything to make it go away.
Attempts to somehow implicate Ryanair in Spanair's collapse are fallacious. Yes, it represented competition that Spanair found difficult to counter, but Spanair's fall was, as I have said before, the consequence of weak financing. It was also a consequence of having failed to apply an adequate strategy to take on Ryanair, unlike Vueling, which has. O'Leary didn't need to do anything, other than just wait in the wings for Spanair to go belly-up and then come to the rescue by adding ever more wings of his own flying around Spanish air space.
Spanair's demise was indicative of two issues which go wider than the airline industry, as they are indicative of Spain as a whole. One was industrial relations and the role of the unions; the other, a lack of competitiveness.
Ryanair has not exactly won a lot of friends with its fiercely anti-union stance. It is known, of course, that there is discontent among some Ryanair personnel, but the fact is that the airline has not been diverted by industrial action, which is more than can be said for some Spanish airlines.
There is uncertainty surrounding at least two of these airlines. Air Europa has been caught up in strikes. It would like to shift to a low-cost operation, but it is struggling to do so. Air Nostrum, taken head-on by Ryanair on some routes, simply can't compete on price. And then there's Iberia, which has had its share of unrest, brought about by what will be the launch of the low-cost Iberia Express at the end of March and by another hint of xenophobia directed at a supposed devil from the Emerald Isle, Willie Walsh, the boss of IAG, Iberia and British Airways' parent company.
The Spanish air industry needs more of a shake-up. O'Leary's comments about Spanair not deserving to survive because its prices were too high again didn't go down too well with some, but he was not wrong. As he has also not been wrong in pointing the finger, along with other airlines, at AENA's airport charges. It is encouraging, therefore, that Ryanair is in discussion with the Balearic Government and Palma airport over charges in winter and what actually constitutes the winter.
Whether this would result in more UK flights in winter is anybody's guess. For now, Ryanair, together with Vueling, are gobbling up what was left over from Spanair.
But with Spanair's disappearance comes the possibility of new players whose business models will be more attuned to the low-cost era. They will have to be in order to compete, and there is one existing airline which in 2011 flew under a third the number of passengers to Spain than Ryanair that might make a move and grow its traffic. And that's Easyjet. If it does though, watch out for a few more outbursts of xenophobia - the Spanish air industry is becoming less and less Spanish, which may be no bad thing.
Any comments to andrew@thealcudiaguide.com please.
Wednesday, October 12, 2011
Subsidies And Winter Flights To Mallorca
The wailing and gnashing of teeth regarding flights between the UK and Mallorca in winter is understandable, as are also understandable the beliefs and thoughts that demand exists to make more flights viable. However, believing and thinking do not make a business case.
One aspect of the airline industry that has flown under the radar in all this discussion is not unimportant. A few days ago, the Spanish National Competition Commission (NCC) issued a report in which it complained that there was a "competitive distortion" in respect of airports in Spain. What it was specifically referring to was the varying levels of subsidies granted by regional governments to airlines.
In the past five years, the Balearics have issued subsidies to the tune of just under six million euros. This may sound a lot, but it isn't when you consider that Castille-León gave 84 million or that Aragón stumped up 34 million. Of the Balearics' six million, just slightly more than two million was allocated to routes into and out of Palma's Son Sant Joan airport.
Finding out what subsidies go to which airlines from which regions or which airports would be almost impossible, but where subsidies have been used, they have favoured the low-cost airlines. Ryanair, for example, has been known to extract enormous reductions on landing charges, paying way less every year than competitors.
Ryanair sparked off a row with Thomas Cook last year over what the tour and charter operator claimed were unfair subsidies for the airline to fly to the Canaries. These were subsidies, lobbied for by the Canaries Government, approved by national government and channelled through AENA, the airports authority. The scheme - discounts on airport charges - has helped off-peak travel, with the island of Fuerteventura having returned to the Ryanair winter schedule.
Thomas Cook may have had a point in being miffed by the scheme, but Ryanair comes in for all manner of criticism, and, subsidies or no subsidies, there are plenty of airports and plenty of passengers who would suffer without them, including those to Palma. If subsidies there are, then so be it.
The problem lies, as the NCC emphasises, with their unevenness and potential to distort competition. The point is that where subsidies are that significant, they can divert capacity from other routes, even ones which may have greater demand but which, because of the lack of subsidy and/or high landing fees etc., can prove to be less profitable.
Given the amount spent by the Balearics on subsidies, by comparison with some other parts of Spain (and in other countries), one would have to conclude that this may just have some bearing on off-peak flight scheduling.
The growth of traffic into Palma over the past few years has been hugely reliant on low-cost airlines, with UK passengers being arguably the greatest beneficiaries, but this low-cost market has itself created a distortion; it is one based on an expectation of cheap flights, the sustainability of which is now open to question. Douglas McWilliams at the ABTA convention argued that the day of the super cheap flight is all but over; even Michael O'Leary has questioned the future of low cost, though with O'Leary you can never be quite sure.
To maintain low cost requires all the right constituents to be in place, and one of them can be the subsidy. Offer a carrier alternative routes which may turn out to be more profitable even if they have lower demand, then it will take them.
Competitor airlines have been critical of subsidies, especially those that Ryanair receives. Spanair is one, and it has closed its Palma base. Air Berlin is another. Yet the Air Berlin case is significant. Though it is reducing capacity this winter, it was flying daily from several German airports last winter, and its flights were generally well booked, if not full. But the cost of an Air Berlin flight is typically substantially higher than that which you would expect of a UK carrier.
Should we conclude, therefore, that price has caused its own market distortion? It has created an expectation as to what it should cost to fly to and from Mallorca, certainly amongst the British. A carrier such as BA can't compete with such an expectation. Though it would be wrong to suggest that subsidies are all that counts, they are not unimportant, especially for low-cost airlines.
Just under six million euros. Here may be part of the answer, because, and I quote from the "AirObserver Blog", "subsidies are such a lucrative business ... (that they are) the sole reason routes exist".
Any comments to andrew@thealcudiaguide.com please.
One aspect of the airline industry that has flown under the radar in all this discussion is not unimportant. A few days ago, the Spanish National Competition Commission (NCC) issued a report in which it complained that there was a "competitive distortion" in respect of airports in Spain. What it was specifically referring to was the varying levels of subsidies granted by regional governments to airlines.
In the past five years, the Balearics have issued subsidies to the tune of just under six million euros. This may sound a lot, but it isn't when you consider that Castille-León gave 84 million or that Aragón stumped up 34 million. Of the Balearics' six million, just slightly more than two million was allocated to routes into and out of Palma's Son Sant Joan airport.
Finding out what subsidies go to which airlines from which regions or which airports would be almost impossible, but where subsidies have been used, they have favoured the low-cost airlines. Ryanair, for example, has been known to extract enormous reductions on landing charges, paying way less every year than competitors.
Ryanair sparked off a row with Thomas Cook last year over what the tour and charter operator claimed were unfair subsidies for the airline to fly to the Canaries. These were subsidies, lobbied for by the Canaries Government, approved by national government and channelled through AENA, the airports authority. The scheme - discounts on airport charges - has helped off-peak travel, with the island of Fuerteventura having returned to the Ryanair winter schedule.
Thomas Cook may have had a point in being miffed by the scheme, but Ryanair comes in for all manner of criticism, and, subsidies or no subsidies, there are plenty of airports and plenty of passengers who would suffer without them, including those to Palma. If subsidies there are, then so be it.
The problem lies, as the NCC emphasises, with their unevenness and potential to distort competition. The point is that where subsidies are that significant, they can divert capacity from other routes, even ones which may have greater demand but which, because of the lack of subsidy and/or high landing fees etc., can prove to be less profitable.
Given the amount spent by the Balearics on subsidies, by comparison with some other parts of Spain (and in other countries), one would have to conclude that this may just have some bearing on off-peak flight scheduling.
The growth of traffic into Palma over the past few years has been hugely reliant on low-cost airlines, with UK passengers being arguably the greatest beneficiaries, but this low-cost market has itself created a distortion; it is one based on an expectation of cheap flights, the sustainability of which is now open to question. Douglas McWilliams at the ABTA convention argued that the day of the super cheap flight is all but over; even Michael O'Leary has questioned the future of low cost, though with O'Leary you can never be quite sure.
To maintain low cost requires all the right constituents to be in place, and one of them can be the subsidy. Offer a carrier alternative routes which may turn out to be more profitable even if they have lower demand, then it will take them.
Competitor airlines have been critical of subsidies, especially those that Ryanair receives. Spanair is one, and it has closed its Palma base. Air Berlin is another. Yet the Air Berlin case is significant. Though it is reducing capacity this winter, it was flying daily from several German airports last winter, and its flights were generally well booked, if not full. But the cost of an Air Berlin flight is typically substantially higher than that which you would expect of a UK carrier.
Should we conclude, therefore, that price has caused its own market distortion? It has created an expectation as to what it should cost to fly to and from Mallorca, certainly amongst the British. A carrier such as BA can't compete with such an expectation. Though it would be wrong to suggest that subsidies are all that counts, they are not unimportant, especially for low-cost airlines.
Just under six million euros. Here may be part of the answer, because, and I quote from the "AirObserver Blog", "subsidies are such a lucrative business ... (that they are) the sole reason routes exist".
Any comments to andrew@thealcudiaguide.com please.
Monday, February 14, 2011
Taking The Flak: Airlines and winter flights
A canard can mean different things. It is a misleading story or it is an added-stability surface on an aircraft. It is also, in French, a duck. Get ready to duck, everyone; the flak being fired at aircraft and airlines is flying.
The story of flights to Mallorca during the winter is not a canard. There may be more of a plot to the story than the simple "tourist authorities must do something" narrative, but it is not essentially misleading. Hence the rumblings of discontent expressed in "The Bulletin", as opposed to the rumblings of engines as aircraft land in Palma; rumblings coming, in particular, from all points northwards in the UK.
The assertion that "there are plenty of winter connections to Faro, Alicante and Malaga" (from Scotland) is not wrong. Nor is the suggestion that Palma is badly served. Take, for example, easyJet and Ryanair. Over a period from 15 to 26 February, there are, from Glasgow, six easyJet flights to Faro and four with Ryanair. For Alicante, seven easyJet connections, five Ryanair. Malaga? Nine and five respectively. The picture is rather different, when it comes to Palma. The number of flights is zero and zero.
These are just two airlines from one city, so the story is not complete, but you can get a flavour of the story by looking at these numbers.
It is hard to compare like with like, but let's just consider what happens with flights from Germany. Take a city such as Nuremberg, a fair-sized place but smaller by about 60,000 people than Glasgow. Air Berlin, over the same February period, is flying from Nuremberg 18 times to Faro, 17 times to Alicante, 31 times to Malaga and 23 times to Palma.
I make this, therefore, 23 more flights over a twelve-day stretch than from a larger UK city. Moreover, Air Berlin's flights to Palma cost way more than do those of easyJet and Ryanair to the three Iberian destinations: 250 euros one way is about its Palma average. EasyJet's basic charge across the three averages out at 85 euros; Ryanair's at 49 euros.
Notwithstanding differences in airline markets in the two countries, the comparison is stark. It is that stark that you are entitled to ask what the hell's going on. You could put it down to stronger business links between Germany and Mallorca and to there being a larger German presence on the island than that from the UK. But the greater German population, roughly double the size of the British, is still not 23 flights worth greater. And these are Air Berlin flights from only one airport; it flies from many others with similar regularity through the winter.
The example of Air Berlin and its Nuremberg flights has to be treated with one caveat, and that is that, apart from a hugely expensive and circuitous trip to Palma with Lufthansa, it has sown up this connection. Which probably explains its prices. Nevertheless, it still manages, if you believe the availability information on its website, to more or less fill these flights. But the sowing-up of the route is itself instructive. Air Berlin's relationship with Mallorca goes way beyond its flights. Its director in Spain and Portugal is the former president of Mallorca's tourism board. The island and the airline are pretty much joined at the hip. Contrast this amicable arrangement with, for example, Ryanair's often frosty relationship with both the Spanish and Balearic governments.
If you go back to the easyJet and Ryanair flights to the peninsula, why are they going there and not to Palma? Much of the explanation has to do with population. In the Alicante province, the official number of UK residents is 127,561. In Mallorca, it is in the region of 16,000. In Malaga province, the number is 40,700. Only in the Algarve is the official figure lower than in Mallorca. So why the flights to Faro? Maybe they're all to do with golf. Mallorca may want a winter golfing tourist, but it does not have the Algarve's reputation for winter golf.
In terms of tourism, Malaga serves not only the Costa del Sol. There are also the mountains of the Sierra Nevada and the ski resort. In Alicante, where the winter climate is much like Mallorca's, there are concerns that the Costa Blanca is losing its winter trade. Yet in the province as a whole (50% or so larger than the area of Mallorca), 392 hotels have been open this winter. Mallorca doesn't come close.
Despite Alicante's UK population and more of a winter tourism tradition, compare Air Berlin's Nuremberg flights and easyJet and Ryanair's combined Glasgow flights. There are five more Air Berlin flights. But what is the German population in Alicante? Nothing like that of the British. Just short of 30% of the size at 36,000.
All of this leads one to conclude that both in Mallorca and on the peninsula, Air Berlin is either out of step with other airlines or that it has been highly proactive in forging markets. Its traffic to Mallorca cannot solely be explained by business travellers or property owners. So there have to be tourists, and German tourists face the same issues as to hotels, restaurants and attractions not being open and face the same weather as their British counterparts.
One reason why Air Berlin is able to generate business is that cycling tourism from Germany is so popular. But it has become popular because of the tripartite efforts of tour operators, airline and tourism officials, co-operation that is vital. The airline may well enjoy more than just amicable relationships with the regional government (and other governments), but whatever agreements it has, something is working - to everyone's benefit.
The story of the lack of flights to Palma from Scotland, and indeed other parts of the UK, is not a canard. But the story is never quite as black and white as it might seem and never as simple as just blaming tourism authorities for inertia. However, the experiences of Air Berlin suggest that greater opportunities for British airlines exist than might be realised. This said, if British airlines started charging the prices Air Berlin does, then just wait for the flak to start flying.
Any comments to andrew@thealcudiaguide.com please.
The story of flights to Mallorca during the winter is not a canard. There may be more of a plot to the story than the simple "tourist authorities must do something" narrative, but it is not essentially misleading. Hence the rumblings of discontent expressed in "The Bulletin", as opposed to the rumblings of engines as aircraft land in Palma; rumblings coming, in particular, from all points northwards in the UK.
The assertion that "there are plenty of winter connections to Faro, Alicante and Malaga" (from Scotland) is not wrong. Nor is the suggestion that Palma is badly served. Take, for example, easyJet and Ryanair. Over a period from 15 to 26 February, there are, from Glasgow, six easyJet flights to Faro and four with Ryanair. For Alicante, seven easyJet connections, five Ryanair. Malaga? Nine and five respectively. The picture is rather different, when it comes to Palma. The number of flights is zero and zero.
These are just two airlines from one city, so the story is not complete, but you can get a flavour of the story by looking at these numbers.
It is hard to compare like with like, but let's just consider what happens with flights from Germany. Take a city such as Nuremberg, a fair-sized place but smaller by about 60,000 people than Glasgow. Air Berlin, over the same February period, is flying from Nuremberg 18 times to Faro, 17 times to Alicante, 31 times to Malaga and 23 times to Palma.
I make this, therefore, 23 more flights over a twelve-day stretch than from a larger UK city. Moreover, Air Berlin's flights to Palma cost way more than do those of easyJet and Ryanair to the three Iberian destinations: 250 euros one way is about its Palma average. EasyJet's basic charge across the three averages out at 85 euros; Ryanair's at 49 euros.
Notwithstanding differences in airline markets in the two countries, the comparison is stark. It is that stark that you are entitled to ask what the hell's going on. You could put it down to stronger business links between Germany and Mallorca and to there being a larger German presence on the island than that from the UK. But the greater German population, roughly double the size of the British, is still not 23 flights worth greater. And these are Air Berlin flights from only one airport; it flies from many others with similar regularity through the winter.
The example of Air Berlin and its Nuremberg flights has to be treated with one caveat, and that is that, apart from a hugely expensive and circuitous trip to Palma with Lufthansa, it has sown up this connection. Which probably explains its prices. Nevertheless, it still manages, if you believe the availability information on its website, to more or less fill these flights. But the sowing-up of the route is itself instructive. Air Berlin's relationship with Mallorca goes way beyond its flights. Its director in Spain and Portugal is the former president of Mallorca's tourism board. The island and the airline are pretty much joined at the hip. Contrast this amicable arrangement with, for example, Ryanair's often frosty relationship with both the Spanish and Balearic governments.
If you go back to the easyJet and Ryanair flights to the peninsula, why are they going there and not to Palma? Much of the explanation has to do with population. In the Alicante province, the official number of UK residents is 127,561. In Mallorca, it is in the region of 16,000. In Malaga province, the number is 40,700. Only in the Algarve is the official figure lower than in Mallorca. So why the flights to Faro? Maybe they're all to do with golf. Mallorca may want a winter golfing tourist, but it does not have the Algarve's reputation for winter golf.
In terms of tourism, Malaga serves not only the Costa del Sol. There are also the mountains of the Sierra Nevada and the ski resort. In Alicante, where the winter climate is much like Mallorca's, there are concerns that the Costa Blanca is losing its winter trade. Yet in the province as a whole (50% or so larger than the area of Mallorca), 392 hotels have been open this winter. Mallorca doesn't come close.
Despite Alicante's UK population and more of a winter tourism tradition, compare Air Berlin's Nuremberg flights and easyJet and Ryanair's combined Glasgow flights. There are five more Air Berlin flights. But what is the German population in Alicante? Nothing like that of the British. Just short of 30% of the size at 36,000.
All of this leads one to conclude that both in Mallorca and on the peninsula, Air Berlin is either out of step with other airlines or that it has been highly proactive in forging markets. Its traffic to Mallorca cannot solely be explained by business travellers or property owners. So there have to be tourists, and German tourists face the same issues as to hotels, restaurants and attractions not being open and face the same weather as their British counterparts.
One reason why Air Berlin is able to generate business is that cycling tourism from Germany is so popular. But it has become popular because of the tripartite efforts of tour operators, airline and tourism officials, co-operation that is vital. The airline may well enjoy more than just amicable relationships with the regional government (and other governments), but whatever agreements it has, something is working - to everyone's benefit.
The story of the lack of flights to Palma from Scotland, and indeed other parts of the UK, is not a canard. But the story is never quite as black and white as it might seem and never as simple as just blaming tourism authorities for inertia. However, the experiences of Air Berlin suggest that greater opportunities for British airlines exist than might be realised. This said, if British airlines started charging the prices Air Berlin does, then just wait for the flak to start flying.
Any comments to andrew@thealcudiaguide.com please.
Tuesday, February 23, 2010
Ryan's Laughter - "El Mundo" And Ryanair
In inviting passengers to vote on ways that Michael O'Leary could settle a dispute with Stelios, Ryanair refer to themselves as "the world's favourite airline". You can't fault them for brassneck, though at a time when British Airways are looking at training even pilots to act as stand-in cabin crew as the former world's favourite airline plunges ever earthward on its collision course with staff, you can perhaps forgive the Irish operator a touch of hubris, to say nothing of taking the piss. And that's it with Ryanair - piss-taking. There is more than just a sense of knockabout, humour and "having a laugh" with Ryanair. How else can one treat the notions of passengers standing or paying to use the loo? They're jokes, aren't they? Anything for publicity. O'Leary is from the same school as Stelios and Branson in this respect.
But there is the other form of "having a laugh", one at the passenger's expense; the passenger who sees the expense of his flight clocking up as he has to add on the "fees" that the airline charges. "El Mundo"** has been having a go at the low-cost operator. It seems to take paying for a pee and standing in the aisles seriously, as it does examples of lax security, treatment of staff, receipt of subventions from Spanish regional governments and those added charges.
**(http://www.elmundo.es/mundodinero/2010/02/19/economia/1266605114.html)
Ryanair has a love-hate relationship with Spain, and not just because of its unauthorised use of a photo of Queen Sofia in its advertising. The regions love the business the airline brings, even if they are often forced to make certain accommodations. If not, the airline is quite willing to pack its bags and go elsewhere, though one might wonder who gets left to pay the fee for the bags. There is considerable disquiet in Spain, and even among those at governmental level, as to Ryanair's practices. The Balearic Government is meant to be pursuing legal action against the airline. Various ministries at national level have been written to by union leaders with demands to investigate the airline's labour relations and tax basis. For Ryanair, though, Spain is good business, with numerous airports, many willing to meet the airline's demand. For the passenger, believe it or not, Ryanair is also good business. Despite the negativity that flies its way, it has broadened options for the traveller.
It is those charges that do of course create the most criticism, and working one's way around Ryanair's hideous-looking website doesn't necessarily make it any easier to fathom them all out. The charges for online check-in and baggage are a nonsense. They are not included in the original price for two reasons: one, to show as low a price as possible and two, because - in the case of baggage - it is always possible to avoid the charge, assuming one can get everything into the required hand luggage size. But other airlines are in on the act. Ryanair is not unique in this regard.
One supposes that the add-ons are all about extracting as much "customer worth" as possible. This is 101 marketing for the new age. Like banks have so-called relationship managers who are ostensibly the customer's point of contact and service yet who are there to try and sell more product, so the airlines look to squeeze whatever else they can out of the customer. Unlike banks though, it is highly debatable whether Ryanair creates a relationship. Most passengers would happily go elsewhere. The airline should worry. The add-ons amount to some 20% of total revenue.
Ryanair can seem as if it is "having a laugh", but it is also disingenuous. It claims lowest-cost fares to ski resorts. Probably so, but sports equipment is levied at 40 euros a pop. Its environmental credentials include a "substantial reduction in the amount of waste" by comparison with airlines which give free meals and newspapers. This line of argument could have come from the Alastair Campbell guide to spin. The policy of a maximum weight allowance of 15kgs may be intended as a means of fuel-saving, but it also brings in extra dosh, so long as the passenger is willing to go along with it. And not all are. At Palma before Christmas, a couple weighed in with one bag at 17kgs. Rather than pay the excess, they called a relative who works in the airport and left with him some contents that brought the weight down. Ryanair's "having a laugh" is that loud that there is a whole website devoted to it - http://www.ryanaircampaign.org.
"El Mundo" is at pains to prove that Ryanair is not the cheapest of the low-costers. The paper draws comparisons with Vueling and EasyJet and also refers to the additional costs associated with booking in ways other than online, e.g. at the airport or via an agency, and to which one can add a call centre (more cost). The paper is though rather missing the point, which is that Ryanair is essentially an internet company. Automation of its processes is one aspect which allows it to be low-cost. The customer is at a distance, and that's where the airlines wants the customer, in front of a computer monitor, accessing only its website preferably. The customer is made to do some of the work, like printing out boarding passes. So much for relationship management (echoing a point I made yesterday), and any notion that the airline may wish to forge a close bond with the customer. The bond lies in the price, and the unpalatable truth for those who might want to give Ryanair a kicking, including "El Mundo", is that the prices are low, very low, even once you add on the basic add-ons for baggage and check-in. Ultimately, it's all about changing habits and expectations. Flying is far from the pleasure it once was, and all the security and faffing about that is now required has seen to that, alongside the low-cost service. Flying is now a pain in the neck, so the cheaper the better, and Ryanair knows this. Yes, its charges can seem unfair and yes, it can seem disingenuous, but play the game - rather as airports and authorities have to play the Ryanair game - and the prices are still good. At Christmas it cost, with the add-ons, sixty euros to go from Palma to Stansted. Sixty euros. You might spend that on a couple of weeks worth of petrol - and not go very far. There should perhaps be some perspective.
Any comments to andrew@thealcudiaguide.com please.
But there is the other form of "having a laugh", one at the passenger's expense; the passenger who sees the expense of his flight clocking up as he has to add on the "fees" that the airline charges. "El Mundo"** has been having a go at the low-cost operator. It seems to take paying for a pee and standing in the aisles seriously, as it does examples of lax security, treatment of staff, receipt of subventions from Spanish regional governments and those added charges.
**(http://www.elmundo.es/mundodinero/2010/02/19/economia/1266605114.html)
Ryanair has a love-hate relationship with Spain, and not just because of its unauthorised use of a photo of Queen Sofia in its advertising. The regions love the business the airline brings, even if they are often forced to make certain accommodations. If not, the airline is quite willing to pack its bags and go elsewhere, though one might wonder who gets left to pay the fee for the bags. There is considerable disquiet in Spain, and even among those at governmental level, as to Ryanair's practices. The Balearic Government is meant to be pursuing legal action against the airline. Various ministries at national level have been written to by union leaders with demands to investigate the airline's labour relations and tax basis. For Ryanair, though, Spain is good business, with numerous airports, many willing to meet the airline's demand. For the passenger, believe it or not, Ryanair is also good business. Despite the negativity that flies its way, it has broadened options for the traveller.
It is those charges that do of course create the most criticism, and working one's way around Ryanair's hideous-looking website doesn't necessarily make it any easier to fathom them all out. The charges for online check-in and baggage are a nonsense. They are not included in the original price for two reasons: one, to show as low a price as possible and two, because - in the case of baggage - it is always possible to avoid the charge, assuming one can get everything into the required hand luggage size. But other airlines are in on the act. Ryanair is not unique in this regard.
One supposes that the add-ons are all about extracting as much "customer worth" as possible. This is 101 marketing for the new age. Like banks have so-called relationship managers who are ostensibly the customer's point of contact and service yet who are there to try and sell more product, so the airlines look to squeeze whatever else they can out of the customer. Unlike banks though, it is highly debatable whether Ryanair creates a relationship. Most passengers would happily go elsewhere. The airline should worry. The add-ons amount to some 20% of total revenue.
Ryanair can seem as if it is "having a laugh", but it is also disingenuous. It claims lowest-cost fares to ski resorts. Probably so, but sports equipment is levied at 40 euros a pop. Its environmental credentials include a "substantial reduction in the amount of waste" by comparison with airlines which give free meals and newspapers. This line of argument could have come from the Alastair Campbell guide to spin. The policy of a maximum weight allowance of 15kgs may be intended as a means of fuel-saving, but it also brings in extra dosh, so long as the passenger is willing to go along with it. And not all are. At Palma before Christmas, a couple weighed in with one bag at 17kgs. Rather than pay the excess, they called a relative who works in the airport and left with him some contents that brought the weight down. Ryanair's "having a laugh" is that loud that there is a whole website devoted to it - http://www.ryanaircampaign.org.
"El Mundo" is at pains to prove that Ryanair is not the cheapest of the low-costers. The paper draws comparisons with Vueling and EasyJet and also refers to the additional costs associated with booking in ways other than online, e.g. at the airport or via an agency, and to which one can add a call centre (more cost). The paper is though rather missing the point, which is that Ryanair is essentially an internet company. Automation of its processes is one aspect which allows it to be low-cost. The customer is at a distance, and that's where the airlines wants the customer, in front of a computer monitor, accessing only its website preferably. The customer is made to do some of the work, like printing out boarding passes. So much for relationship management (echoing a point I made yesterday), and any notion that the airline may wish to forge a close bond with the customer. The bond lies in the price, and the unpalatable truth for those who might want to give Ryanair a kicking, including "El Mundo", is that the prices are low, very low, even once you add on the basic add-ons for baggage and check-in. Ultimately, it's all about changing habits and expectations. Flying is far from the pleasure it once was, and all the security and faffing about that is now required has seen to that, alongside the low-cost service. Flying is now a pain in the neck, so the cheaper the better, and Ryanair knows this. Yes, its charges can seem unfair and yes, it can seem disingenuous, but play the game - rather as airports and authorities have to play the Ryanair game - and the prices are still good. At Christmas it cost, with the add-ons, sixty euros to go from Palma to Stansted. Sixty euros. You might spend that on a couple of weeks worth of petrol - and not go very far. There should perhaps be some perspective.
Any comments to andrew@thealcudiaguide.com please.
Monday, July 21, 2008
Summertime Blues
First viewing in weeks. An estate agent admitted to me the other day that this was the case. Want to know in how much of a trough the local property market is? Go ask a few estate agents. Don't ask those who deal at the luxury end (even if some of these are feeling the pinch when it comes to British purchasers faced with a poor exchange rate). Talk to those at the middle and low end. All those estate agencies that have closed, and nothing by way of an improvement in the market; it just gets worse it seems. Another agent told me of an apartment for sale in Puerto Alcúdia. Pretty good place, but a seriously overstretched owner who had hoped the summer rentals would suffice in order to pay the hefty mortgage, the sort of mortgage it would be hard to conjure up just at present. You can't even rely on the holiday let to bail you out. The Taylor Woodrow development in Puerto Pollensa, the one from the company with the "We Build in Spain since 1958" line; these apartments would once have all been snapped up off-plan. They haven't been. In Playa de Muro there is a development of detached houses - "in an extraordinary setting, clean beach and natural surroundings make this a veritable 7km paradise within your reach". This comes from the catalogue thing that was shoved under windscreen wipers at the weekend. It follows the appearance of several street posters pointing the potential customer in the direction. It's a building site. They want, sorry need, off-plan sales. The spate of publicity suggests a worry, perhaps more. Sell off-plan and the deposit and the virtual guarantee of a sale will help to secure further lines of credit from the bank. That would be the hope. There is another aspect to the property development uncertainty. It is the inordinately long time that it can take to actually finish the building. Given restrictions on construction work in tourist areas during the season, the time-scale between starting, beginning to sell off-plan, receiving deposits to final completion can be extremely lengthy. It only takes an economic crisis to invade that time-scale for the walls to come tumbling down. And this is what has been happening.
Martinsa-Fadesa, one of Spain's largest property developers, has collapsed. "The Sunday Times" carried this story yesterday, angling it from the point of view of the Brit purchaser who stands to lose a shedload. The paper mentions also an unfinished development on the Costa Blanca. There are probably many more. The problem now is that if a deposit is put down, it may never be recouped and the property may never be built. Martinsa-Fadesa has been hit by the double whammy of too much borrowing and therefore too much debt and a fall of up to 60% in Spanish developer sales.
Picking up on the reference to Spanair on 19 July (the airline is planning the axeing of a third of jobs), there is now also the news - carried by "The Bulletin" over a couple of days - that Ryanair is pulling its Palma service for a period this winter (from 4 November till 19 December). The company cites the cost of fuel and the costs of operating at Palma, this latter point being challenged by AENA, which runs Palma airport. Whatever the situation, Ryanair's decision hardly warms the already chilly winter scene. Winter flights they may be, but at present there ain't no cure for the summertime blues, though at the end of the month Balearics leader Francesc Antich is due to unveil a package of measures to assist the freezing local economy. I'm not sure we should be holding our breath.
Sorry, it's not great news today. I'll try and be more cheery tomorrow.
QUIZ
Yesterday's title - The Beatles, "A Day In The Life" (http://www.youtube.com/watch?v=gZez_k4vAzU). Today's title - who? Died at 21.
(PLEASE REPLY TO andrew@thealcudiaguide.com AND NOT VIA THE COMMENTS THINGY HERE.)
Martinsa-Fadesa, one of Spain's largest property developers, has collapsed. "The Sunday Times" carried this story yesterday, angling it from the point of view of the Brit purchaser who stands to lose a shedload. The paper mentions also an unfinished development on the Costa Blanca. There are probably many more. The problem now is that if a deposit is put down, it may never be recouped and the property may never be built. Martinsa-Fadesa has been hit by the double whammy of too much borrowing and therefore too much debt and a fall of up to 60% in Spanish developer sales.
Picking up on the reference to Spanair on 19 July (the airline is planning the axeing of a third of jobs), there is now also the news - carried by "The Bulletin" over a couple of days - that Ryanair is pulling its Palma service for a period this winter (from 4 November till 19 December). The company cites the cost of fuel and the costs of operating at Palma, this latter point being challenged by AENA, which runs Palma airport. Whatever the situation, Ryanair's decision hardly warms the already chilly winter scene. Winter flights they may be, but at present there ain't no cure for the summertime blues, though at the end of the month Balearics leader Francesc Antich is due to unveil a package of measures to assist the freezing local economy. I'm not sure we should be holding our breath.
Sorry, it's not great news today. I'll try and be more cheery tomorrow.
QUIZ
Yesterday's title - The Beatles, "A Day In The Life" (http://www.youtube.com/watch?v=gZez_k4vAzU). Today's title - who? Died at 21.
(PLEASE REPLY TO andrew@thealcudiaguide.com AND NOT VIA THE COMMENTS THINGY HERE.)
Subscribe to:
Posts (Atom)
