Analysis: What's really behind O'Leary's mea culpa?

Analysis: What's really behind O'Leary's mea culpa?

Ryanair has seemingly experienced a customer service epiphany in recent days. Ian Taylor ponders why

Ryanair's new-found 'customer comes first' ethos and Michael O'Leary's previously unsuspected touchy-feely persona have attracted no end of attention.

Yet for once the carrier and its chief executive are not on the front foot.

This may seem a strange thing to say about an airline that carries 80 million passengers a year and is targeting 110 million.

But Ryanair's announcement of customer service improvements last Friday (October 25) was revealing.

The announcement came, Ryanair said, "after an extensive feedback programme" conducted through a "Tell Michael O'Leary" initiative launched 10 days earlier.

In between, O'Leary conducted a Twitter love-in with punters, whom he assured: "Humility, courtesy, service [are] my middle names."

So to show "we are listening and responding to our customers", Ryanair will:

  • Remove the 'Recaptcha' security code from its site for individual bookings - clearly the system has affected bookings;
  • Allow a 24-hour grace period for customers booking direct to correct an error to a booking - clearly people are pissed off with the previous charges for making a mistake;Operate 'quiet flights' with no PA announcements before 8am and after 9pm - clearly people are fed up with the sales patter;
  • Allow passengers a second small carry-on bag - clearly the ferocity of Ryanair's existing bag policy has aggravated customers, not to mention its airport 'partners' stripped of valuable retail revenue;
  • Cut its boarding card reissue fee from £70 to £15 - presumably because people have cottoned on that O'Leary is more Dick Turpin than Dick Tracy;
  • And halve the standard airport bag drop fee to £30 - because clearly even Ryanair  could not get away with such a hike indefinitely.

This poses a challenge to rivals, of course - a fact immediately acknowledged by investors who sold off shares in British Airways and easyJet, lowering the carriers' respective share prices.

All of it came after Ryanair issued a first profit warning in early September, albeit a relative one - failing to make €570 million (£485 million) would hardly rate as a warning for any other carrier.

Nonetheless, O'Leary has apologised for Ryanair's "over-abrupt culture" and declared the airline is becoming more "sophisticated".

"We have made some errors in the way we behaved in the past that need to be corrected," says O'Leary.

In a nutshell: "In the past we said 'go to hell'. The culture needs to evolve." Indeed. A major part of the correction in behaviour will be an appeal to business travellers.

"Before we get to next March, we will have a business product," O'Leary told the Airport Operators Association conference in London last week.

This is an intriguing idea. How many corporate travellers wish to fly to Frankfurt Hahn or Charleroi is unclear.

But a lot of corporate travellers must be heading to airports few others fly to because O'Leary claimed last week that 27% of Ryanair's existing traffic are business passengers.

This is higher than the 20%-25% the carrier claimed less than a month earlier, and the kind of growth we expect to see from Ryanair

Yet I'm bound to say I'm sceptical. One reason is most companies above a certain size want their corporate travel managed and require the management information that accompanies the process.

This is why most business travel goes through travel management companies (TMCs) and global distribution systems (GDSs). Ryanair stands aloof from both (although TMCs do book the carrier).

Another reason is easyJet: Ryanair's biggest rival has been wooing corporate customers since 2007 and with no little success.

EasyJet does what Ryanair does not. It flies to big hub airports (Schiphol and Charles de Gaulle). It offers flexible fares. It is available on GDSs.

Yet easyJet has a 20% target for corporate passengers. Last I heard, the Gatwick-based carrier's business traffic was at 17%. Could Ryanair really have a lead of 10 percentage points?

Figures released by Amadeus and reported today by Travel Weekly Business:am offer a wider context.

London is the world capital of low-cost carriers, with 15 million seats available in the first half of 2013 and year-on-year growth of 3%.

Europe is by some way the world's biggest regional low-cost market, with 182 million passengers in the first six months of 2013. But growth was just 0.8%.

That is the backdrop to O'Leary's mea culpa and Ryanair's conversion to corporate travel's attractions.

Amadeus reports low-cost traffic at Madrid down 27% year on year, Athens down 17% and Rome down 13%. Parts of Europe are hurting and Ryanair is not immune.
At the same time, the carrier has aircraft on order that require it add another 30 million passengers.

Unless Ryanair moves beyond the bargain basement - or flies beyond Europe and North Africa - it faces a challenge to find them.

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