Flanker2 wrote:
FR's partial shift in strategy is likely to increase the costs across all segments if they don't offer it as separate brands or optional things that can only be booked on corporate routes. For instance, a second bag will increase their costs of operating those typical leisure CRL flights as well, even if it's to satisfy the typical customer flying out of BRU.
A small increase in costs here and there over thousands of flights a day can result in a major difference on the earnings at the end of the year... which is a great concern that I have.
That's the whole point is it?
Selling frills as anciliary products is a nice add on, but they are doing more than just that: they are being lenient on booking errors, allowing more free cabin luggage, waving a kilogram or 2 in excess checked luggage, moving into bigger airports with higher costs and longer ground times and also often more delays etc. etc. all of which will drive up their costs which somehow need to be passed on to ALL passengers, not just those who decide to pay for it.
As already said, since they don't start at bigger airports under a seperate brand, all of this is somehow also going to be carried over to the 'old bases' too as passengers will come to expect it too there since they too fly the very same ryanair as the one at say BRU or FCO, where it is indeed needed to come with such a more business customer minded attitude.
Flanker2 wrote:
On the other hand, FR is not reacting to a bad year
Don't forget they have issued 2 profit warnings since summer and are known to be losing more than 100M over this winter for the very first time ever: while I agree this is not dramatic (yet), the clearly negative trend must have come as a huge shock to them, especially as their direct competitors and even the wider aviation industry is showing significantly improved operating results at the same time.
They clearly didn't see this coming as early as this spring even, so they have rightfully decided that they must act for they know that things wont get any better by just sitting it out.
As you say their access to subsidies -which have been a vital part of their business plan- will only decrease in future while competitors like vueling and easyjet are moving full spead ahead, stimulated by great commercial and financial successes which are making ryanair's operational results look very bleak in comparison, so a strategic reorientation was urgently needed, even if their current plans show all signs of being a little bit too rushed to feel comfortable with at present. O Leary seems to be in panic mode, quite frankly.
Flanker2 wrote:
SAVE's wait and see attitude is very understandable here indeed. I can see why this is also why they would like to have the best possible price for their capital share increase, the underlying risk is becoming bigger.
A 12.5% per annum ROI isn't bad, but obviously a shift in FR's strategy can bring changes to that as FR is a big mass in their portfolio of customers and the steadiest routes are most likely to be shifted to BRU.
Indeed.
If ryanair indeed feels that after this summer, they have managed to improve their deteriorating financial results by moving into the direction of easyjet/vueling/germanwings, don't expect them to just say: 'Good, we've stopped the assault'! Regardless what they are saying about their long term loyalty to CRL right now, they will not hesitate one second to move much more routes from CRL to BRU and make another U-turn on whatever strategic airport commitment they now show, just as they have been doing on their product strategy too which until 2 months ago couldn't be enough spartan, remember? Who would have thought in May they would be doing what they are doing now? Not even MOL himself, I bet!
Of course, BSCA -controlled by regional government- is pretending nothing changed and keeps a blind eye to the new reality, hoping things will turn out well for them, and it can, but still: they'd do well to keep a flexible attitude towards future, not to commit to any major investments short term (say put it on hold for at least a year) and especially not to rely too much on whatever assurances MOL gives them right now. If worst comes to being, CRL will just keep the very low yield, thin routes which operate just a few times weekly, with the big mass routes like BUD, DUB or whatever they have at CRL all quickly moved to BRU where they can make more profit from it, despite the higher costs there.
In the end, it all comes down to this simple question: given that the overwhelming majority of passengers from CRL are not from Charleroi itself but coming/going to places well north of Charleroi, are those passengers willing to pay a say 25 euro price difference for the convenience of a -from their point of view- more closer airport like BRU?
I have a feeling that for most of their steadiest routes (which are ultimately mostly business routes) the answer is YES, especially as Ryanair starts to target more upscale customers. If I am right, this can have huge repercussions for CRL.
Remember Girona - Barcelona? SAVE certainly does and it likely feeling there's a risk things may be moving in the same direction here!
