Budget Travel - OT: Germanwings boss: Ryanair won't last

I suspect this will be Mod-speeded elsewhere but thought that BA FTers, given their interest in FR ;), might be interested in Germanwings' view of FR.

The chief executive of German low-cost carrier Germanwings Thomas Winkelmann has predicted the demise of Ryanair because it does not attract the corporate market.

The airline boss told Travelmole that airports also found that the more Ryanair flies to an airport, the higher the losses it has to sustain. He added that tax payers in destinations should not have to bear the brunt of Ryanair’s business model.

He said: “I think the Ryanair model is coming to an end. The more Ryanair flies to a destination, the more losses taken by the airport and the local tax payers wont stand for that.”

Ryanair was unavailable for comment.

More at http://www.travelmole.com/stories/1139128.php?mpnlog=1&m_id=_r_r_rb~An

Germanwings fly to all of 2 destinations ex-UK, FR somewhat more. :eek:

Well what Germanwings is saying is that the Easyjet model is more sustainable than the Ryanair one.

Which is probably just about the case.

I recall Safeway-UK Boss saying the same about Morrisons :D

I think Herr Winkelmann suffers from too much wishful thinking, and needs a little reality check. While I may not often agree with MOL's business strategy - it is hugely successful. Germanwings carried 7 million pax last year, FR 57 million. Germanwings is part of Lufthansa - FR is independent. Most (although certainly not all) airports fall over themselves to get FR service.

LOL- what a douche.

Ryanair will be around longer than Germanwings.

I don't understand the bit about airports making higher losses because of more flights. Are the airports completely subsiding FR and not making any money from them? I guess the article doesn't take into account the boast of tourist spending in these areas which presumably the local tax payers are quite happy about.

Well what Germanwings is saying is that the Easyjet model is more sustainable than the Ryanair one.

Which is probably just about the case.


I assume there's a bit missing? Assuming that's what you intended, then I agree. FR's strategy of only going places where they can get heavy local subsidies has been good to get started, but I too think Easyjet's is more sustainable. I'd also point to the similarity between Easyjet and the Granddaddy of LCC's - Southwest who have been in business a long time and have achieved a very sustainable business with an enviable track record of profitability. One of the characteristics of WN is their customer service - they're easy, helpful, straighforward people to deal with who will do their darndest to get you to their destination when things go wrong, rather than require the poor passenger to insure against their incompetence. My guess is that lack of customer service will cap FR's growth, and once they start to go ex-growth the whole model is going to fall apart.

Thanks for pointing that out, bernardd, duly corrected ;)

One would have to be brave indeed to bet on Germanwings being the long-term winner of Ryanair, but it's true that some airports have failed to reach agreement with Ryanair because they don't see the economic benefit.

I don't understand the bit about airports making higher losses because of more flights. Are the airports completely subsiding FR and not making any money from them? I guess the article doesn't take into account the boast of tourist spending in these areas which presumably the local tax payers are quite happy about.
Some make losses from them, as they pay FR money for each PAX they bring in, usually in a somewhat disguised form. Ever wondered why local authorities buy advertising space in Ryanair's planes, or its flight magazine?

The "extra tax", if it actually exists, does not usually end up in the airport's coffers, or even in the local authority operating it. Sometimes, "white elephant" airports will be happy to pay for business, as long as it keeps the locals in jobs and creates the impression that "something's being done" to create some semblance of sustainable business activity. Frankfurt-Hahn, and various local chamber of commerce operated French airports, spring to mind.

Sometimes, "white elephant" airports will be happy to pay for business, as long as it keeps the locals in jobs and creates the impression that "something's being done" to create some semblance of sustainable business activity. Frankfurt-Hahn, and various local chamber of commerce operated French airports, spring to mind.


The corrollary of that in France was it helped suck in Northern Europeans who bought up the pretty local houses for a song pricing the French off the land. Presumably shrinking asset values in the UK will have restricted the supply of funds for second homes in rural France, though I guess FR are shuttling more than a few people down there who now have "white elephant" second homes to go with the "white elephant" airports. It's a funny old world, isn't it?

I seem to recall the CEO of Lufthansa saying some years ago that German passengers wouldn't fly with Ryanair as they prefer to pay for full service.

... and FR fly from 9 German airports, 10 if you include BSL/MLH/EAP.

I don't think all their passengers are non-German so they must be doing something right.

In the long term, consumers are suckers for low prices, and loyal to brands largely for that reason alone.

Of course, that means that Ryanair is unsustainable once you take into account the extras they charge...!

I don't understand the bit about airports making higher losses because of more flights. Are the airports completely subsiding FR and not making any money from them? I guess the article doesn't take into account the boast of tourist spending in these areas which presumably the local tax payers are quite happy about.
Airports usually set a PSC which reflects the costs of providing the services to the airline for each plane, in addition to the landing fees.

If, in trying to attract a voracious LCC, the airport unwisely reduces its PSC (new airlines, offering new routes, will generally look for discounts from the airport) to below the break even point, hoping to make it up by increased revenue from the terminal (car parking, shops, etc), and it can't, then the more pax the airport handles, the greater the losses will be.

I assume there's a bit missing? Assuming that's what you intended, then I agree. FR's strategy of only going places where they can get heavy local subsidies has been good to get started, but I too think Easyjet's is more sustainable. I'd also point to the similarity between Easyjet and the Granddaddy of LCC's - Southwest who have been in business a long time and have achieved a very sustainable business with an enviable track record of profitability. One of the characteristics of WN is their customer service - they're easy, helpful, straighforward people to deal with who will do their darndest to get you to their destination when things go wrong, rather than require the poor passenger to insure against their incompetence. My guess is that lack of customer service will cap FR's growth, and once they start to go ex-growth the whole model is going to fall apart.

WN do seem to have something, cheery staff, no bag fees, American on time departure ethic, more in common with eazyjet certainly. They dont come off too badly on Airline USA and it was a huge surprise to find they were a perfectly good LCC an better than US on the routes I have used

I seem to recall the CEO of Lufthansa saying some years ago that German passengers wouldn't fly with Ryanair as they prefer to pay for full service.

I am not so sure if that is quite correct, given the general price consciousness of German consumers ("Geiz ist Geil" or Miserliness Rules mentality) and hence, the woefully under-developed service industry for an economy the size of Germany's ....

I seem to recall the CEO of Lufthansa saying some years ago that German passengers wouldn't fly with Ryanair as they prefer to pay for full service.IIRC, Germany is the country that gave the world Aldi and Lidl.

'Nuff said.

I am not sure why this has become a "will Germanwings outlast Ryanair debate". Surely the point of the original comment is valid - FR do not attract buisness customers and place a high financial burden on the airports and their local tax payers to which they fly. This is all down to their business model, which seems to me to be as follows:

Extract best possible deal from local/regional airports (but at risk that this may be an unlawful state subsidy or local tax payers will not be willing to continue to foot the bill in the longer term).

Advertise low headline fares (but have numerous extras which are difficult to avoid).

Take no responsibility if things go wrong (after all if you pay a penny or an euro cent for a flight, do you really expect full service style compensation if things go wrong?)

The issue with all three parts of this is that the EU could at any moment totally destroy the whole model. What would happen if any loss making airport charges were deemed unlawful state subsidy, all charges had to be included in the advertised price unless the majority of customers could reasonably avoid them and full EU compensation were strictly enforced with rejection of many outside the airline's control claims. Surely the business model then fails.

The point that low headline fares don't often translate into reality and if anything goes wrong, you are on your own, would surely put off most businesses - the very point of the original comments.

Never thought I'd be defending FR. I've got to declare an interest though - I've got some very cheap tickets booked to Italy in a couple of weeks, and don't really want them to go bankrupt before then :D

Extract the best possible deal from an airport - sounds like common business sense to me - although you could argue over the definition of best. And don't forget that the European Court overruled the Commission on the Charleroi case.

hidden charges - well - if consumers are stupid enough to book a more expensive ticket (incl charges) on FR than they could get on another airline, they deserve it. Fact is of course than in most cases FR genuinely is cheaper, even taking total travel cost into account. Consumers are very price sensitive.

No responsibility - true - but otoh their on time performance is better, and they don't loose many bags. What they've done is simplify the model so they can pass cost saving on to travellers. After all, those shiny Electron cards you get from BA have to be paid from somewhere - it is simply included in your fare.

So - they don't attract business travellers, and therefore they won't succeed. That's a bold statement.

So - they don't attract business travellers, and therefore they won't succeed. That's a bold statement.

I think the main thrust of this is that airlines are in the yield management business. You can offer quite a few headline grabbing low fares so long as you have enough people prepared to pay top dollar (relatively speaking) to fly at very short notice. The point is what business traveller is ever going to be willing to pay the higher prices whenever there is a choice? How can anyone make a profit on an aircraft full of passengers paying 1p each? No matter how efficient they are the fuel alone costs more than this without the operating costs of the aircraft, staff etc. etc.

FR has been quite inventive in broadening out its source of revenue but there has to be a finite limit to how far they can take this? Their considerable income from selling used aircraft (bought very cheaply as part of a large block purchase deal) has now dried up and only so many local authority operated airports are going to be attractive O&D locations.

There is a certain element of society that values cost above everything else and who will presumably stay loyal to FR no matter how badly they are abused at the hands of the airline. They are presumably the type of people who eat at places like Taybarns. Good luck to them but this customer segment alone does not give you a profitable business model.

How can anyone make a profit on an aircraft full of passengers paying 1p each?They don't, of course. You answered your question earlier in your post.... airlines are in the yield management business.ISTR that FR's average fare is around €45 and their costs are somewhat lower than legacy carriers'.

We have plenty of loss making airports here in Germany which realisitcally should be closed down immediately instead of funding the ever growing deficit by taxpayers money.
Weeze (advertised as DUS by FR; 80km from DUS) and Lübeck (advertised as HAM by HAM; 70km for HAM) come to mind, as does Hahn. (130km from FRA).

All of these airstips generate high deficits each years and need to be bailed out by local governments. In Weeze the regional city of Kleve pumped more than €20m into this airstrip and only yesterday Lübeck got another cash injection IIRC of €1.4m to keep the airport afloat.

FR certainly isn't paying enough for the use of these facilitites. I really don't see why my tax Euros should be put to use to fund these operations ??

... and FR fly from 9 German airports, 10 if you include BSL/MLH/EAP.

..........err .......... actually the airport itself is built on French soil, and is reached from Switzerland by a gated road. The designation BSL/MLH strictly refers to the sector you are flying out of (the airport is built in the form of a Y which is split down the middle) and EAP because of its proximity to Germany is really only a courtesy title ......... although all three can be used.

FR certainly isn't paying enough for the use of these facilitites. I really don't see why my tax Euros should be put to use to fund these operations ??


Nor me! To compund the problem national Governments are (allegedly)committed reducing carbon footprints yet local Governments are doing unnecessary things to increase them. How twisted is that? Particularly in Germany that has a decent railway network and a good fleet of ICE's.

There is a certain element of society that values cost above everything else and who will presumably stay loyal to FR no matter how badly they are abused at the hands of the airline. They are presumably the type of people who eat at places like Taybarns.

I'd never heard of Taybarns before you mentioned it so I googled it.

It looks repulsive.

I fully support making sure that people on low incomes have enough to eat, but this sort of "all you can eat buffet", with the (low) quality of food that it necessarily involves, does not engender thoughtful attitudes to a meal as a social occasion with wider ramifications than merely eating to fill up, as if you're filling the tank of a car with petrol.

The notion that people should be able to choose is fine, but what about a choice that is actually harmful, but which is not really a choice because it's the only option some can afford?

See here (http://www.telegraph.co.uk/health/healthnews/6451119/Junk-food-as-addictive-as-drugs.html) about junk food being as addictive as heroin.

Weeze (advertised as DUS by FR; 80km from DUS) and Lübeck (advertised as HAM by HAM; 70km for HAM) come to mind, as does Hahn. (130km from FRA).Well, yes. At least they use LBC as the code for Luebeck ('Hamburg') and we have a regular business flyer to Luebeck. :) On a technicality, FR don't advertise Weeze as DUS but Dusseldorf (Weeze) (NRN) and I don't think anybody booking FR to NRN would think they would land at DUS.

FR's other German airports include BRE and SXF which are hardly remote. Indeed, many (most?) of FR's airports are regular airports.

..........err .......... actually the airport itself is built on French soil ...Yes, I know. ;) I've been there more than once. It is promoted as EuroAirport serving three countries. Why, we even saw a signpost to Germany last time we were there. :eek: That's why I said:FR fly from 9 German airports, 10 if you include BSL/MLH/EAP.:)

Oh goodie. Another chance to mention underlying and induced demand. Twice in 24 hours. I never would have imagined.

The Germanwings chap seems to fail to understand that a large part of FR's traffic predominately arose from induced demand, which later became a structural feature of European air travel, and not from a change in underlying demand. The huge amount of demand they created, together with all the unbundling initiatives they employ, is sufficient to sustain the airline at low yields. Hence the argument that FR will not survive because they do not have the corporate market is incorrect.

Just to explain the two concepts for those who don't know: induced demand comes from people who would not fly at the old level of fares but are willing to, often frequently, at the new lower level; on the other hand underlying demand represents those who would fly anyway at the old fare levels, and this probably rises with business activity and incomes.

You could, to be honest, argue that the Ryanair / local authority business model makes a lot of sense.

Imagine you are tourist chief of Biarritz and have a budget of €1m to attract more tourists. You could either spend €1m on a random advertising blitz, with questionnable benefits, or could give €1m to Ryanair (through advertising subsidies, cheap landing fees at the local authority owned airport etc) to physically bring people in by a) getting a route running (no-one will come if they can't get there) and b) offering cheap enough fares.

This latter option does indeed generate some bodies on the ground and can be partially self-funding, assuming that Biarritz has a 'bed tax' of a couple of Euros a night to fund local tourism, as well as the non-financial benefits of increased employment etc.

They don't, of course. You answered your question earlier in your post.ISTR that FR's average fare is around €45 and their costs are somewhat lower than legacy carriers'.

I thought banks had got this wrong recently as well-its not what you charge for a product or even what it apparently costs you immediately- but what the full burden you are under with respect to delivering that product within the market.

If a home loan wasnt 25 years in duration and didnt incur a contractual risk there wouldnt be a problem for many banks one supposes-the banks could rest on the laurels of profits in former years.

A cheap home loan might sell but there may be longer term risk costs wrapped up in that cheap price that can be accumulated historically.

The possible problem that all carriers (not just FR) may face is what their full burden is under relevant consumer legislation-that now removes the carrier's former ability to use their own contract to limit those risks associated with lack of timely service delivery.

If like banks, carriers have/continue to misprice/overlook/ignore/deny certain contractual risks-perhaps due to competitive pressures-that doesn't remove the risk-nor does pointing at the original mispricing get them out of a hole.

IIRC, Germany is the country that gave the world Aldi and Lidl.

'Nuff said.

It didn't just give the world Aldi and Lidl, it embraced it. I've always felt that even an Asda would be a massive improvement for most German towns, yet alone a Waitrose! There is a cultural thing in this, though, in that Germans simply refuse to spend excessive money on food in the same way that I wouldn't buy designer bin liners. On the other hand, German hotels are generally of a far higher standard than British ones because (presumably) Brits are less bothered about where they stay.

Imagine you are tourist chief of Biarritz and have a budget of €1m to attract more tourists. You could either spend €1m on a random advertising blitz, with questionnable benefits, or could give €1m to Ryanair (through advertising subsidies, cheap landing fees at the local authority owned airport etc) to physically bring people in by a) getting a route running (no-one will come if they can't get there) and b) offering cheap enough fares.

A very sound point Raffles.

The amazing thing about the FR model, and part of the reason why it works, is that if there are cheap fares somewhere people will go, seemingly regardless of where it actually is.

The amazing thing about the FR model, and part of the reason why it works, is that if there are cheap fares somewhere people will go, seemingly regardless of where it actually is.I'm (almost) in that position. I admit to booking several tickets for 2p or so return all in to places we wouldn't normally have visited by air. Thanks, FR, for the opportunity of flying to Aarhus, Friedrichshafen, Cork, Belfast, Biarritz and Salzburg. :)

With BSL available for 2p* return from time to time, it would be rude to decline. :eek: And the LX lounge at BSL is one of the better lounges we have visited on the mainland, as BA CE and status passengers may confirm.

* except that somebody in the family insists on buying Swiss products, so we're stuck for the £30 baggage fee.

I think RyanAir would be happy with 10% of the subsidy the German Government have allegedly NOT Given to Opal:D

Imagine you are tourist chief of Biarritz and have a budget of €1m to attract more tourists. You could either spend €1m on a random advertising blitz, with questionnable benefits, or could give €1m to Ryanair (through advertising subsidies, cheap landing fees at the local authority owned airport etc) to physically bring people in by a) getting a route running (no-one will come if they can't get there) and b) offering cheap enough fares.



I don't dispute that strategy works to develop a new market, but the BIG question remains is whether the market exists to support the service once the various subsidies run out. Similarly, if I'm not mistaken, FR has low crew costs because it's exploiting pools of labour in low cost areas, as well (allegedly) as some wannbe pilots who are flying almost for free in order to get qualifications. Add to that minimal customer service cost of zero product responsibility and pushing their problems onto the customer.

The question surely is what happens when there's no pool of low cost labour, less people want a pilot internship/apprenticeship and the local government subsidies run out? As that happens FR's costs will rise closer to the industry norms, and will all those routes to obscure places still be viable? In particular, will they be viable with purely leisure travels and without corporate spend?

Maybe FR can/will re-model itself as that happens, but I suspect it's going to be hard to undo the image of abusive customer non-service - I say again, one reason Southwest are now overtaking the legacies in the US domestic market is because, while they may promote themselves as cheap, their customer service is second to none.

Nor me! To compund the problem national Governments are (allegedly)committed reducing carbon footprints yet local Governments are doing unnecessary things to increase them. How twisted is that? Particularly in Germany that has a decent railway network and a good fleet of ICE's.

But FR's flights from these small airports in Germany are international so there's no competition with the ICE.

It didn't just give the world Aldi and Lidl, it embraced it. I've always felt that even an Asda would be a massive improvement for most German towns, yet alone a Waitrose! There is a cultural thing in this, though, in that Germans simply refuse to spend excessive money on food in the same way that I wouldn't buy designer bin liners. On the other hand, German hotels are generally of a far higher standard than British ones because (presumably) Brits are less bothered about where they stay.

On the other hand, Germany still shares the tradition of small independent food shops (fishmongers, butchers, bakeries etc.) with Mediterranean countriers like Italy and France. So one does also have the quality choice, albeit in a different form from Britain.

ALDI and others are of course doing their best to convert the whole nation into true believers of the discounter philosophy. And unfortunately with visible success.

Airports usually set a PSC which reflects the costs of providing the services to the airline for each plane, in addition to the landing fees.

If, in trying to attract a voracious LCC, the airport unwisely reduces its PSC (new airlines, offering new routes, will generally look for discounts from the airport) to below the break even point, hoping to make it up by increased revenue from the terminal (car parking, shops, etc), and it can't, then the more pax the airport handles, the greater the losses will be.

I would say that FR pax are much less likely to spend in airports. I am sure, % wise, that fewer arrive/leave in cars/taxis and certainly few use the shops/restaurants.

Taking my local airport for example (Tampere) which I have taken to STN a few times. Shop - empty - maybe 1-2 bottles coke sold. Restaurant, maybe 10 people, out of 200 up there, if they are, they are nursing drinks.

Parking is full, but the carpark is small, and there are 5 FR flights a day. The taxis usually are not all taken.

Compare this to the FINNAIR/SAS terminal.

Restaurant mainly busy, car park full, taxis all used after each flight arrival.

I know its probably not always this typical. But budget travellers tend not to pay €5 for coke, when they can get one for €2 in a local store.

Time to spirit this off to Budget Travel :)

Now I'm up to 4 Ryanair flights in my life, so I'm hardly an expert compared to some. However, I have not noticed any problems with the staff - they are as friendly and pleasant, at least, as any other given airline, nor have I noticed problems with the planes - no inflight entertainment, of course, and terrible seat pitch, but otherwise no worse than any other airline's. One slight delay (although I know worse can happen) and no cancellations.

Having said that, I have not put Ryanair nor any airline to a real test - how do they do with handicapped or elderly passengers or children, how do they handle flight cancellations (very poorly if I believe what I've read), and so forth. Nonetheless, for average passengers on average flights lasting less than 2.5 hours or so, they'd be hard-pressed to say why they should pay more not to fly on Ryanair.