Ryanair could shift many of its flights from Stansted to Gatwick if the Sussex airport’s new owner lives up to promises to improve its services and keep charges down . . .
That’s from the Evening Standard earlier this month, based on comments from Ryanair COO Michael Cawley made as the Irish carrier presented its third-quarter results.
But Ryanair’s new-found interest in London’s Gatwick airport may have an ulterior motive.
The low-cost airline, which has modeled itself on the no-frills structure pioneered by Southwest in the US, may essentially be reaching a floor in its costs, just as the European recession, plus saturated markets, mean it can’t raise fares enough in its current markets to compensate.
The below (feeble) chart shows recent percentage movements in Ryanair’s unit costs excluding fuel, average fares, and traffic growth. Ideally what you want is for declines in unit costs and traffic growth to compensate for falling average fares — but that’s not really what Ryanair’s had over the past year or so.
If Ryanair feels the need to increase its average fares to compensate for slowing traffic growth and cost-cuts, increasing its presence at Gatwick — traditionally more popular with higher-paying leisure travellers than Ryanair’s current London Stansted base — may be a good way to do it.
Ryanair could potentially charge more at Gatwick than its current average fare of €34, but still be below the average ticket prices of other Gatwick carriers. EasyJet, currently the biggest carrier at Gatwick after acquiring GB Airways, has an average fare of about €66.
No wonder Ryanair CEO Michael O’Leary keeps challenging EasyJet founder Stelios Haji-Ioannou to a Sumo match then.
Related links:
Low-cost flying liquidity collars – FT Alphaville
Diverging strategies, airline edition – FT Alphaville