Recent reports that Ryanair profits are set to break the €1 billion barrier have shone a spotlight on its notorious customer service and how a softening of policy may have helped turn around its fortunes. After years of seemingly going out of its way to make life difficult for its customers, Ryanair has embarked on a charm offensive and boosted its finances after a couple of profit warnings in 2013. Renowned for its cheap fares, Ryanair has often been criticised in the past for its poor customer service.
So has Michael O’Leary, CEO of budget airline Ryan air, finally discovered the benefits of treating customers well? Or has the current focus on customer service forced him into changing his approach? Did our need to be treated well become a greater desire than low cost?
O’Leary is of course (in)famous for his politically incorrect, often crude, pronouncements on his airline’s customers and how they should be treated. He once said: ‘If drink sales are falling off, we get the pilots to engineer a bit of turbulence. That usually spikes sales.’ And – on passengers who forget to print out their boarding passes – : ‘We think they should pay the €60 (£47) for being so stupid.’
But following complaints from shareholders about the company’s dire public image and fierce competition from other ‘no frills’ airlines the company embarked on a charm offensive to try and turn things around; and so far it seems to be paying off with earnings growing by 66% last year.
An AGB (Always Getting Better) programme did away with the most egregious customer complaints. Gone, for example, are the 17 clicks needed to opt out of various add- ons when booking online. Previously, Ryanair’s booking process meant that options to purchase priority boarding, sightseeing tours, transfers, Ryanair-branded cabin bags, phone cards, travel insurance and car hire all had to be laboriously ‘unclicked’ before a customer could finally get to the end of the process and actually pay for a ticket.
Gone too is the queuing and jostling for unallocated seats. Under the new regime, all passengers will be given a seat number, and those who prefer to choose a particular seat will be able to do so for £5 per flight. Gone too are the most punitive charges for checking in baggage. Passengers are now able to take onboard a second ‘small’ carry-on bag.The charge for checking in luggage on arrival at the airport will also halve from £60 to £30 per bag.
Of course, Ryanair wouldn’t be Ryanair without a few quirks, so some things will stay the same and that’s OK as we like cheap but we also want a reasonable level of service. The airline keeps costs down by using smaller, cheaper airports which tend to be quite a long way away from where the location name would at first suggest and we put up with this for the low fare. But put simply, O’Leary says that in future, Ryanair will stop ‘unnecessarily pissing people off’.
Low Cost Carriers
It’s not just that O’Leary is getting soft in his old age. Ryanair is not the only Low Cost Carrier (LCC) to realise that customers not only want low fares, but also decent flying experiences as well. Following years of stunts and gimmicks, the Ryanair model has matured. Budget airlines are no longer challenging the status quo – they have become the status quo. After years of grabbing headlines from the full service airlines such as British Airways, Air France and Lufthansa, they are beginning to operate like mature companies and raise the customer service bar.
For years, Low Cost Carriers have aimed for stripped back efficiency, simplicity and productivity to keep operational costs down and offer low fares. But now many traditional airlines have also slashed their prices and created new products to compete, so that the gap between the two models is not so extreme.
Passengers travelling on traditional airlines value comfort, attentive staff, flexibility, reliability, and good connections, while passengers taking Low Cost Carriers are mainly focused on cost. Research has shown that, in an ideal world, passengers would like to have something in between the two – low fares, but with a little bit of full service offered as well.
What this means is that a “hybrid” business model has emerged combining the best of both worlds. Ryanair is simply following the trend and upping its game. This strategy offers a product more aligned to the higher-yield corporate market and away from the low cost student and holidaymaker market. Ryanair must be careful not to get stuck in a strategic limbo between low-cost and full-service, doing neither model very well, but so far the figures seem to be showing that the strategy working.
For a man who once told a passenger: ’You’re not getting a refund so f*** off. We don’t want to hear your sob stories. What part of ‘no refund’ don’t you understand?”, Michael O’Leary is taking quite a big step forward.