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I come from a middle class family. Most families belong to this group.

For us, flying means one thing: get from Pt. A to Pt. B. Nothing else matters. Sure, I complain. Ryanair is bullshit - it doesn’t let me choose the seats for free! It doesn’t let me take more than one bag! It forces me to print my boarding passes on vacation!

But despite all my complains, I’ll always travel with Ryanair, unless I find a cheaper flight.

Ryanair gets that. And it’s modifying its business model to showcase that.

I think they are onto something.

I just travelled to Porto. There were no magazines inflight, no free food, no entertainment. Nothing we’ve all come to expect with flights. But what I saw was an inkling of what’s to come - and it might change air travel as we know it.

First, let’s go through what Ryanair has achieved, and then let’s go through what’s to come.

Economics of a low budget airline

Ryanair is a budget airline, which means it has dirt cheap flights. In no way does it imply Ryanair is small.

Ryanair is massive. 100+ airplanes, 100+ destinations and 1000+ employees.

When the goal is to make the flight ticket as cheap as possible, you need to remove all in-efficiencies from the system. Anything that’s extra, anything that’s not essential to flying needs to go.

Ryanair has taken this to the extreme. It all begins right in your home, 24 hours before the flight. You need to print out your boarding pass.1

If you don’t, the fees are hefty. £25 ($30) for printing it out at the airport. Not because it costs them anything, but because they really don’t want you breaking their system. If it costed £3-5, people who print it to save the £25 will stop doing that - increasing burden on Ryanair for getting the print outs, having someone on deck to help passengers, keep the queue moving, and fix the printer when it breaks.

Make it cost a ton? People will go to extreme lengths on vacation to find a post office to print out their boarding passes.

Next, comes your luggage. People without luggage move through the queue faster. There’s nothing to check in. For those who have things to check in, Ryanair needs a dedicated person on deck to do it for them. That costs Ryanair extra - and it passes the cost to the customer. Each check-in bag costs another £25.

Next, comes the airport. Have you noticed how Ryanair flies to the shittiest airports? Like Gatwick instead of Heathrow? And why the flight timings are the worst?

Welcome to the world of airport - airline economics.

Each airline needs to pay the airport charges for parking the plane in a bay, peak hour operations costs, landing charges, and some random extra charges2. Further, the nicer, busier, closer-to-the-city airports charge extra.

And there you have it. It’s Gatwick because Heathrow is expensive. Heathrow is the prime airport - everyone wants to land in Heathrow, so Heathrow gets to pick and choose. Heathrow gets to charge a premium.

Gatwick is far away from the city, and not very well connected. Few airlines want to land here - none of the big airlines do. So, Gatwick needs to entice airlines and the best way to do that is to offer a discount.

Some smaller airports become so dependent on one airline that if the airline leaves, the airport dies.

Because of the peak hour operations costs, the late at night and early morning flights are cheaper. It’s not the time when the business class likes to travel.3

Next in line are the parking charges. The longer an airline stays at the airport, the more it costs them. Thus, they need a crew trained to clean the plane as quickly as possible, and passengers trained to not hinder them.

Ryanair has done this is in several ways, and it goes beyond the airport economics - it’s manufacturing optimisation and supply chain management.

Here are the maxims.

If the plane is designed to stay clean, you don’t have to clean it.

Planes get dirty because people use the toilets, spill random stuff on their seats, and stash stuff in their private dustbin - the front pockets.

The toilets are inevitable, but you can get rid of the private dustbins. That’s what Ryanair did. There are no pockets on the seats. All the trash stays in your hand or on your table, until an airhostess comes with a trashcan.

Thus, the cleaners don’t need to spend hours emptying the pockets - a quick vacuum of the plane and they’re done.

If all planes are the same, any crew can fly any plane

Ryanair flies one type of plane - the Boeing 737-8004. Every crew is trained for this plane. This optimizes both the training costs and procurement costs.

If you only have one type of plane, you can buy that one plane in bulk, thus getting them at a cheaper price.

If you only have one type of crew, you don’t have to spend extra in having multiple crew training teams.

You got a plane stuck in Iceland because of the volcano? Don’t worry - a new crew can complete the remaining flights.

Further, Ryanair operates in Europe. Europe is small. Everything is close-by. They don’t need a bigger plane for the trans-atlantic flights, simply because they don’t do those flights.

If the flights are atomic, you don’t need to spend extra managing the complexity

Ryanair doesn’t do connecting flights.

There are no complex tickets.

No payments to ground crew to move luggage from one plane to another.

No refunds if a delay in the first flight makes passengers miss the second flight.

Entertainment

The final optimization straw is inflight food and entertainment. There is no entertainment. There is food - but only if you buy it.

What Ryanair has done, is hyper-segmentation. It removed all business class passengers, they aren’t the target audience. It created segmentation inside the economy class. There’s the base product - the flight, and everything else is an add-on. Plugins you can buy.

Taking this to the extreme, the “in flight grocer” is optimised too. What do people buy frequently? Lottery tickets. What does Ryanair sell inflight? Among a host of other things, lottery tickets.

Looking forward

With the operational breakthroughs out of the way, what’s next to come is the digital technology breakthroughs.5

There’s WiFi, and the Ryanair app.

The WiFi is internal only - it works to connect the Ryanair app to the plane - but it opens up a whole new system.

Your phone becomes the inflight entertainment. Through the app - you get control of your experience. Instead of having a screen on each seat, you can use your phone as your screen.

That means the track your flight screen, games, and movies inflight all show up on your phone. Oh, and multiplayer inflight gaming too - everyone’s on the same network.

It’s an extra plugin at no cost.

It’s data to help optimise their inflight grocer. Deferred payments for inflight purchases via the app makes it lucrative to passengers. Figuring out what people buy frequently 30,000 feet above the ground hasn’t been solved yet. Maybe lottery tickets aren’t the most profitable in the air. They can now collect exact data, collated over all their flights, and figure this out. Even more than that, figure out what kind of person buys which kinds of product, and which person travels most frequently.

I’m not sure if this is an empty straw though. Since I was looking for the cheapest flight, why would I spend anything in flight?

Aligning incentives.

Where the policies are cost-optimized, troubling the customer, they can make up for them with great customer service. I had an air-host who was all about taking jabs at the stingy business model.

“Ladies and Gentlemen, the toilets are free - 2 behind you and 1 in front.”

“Apologies for the long wait outside. We were in a different plane but we got this brand new one just for you guys. You can smell the plastic in the air”

“Majority of the seats have a life jacket underneath them”

This was fun. And addressed the elephant in the room - Ryanair is comfortable with this new change.

Not every attendant is like that. But now, you have an easy way to align incentives.

” [..] it’s not about trying harder. It’s about setting up their business model to align with prioritizing customer service.” - Kevin Kwok, on focusing on customer service

The app provides immediate feedback on who is doing well and who isn’t. Do well, and your attendant promotions are fast tracked. Focus returns to the customer.

This happened in the 1960s with grocery supplies. You trusted the brand. Because you had no other alternative - and no recourse.

With Amazon, democratization of products happened. We got infinite shelf space, and we could directly hear from consumers about what product is good or not.

It’s the same with airlines right now. They have no easy way to figure out which of their attendants are doing great. What happens on the plane is a blackbox [pun intended].

The captain is authority on everything, followed by the lead air host. The captain doesn’t fill a feedback form for hostess - and even if they did, it’s all heavily biased.

Feedback is driven via the lead air hostess liking the host, not the passengers liking the host.

With the app, customers get an easy way to reward and punish the hosts they like. The feedback loop tightens - which enables Ryanair to do quality control.

Moats

This might seem like a contradiction. The people want to get from A to B. They don’t care about the convenience. Then, why does improving the app make sense for Ryanair? That’s because competing only on price isn’t an enduring advantage. Sooner or later, other low budget airlines will follow. It’s unsustainable.

If you get a choice between a Rolls Royce and a Ford Fiesta, both costing the same, which one will you choose?

Next, what about competition with the regular (non budget) airlines?

Those airlines make all their money via the business class. And the business class wants not just the right time, but the right airport too. They don’t want to end up at a dingy airport far away from the city. This prevents the regular airlines from encroaching on Ryanairs territory.

There’s a monopoly for the incumbent low cost airlines at small airports. They leave, the airport dies.

Next, tourism.

Budget airlines drive tourism. Sometimes, figuring out where to go, I sort by the cheapest flight to anywhere - and then discover the places. Countries seem to agree.

Given a town that wants to promote tourism, attracting a low cost airline to open up operations makes sense. If the route is calibrated right6, it becomes a win-win. And Ryanair will be in a unique position to do this calibration, if it can successfully integrate passenger data.

How much of this can Ryanair pull off, though? I think everything.

References

[1] Low cost carriers

[2] How Budget Airlines Work

[3] Why flying is expensive

Thanks to Siddhant for kindling the idea.

  1. This has started to change. The Ryanair App now lets you check in and get the boarding pass on your phone. ↩

  2. Like security, noise and emissions. ↩

  3. I mention business class here because they are the main profit centers for regular airlines. ↩

  4. It does have another Boeing 737-700 for training. But, mainly as a charter plane. ↩

  5. Or so I expect. ↩

  6. By calibration, I mean a route chosen correctly. People at the source are willing to try out new places, the destination matches their tastes, and they are enough people to move the tourism needle. ↩