Just two months ago Ryanair CEO Michael O’Leary was adamant: Getting into the longhaul business was a “great distraction” from the company’s core business and would be terrible mistake. Today, however, he’s apparently singing a different tune. Reports out of London have the airline keen to bid on the assets of Alitalia, including the fleet, crew and engineers. This news comes after O’Leary loudly denounced the Air Berlin asset sale as a rigged process. And none of it makes much sense.
Here’s O’Leary in his own words calling out the bad idea of going long-haul (1:25ish in):
I think that would be one of the great mistakes we would make. If we get distracted, let’s set something up in Argentina, let’s set something up in Alaska, blah, blah, blah. All of a sudden no one in my operation wants to go to Luton four times a day. They all want to go long-haul or something else. That’s where you lose the discipline that we have.
Europe is plenty big enough. I only have 15% of the European short-haul market.
So, what gives??
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Were it just an asset play – buy the frames cheap and lease them out – then Ryanair likely wouldn’t need the engineers and crew. Also, the engineers and crew are likely the most expensive part of the deal given the union challenges they face. Perhaps they could get away with dropping just the cabin crew union (the one that rejected the most recent restructuring attempt) but even that is a risky play.
There’s always the crazy idea of simply integrating the new assets into the existing Ryanair portfolio. But perhaps “crazy” doesn’t do that idea sufficient justice. Ryanair operates a uniform fleet of just over 400 737-800 aircraft. Mixing in twin-aisle jets, and Airbus single-aisle planes would destroy many of the cost efficiencies the company has. And O’Leary does legitimately seem keen to not do that. More than anything, his focus on cost controls is incredible.
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Perhaps there is another angle, one that lines up with the Air Berlin “bid” noise.
Getting to bid on the assets means necessarily getting a look at the books to see how things have run in the past and how the company has managed the fleet, crew, scheduling and more. In other words, it is a great competitive advantage to better understand the costs the competition faces. That’s tremendously valuable information for Ryanair to get a look at. Then it can low-ball a bid number that would never make sense to sell at and move on.
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Or just the mention of Ryanair considering a bid could make others bump up their numbers a tiny bit. A little higher on the expense side for a tire fire is still good news for Ryanair.
Yeah, I’m terribly cynical, but I struggle to believe there’s a real chance that the company wants a long-haul operation, Italian union challenges, Airbus aircraft or anything else associated with Alitalia.
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words coming out of his mouth are just as loud and useless as that of Qatar’s CEO. And I’m very proud of the fact I’ve never flown either.
I generally agree with your analysis on this; that said, IF Ryanair is rethinking the virtues of having a longhaul network, scooping up Alitalia for a song would be a fairly smart way to go.
I think the odds of MOL suddenly reversing course on this topic so quickly are INCREDIBLY low. Plus, the raw assets – the planes – come with major costs and headaches if they pick up the crew/engineers as well. Why would he base a new long-haul op (that isn’t actually going to happen) in Italy? He’s not that crazy.
Ryanair is also, in many regions, the defacto national carrier since Alitalia pulled out of so many domestic routes.
The only reason he’d buy it is to shut down its short haul operations altogether. I can’t see that happening, either.
Only shut down the short-haul? Okay, so that removes a little competition but still stuck with the long-haul fleet/network that doesn’t really make any money. What then??
I’m guessing part of the thinking is the Italian longhaul market has been underserved due to AZ’s woes. This would potentially allow FR to launch/grow Italian longhaul ops more on its terms than merely inheriting the ways of legacy Alitalia.
Norwegian just set up shop at FCO. Service starts in November. https://www.flightglobal.com/news/articles/norwegian-adds-rome-to-transatlantic-gateways-437727/
That’s a long, expensive battle to get in to. Particularly with an older fleet that carriers a higher CASM pretty much across the board, even ignoring crew costs.
Maybe operating ex-MXP, like everyone said they should back when they had to choose, would help. But I dunno.
He just wants the Pope to fly Ryanair….
Agree with your analysis, doesn’t seem to be a good fit. Maybe it’s a knee-jerk reaction to the airberlin insolvency – consolidation might be accelerating in Europe and he doesn’t want to be left out? He could probably also use some more pilots…
I have to think that he’s better off just hiring pilots on the open market than trying to buy out a full union group.
I think he is just talking rubbish as normal one thing in public something completely diffrent behind closed doors. Ryanair won’t do anything how can you buy a airline when so many of the aircraft where on lease?
Well, he did say that part of the bid would require renegotiating all the leases, too.
Italian Labor demands are the single reason the government bailed Alitalia out so many times, yet the single biggest drag on their bottom line. That aspect wouldn’t change simply with new owners, so I just can’t imagine the economics would work.
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