In Depth interview with Pádraig O'Céidigh

Pádraig O'Céidigh

While Ryanair have indisputably brought a significant increase in air travel and allowed airports to develop infrastructure to match the changing demand, this growth has not come without some fundamental changes in the competitive structure of the airline business, as Ryanair strive to maximise market share in the areas in which they operate.
When Easyjet started operating into the Knock, Shannon and Cork to London Gatwick markets in 2006 – Ryanair launched services on these routes to compete directly, eventually creating an environment which made the routes unviable for Easyjet. Once Easyjet withdrew its services, Ryanair also immediately terminated its Knock services (leaving the route with no flights at all) and reduced its Cork – Gatwick frequency.

In May 2007, Ryanair announced an expansion of its Shannon operations at a press conference held in Galway, with four of the new destinations to be served already offered from Galway (Dublin, Birmingham, Leeds, Luton) and increased frequency on two other UK routes served from Galway (Edinburgh, Manchester).

Cork airport has seen significant traffic growth driven by the presence of Ryanair. The Dublin to Cork route, which is competed with Aer Arann, has been subjected to regular below-cost promotions and is currently under investigation by the Competition Authority. According to Aer Arann boss Pádraig O’Céidigh, “the tactic of below-cost selling to boost aircraft load factors is employed by Ryanair on many routes in its network and not unique to Cork.
However, such tactics, whilst satisfying the stock market’s desire to see traffic growth, make competition on a sensible cost level impossible. In effect, Ryanair can afford to sell at these levels by offsetting costs against income elsewhere on the network.”

Dublin to Kerry Route Saga

It’s a dog eat dog business as airline owners scramble for market share. O’Céidigh makes no secret of the fact that while the company will still profit this year, it’s down to basic survival tactics. “There are three reasons why my business is suffering, oil prices, the economic downturn and Michael O’Leary.” At a time when the economy is taking a serious hit, O’Céidigh could have done without losing it’s Public Service Obligation (PSO) subsidised Dublin to Kerry route to Ryanair. The company tendered for the Kerry route three years ago looking for two million euro more than their latest tender. This begs the question as to how Ryanair see themselves making money on this route given the fact that their costs have increased significantly since then, including fuel which has increased by almost 300%. There are approximately 250 PSO routes throughout Europe, with 6 in Ireland. Does this mean that we will see Ryanair bidding for some of those PSO routes?
If so, this is a significant departure from the successful business model created over the years. If they are only focusing on Ireland and Kerry, in particular, are there other reasons for their efforts, for example, would it be in order to put an existing Irish local airline out of business, as O Céidigh claims, or is this a strategy the Ryanair shareholders and management are focused on.

Micheal O’Leary explains to Irish Entrepreneur, that Ryanair is profitable on this route, “because our costs are so much lower than those of Aer Arann,” and goes on to say, “Pádraig O’Céidigh has recently made similar complaints to the Competition Authority, who have properly investigated his complaints and we have demonstrated to them that Aer Arann’s claims are untrue. The reality is that traffic on the Cork-Dublin route was in decline in 2005 when Aer Arann had a high fare monopoly on it. Since Ryanair’s arrival in November 2005 with low fares, traffic on the Cork-Dublin route has more than doubled.”

Published in the July/August 2008 Issue of Irish Entrepreneur.

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