Short haul mastery

http://www.bloomberg.com/news/2013-05-12/ryanair-s-o-leary-targets-short-haul-supremacy-in-europe-endgame.html

Extracts :

Ryanair’s O’Leary Seeks Europe Short-Haul Route Mastery

Michael O’Leary, who built Ryanair Holdings Plc (RYA) into Europe’s biggest discount airline over two decades, pledged to stay another five years and render its dominance complete as competitors exit short-haul flying.

Ryanair will seize on the likely failure of major carriers such as Air France-KLM Group to earn profits on short routes and the withering of networks at Alitalia SpA in Italy, Iberia in Spain and SAS AB (SAS) in Scandinavia, the 52-year-old chief executive officer said in an interview in London.
“The problem with all the flag-carrier airlines is they’re ultimately doomed to failure because they’re not really committed to low fares.”
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O’Leary, who has regularly promised to quit Ryanair “in a couple of years,” will boost the fleet to more than 400 jets by 2018 and aims to double the company’s 8.65 billion-euro ($11 billion) market value over the same period. That could pave the way for a shift into low-cost trans-Atlantic flying as demand for wide-body planes eases, making them cheaper, he said.

“There’s going to be a push for the legacy carriers to walk away from the loss-making, short-haul business, handing over more and more market share,” O’Leary said.
O’Leary said that the experiment -- which has seen IAG set up a discount unit, Iberia Express, in Spain and Lufthansa develop plans to transfer European flights outside its hubs to low-cost division Germanwings -- won’t succeed.
Only a handful of short-haul routes feeding profitable long-haul services will survive even at the biggest operators, while the likes of SAS and LOT Polish Airlines SA may be forced into a deeper retrenchment or collapse, O’Leary said.
“We’ve re-invented the European airline industry away from this failed ’50s and ’60s model where you had to be rich to fly,” he said in the interview. “And what we’re going to do in the next five years is going to be even more revolutionary.”

Ryanair ordered 175 Boeing Co. (BA) 737-800 single-aisle jets in March and has appointed a team to work on a follow-up deal to add a further 100 planes, most likely the U.S. company’s new 737 Max model, giving a total list price of more than $20 billion.
O’Leary said a purchase, which may also include further 737-800s, could be sealed by year’s end, with a decision hinging on pricing in view of the Max’s trade-off between economy and weight. While the re-engined jet will offer fuel savings of as much as 13 percent, modifications have made it heavier and liable for higher fees from infrastructure providers, he said.

New Ethos
“There’s going to be a time over the next few years to ease me out and try to change the image of Ryanair away from being somewhat cavalier, that we don’t care,” he said. “I think we need to soften those sharper edges of my personality.”

O’Leary said he retains an interest in establishing a long-haul discount airline that would ferry passengers between five or so major European cities and about 10 in the U.S., spread evenly between the east and west coasts. The airline would operate under a different brand and feature a business class similar to that of Richard Branson’s Virgin Atlantic Airways Ltd., but with a less costly and more basic experience in coach.
Start-up costs could be as low as 50 million pounds, plus fleet expenses.
“We’re waiting for a downturn in long-haul aircraft values,” he said. “If you had ten-pound or ten-euro air fares in economy you’d be unbeatable. I’m amazed none of the trans-Atlantic carriers have really targeted that market.”

Aer Lingus Wrangle
“If we were forced to sell down our stake in Aer Lingus who would we sell it to?” he asked, adding that while the Ryanair board would consider a “reasonable or profitable” offer for the 30 percent holding, “nobody wants to buy it.”

Ryanair will report full-year results on May 20.