4th August 2004

Ryanair is not such a miracle

TO listen to some people, the history of Ireland could be divided into two great epochs: BR and AR (Before Ryanair and After Ryanair). According to this gospel, Ryanair liberated us from the tyranny of monopoly and is proof positive of the triumph of free market economics.

I don’t think so.

What Ryanair did was to recognise that an airplane is a bus with wings. Once they had copped that, they and Aer Lingus were in a completely different business.

In the market of bus-with-wings Ryanair had the field to themselves. They were not competing with Aer Lingus. As things turned out they were actually creating a new market in travel. Up to then, airlines both public and private, still thought they were in the same business as the great ocean liners where the journey was as important as the arrival.

Ryanair not only shook up things here but they also cut a scatter in Britain where competition had already been introduced and where BA had already been privatised.

In fact, the British market is a lesson in the downside of free market economics. Instead, of competing with each other on price, some British airlines tried to stab each other in the back to get rid of the competition.

Ryanair recognised that it was in a new market, and especially that the market was in its growth phase. It has expanded rapidly into Europe, bringing its Irish experience on to routes still operated by airlines living in the old culture.

It had a couple of strokes of fortune along the way. One was the opening up of Europe’s skys to competition and another was the advent of the web, where 90% of its bookings are now made.

Because it invented this market, because it is the biggest in this market and because it has clout with airport owners it has many advantages over its competition. But in the coming years Ryanair itself will face real competition. Its attempts to bully airport operators, aviation workers and governments might not be as rewarding as it is now.

Praise where it is due but hold the adoration.

Fair taxes please

I WENT online and priced a trip to Liverpool in December with both Aer Lingus and Ryanair.

The fares turned out to be €18.00 for Aer Lingus and €1.98 for Ryanair. The charges and taxes turned out to be €35.89 for Aer Lingus and €33.01 for Ryanair.

Firstly, congrats to Ryanair on having the lowest fare. Secondly, the taxes and charges are almost identical for both airlines even though the one fare is nine times the other. Thirdly, the Ryanair fare makes up just 6% of the price the passenger pays.

Clearly this is ludicrous. If an airline makes an effort to reduce its fares the state should not be stepping in to rip people off.

The problem rests with the flat fee nature of airport taxes. There should be a maximum proportion of a fare that the state is allowed to take.

A 50% maximum seems a fair share to me. This would have resulted in fares of €27 and €2.97.

Much more competitive.