Tuesday, 21 July 2009

BA vs RyanAir - cheap vs pricey

Richard King on the Tom Peters blog comments:

"European low fares/no frills airline Ryanair flew 5.8 million passengers in June, up a cool 13% on their June 2008 figures.

Meanwhile "the world's favourite airline" British Airways has struggled to attract 2.9 million passengers in June, down 5% over the same period.

Ryanair gets regularly pilloried for its relentless efforts to cut its operating costs, simplify its processes, and find novel ways to charge passengers for "extras"—like using the toilet in flight! BA, on the other hand, continues to get a largely sympathetic press as it tries to persuade its staff to take less pay, in one form or another, to offset their declining numbers and mounting losses."

Everyone complains bitterly about Ryanair but they love their low low prices too much to use a different carrier. 'We' continue to use Ryanair despite what experience tells us.

BA is like a national institution that doesn't always get it right (remember Virgin vs BA) and yet, for many, it gets forgiven because it harks back to some dim, distant idea of being British and being 'the world's favourite airline'. Despite what experience tells us.

Some thoughts:

- low low prices will always find a market - are you a Ryanair or a BA? an Aldi or a Waitrose?

- will BA survive with its old business model? - maybe, maybe not; you mistake me for someone who looks like they care

- will Ryanair survive with its 'newer' business model? - probably yes, and yes I will probably end up using them despite everything I hate about them - short memory, eh!

A quick look at how Ryanair makes its money on a flight helps understand its financial success. Chris Anderson points out that Ryanair makes a loss on most of the seats they sell on their planes, but by offering their customers a whole range of services and products (insurance, upgrades, hotel booking, car hire, etc) the company is very profitable.

The same thoughts apply to the music, book, news, and newspaper industries. And maybe your industry.

Some examples from our clients:

- pubs now make their money on the food and mixer drinks

- public toilet manufacturers now make their money on the maintenance contract

- keynote speaker makes his money from licensing content

- office designer makes her money on commission from product sales

- software manufacturer makes money from giving away the standard version but selling the premium model (see also Microsoft)

- Pilates trainer makes money on back of the room sales

- coffee shop makes money on selling CDs and coffee machines

- blog makes money from Ads.

It is all about giving with one hand and taking with another.

Most of this is not new but it (the trend towards free/cheaper stuff and adjusting your business model to accommodate) will be more pronounced as time goes on.

While it is not a fundamentally new model (I will use that word "paradigm" from one of our comment makers), it is a trend that we will see more and more amongst our competitors.


Where did people make the money in your industry, say 5 years ago?

Where will they make the money in 5 years?

Why $0.00 Is The Future of Business - Chris Anderson
Airline Food - blog entry
The Vulgar Mr O'Leary - blog entry

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