Ryanair increases Baggage Fees again

The Irish 'low fares' airline Ryanair has announced a further increase in its fees for checked-in baggage from next month. According to the airline, it is "part of a change in company policy".

In order to keep people confused at all times, the amount of bags Ryanair passengers can check in will increase, but at a higher cost.

From October 1st passengers will be able to check in two bags, each with a separate 15 kg allowance. This a double the current Ryanair luggage allowance of 15 kg.

But the on-line fee for the first checked-in bag will rise from currently € 10 to € 15, while the fee for the second bag goes up from € 20 to € 35.

If the bags are checked in at the airport, the fee for the first bag climbs from € 20 to € 30, while the charge for the second bag goes up from € 20 to a staggering € 70!!!

The airline says that the higher charges will "recover" the cost of what has apparently been "a 20% fall in average fares" this year. And it adds that the increases are "aimed at encouraging passengers to travel with carry-on luggage only".

I am not so sure about this. To my knowledge, Ryanair fares have not fallen in recent times. In fact, with all the add-on charges for luggage, credit card use (which is obligatory for booking with Ryanair) and other so-called 'extras' that were free until recently and still are with many other airlines, travelling with Ryanair has in fact become ever more expensive.
Adding to this the fact that many Ryanair flights do not go to major European cities - despite the airline's claim that they do - but to obscure small airports* many miles away from these cities, the idea of 'cheap flights to the heart of Europe' becomes even less attractive.

Since Ryanair's boss Micheal O'Leary (right) never does anything without a reason - and without gaining a profit from it - I do wonder if the real reason for the sudden and steep increase in baggage charges might be that Mr. O'Leary is a strong supporter of the Lisbon Treaty. Has become a major donor to the YES campaign in the run-up to the second referendum on October 2nd, and I am sure he is keen to recover this money in some way.

Personally I do no longer fly at all (as regular readers of this weblog will know from previous entries) and I have never used Ryanair. But if I would still fly, Michael O'Leary's aggressive support of the YES campaign for the Lisbon Treaty would be a good reason never to use his airline again.
I hope that readers who still fly with commercial airlines will take notice of this and follow my line of thought.

The Emerald Islander


* Many Ryanair flights pretend to go to major cities, but their aeroplanes actually land on small airports nearby, or in some case quite a distance from the 'official' destination. Passengers are then transported to the actual destination by train or - more often - by bus. When Michael O'Leary developed the Ryanair network, he took advantage of the large number of small local and regional airports in Europe. Some of them had existed for a long time and serviced mainly small private aeroplanes and flying schools, without any airline ever going there. Others had been military airbases during the 40 years of the 'Cold War'. When, after 1990, the strength of NATO military power was reduced all over the European continent, a growing number of these airfields became available for civilian use. A typical example is the former US Airforce base at Hahn, in the German state of Rheinland-Pfalz (Rhineland-Palatinate), which was the home of American fighter bombers for decades. Now it is a civilian regional airport and serves - among others - Ryanair as one of their main destinations in Europe. But only Ryanair sells their flights to Hahn as flights to "Frankfurt-Hahn", even though no such place actually exists. Frankfurt, the metropolis of the neighbouring state of Hessen (Hesse) and the financial capital of Germany, is in fact more than 100 km away.

SIPTU Members accept Aer Lingus Compromise

Members of Ireland's largest trade union SIPTU at Aer Lingus have voted to accept a compromise package of cost-cutting measures, aimed at saving the troubled Irish airline around € 24.5 million.

Almost 80% of the ground staff voted in favour of the proposals, which would see redundancies, lower pay and more efficient work practices. The turnout for the poll was also around 80%.

In total, the airline is seeking to reduce its staff costs by € 50 million. (for details see my entry of October 7th)

Cabin crew, which is represented by the IMPACT trade union, will announce the result of the vote on their reform package on Sunday.

Following talks at the Labour Relations Commission last month, SIPTU members were asked to consider a range of proposals put forward as an alternative to outsourcing more than 1000 jobs.

Meanwhile SIPTU's National Industrial Secretary Gerry McCormack said that he thought the latest bid to take over the company by Ryanair (see my earlier entry below) would have "little or no effect on the ballot, except to make members even more determined than ever to defend decent pay and conditions within the aviation sector".

McCormack said that given Ryanair's track record, he thought Ryanair CEO Michael O'Leary's claims about fleet expansion and job creation would carry little credibility.
Even if the claims were credible, the bid still raised the spectre of a monopoly position for "an airline not noted for its concern for the public".

He added that SIPTU would be calling on the Irish government and on EU Competition Commissioner Neelie Kroes "to ensure competition and strategic connectivity are preserved for the Irish people".

Aer Lingus rejects new Ryanair Take-Over Bid

The board of Aer Lingus has rejected a € 748 million offer by Ryanair to buy and take over their airline.

In a statement, the board strongly advised its shareholders to "take no action" in relation to the Ryanair offer.

An earlier take-over bid by Ryanair, issued more than two years ago, was also rejected and later blocked by the European Union as well.

On October 5th, 2006 - only days after Aer Lingus was floated on the stock market - Ryanair announced it had bought a 16% stake in Aer Lingus and was offering € 2.80 for each of the remaining shares.
After Aer Lingus rejected these advances, Ryanair declared a few hours later that it had raised its stake to 19.2%. The low-cost airline also said it had no problem with the Irish government keeping its 28.3% of shares.

It is no secret that Ryanair's CEO Michael O'Leary (right) has a dream. The maverick entrepreneur who changed the structure, character and costs of European air travel in a few years beyond recognition and forced many other airlines to adopt his concept at least in parts, wants to create a single powerful Irish airline, which could carry over 50 million passengers a year.

Ironically this is exactly the opposite of what he wanted - and did - when he established Ryanair, which was to break the monopoly of Aer Lingus. The new large airline he now envisages would in fact restore the monopoly situation Ryanair has broken.

After the rejection of the 2006 take-over bid, which was criticised by the Irish government and eventually banned on June 27th, 2007 by the EU Commission on competition grounds, some analysts believed that this was the end of it and Ryanair would be content with owning a significant portion of their rival's shares.

But they did not take into account the personality of Michael O'Leary. He is a man used to get what he wants. And when he has set his mind on something, he usually keeps at it like a terrier. Whenever there is a chance, he points out the "unique opportunity" to form a large, competitive and profitable Irish airline.

In a move that surprised most analysts and was announced to the Irish Stock Exchange in Dublin yesterday morning, Ryanair declared it was offering now € 1.40 per Aer Lingus share (exactly half of what they offered two years ago).

It already owns now 29.82% of the former state airline, having bought up more Aer Lingus shares steadily and quietly all the time.

Ryanair says it wants to "merge the two airlines into one strong Irish airline group under common ownership, similar to recent mergers in Europe such as Air France-KLM and Lufthansa-Swiss".
It points out that its proposal represents "a premium of about 28%" over the average closing price (€ 1.09) of an Aer Lingus share in November 2008.
In fact, it also represents an premium of about 25% over the closing price of € 1.12 of an Aer Lingus share on Friday.

Ryanair suggests that both airlines should operate as separate companies and keep their separate brands, but share and combine organisation and facilities (such as maintenance, catering etc.).

It says that if the offer is successful, it will double the size of the Aer Lingus short haul fleet from 33 to 66 aeroplanes over the next five years. And it also promises 1000 new jobs.

But still the board of Aer Lingus is having none of it. For them Michael O'Leary is what the Carthaginian General Hannibal was to the Senate of Rome: the arch enemy "ante portas" (at their gates).

Aer Lingus, previously a fully state-owned company, floated on the Dublin stock exchange only in 2006, after the Irish government had decided on a part-privatisation. Within days Ryanair began snapping up shares, before going public with its take-over interest.
Only outsiders and people who never heard of Michael O'Leary could have been surprised by that.

And O'Leary still keeps trying, now with new arguments. "The world has changed", he says, pointing out the various mergers of other airlines and dwelling gloomily on the recession and global financial crisis.

"Over the past two years, the trading environment for all European airlines has deteriorated dramatically as a result of high oil prices and the global recession," O'Leary states plainly. "And more than 30 airlines have failed this year alone."

He says that the airline has requested meetings with the Ministers for Finance and Transport (Brian Lenihan and Noel Dempsey), the board of Aer Lingus and the airline's ESOT trustees to discuss the latest move.

After the announcement Aer Lingus shares jumped over 16% to € 1.30 on the Dublin stock exchange, while Ryanair shares were down marginally.

As much as one might think that with the formal rejection from the Aer Lingus board this second attempt of Ryanair to swallow their rival has ended in failure, just like the first one more than two years ago, this is not necessarily so.
Michael O'Leary is a man with vision and long-term plans, and as long as there is even the slightest chance of success, he will not give up.

Take-over battles can be lengthy and costly, but Ryanair has deep pockets, filled with plenty of cash, which is becoming ever more scarce elsewhere. I am sure that O'Leary will continue to buy up as many Aer Lingus shares as he can get hold of. And the larger his stake in the company grows, the more likely it is that he might one day succeed with his take-over ambition.

With the Irish government finding itself in ever more financial trouble now, I would not rule out a deal in which Ryanair offers Finance Minister Brian Lenihan a nice lump sum for the 25.1% of Aer Lingus shares that are still in state ownership.
Michael O'Leary has long argued that it is "not the job of a goverment to run an airline". With an increase of the financial crisis and a decrease of government liquidity such an argument could suddenly find new supporters where there were none two years ago.

Only time will tell, but I would advise anyone - in government or private business - never to underestimate Michael O'Leary.

The Emerald Islander


P.S. In a separate development it has been reported that British Airways (BA) are in merger talks with Quantas, the main airline of Australia. If successful, this would create the world's third-largest airline.
In a statement BA says that a merger would be through the creation of a dual-listed company, listed in both London and Australia.
This follows indications from the Australian government that it may be prepared to relax the rules on foreign ownership. Under current Australian law, Qantas must be at least 51% Australian-owned and any individual foreign airline can only own up to 25% of it.

Ryanair Mishap closes Polish Airport

The airport of Lodz in central Poland was closed today after an aeroplane from Ireland's no-frills airline Ryanair with 170 passengers on board went off the runway while preparing for take-off. A wheel on the Nottingham-bound Boeing 737 got stuck in soft ground after leaving the tarmac while apparently trying to turn around at the end of the runway.

Polish officials closed the airport at around noon, while groups of technicians prepared to pull the trapped aeroplane back on to the runway.
Meanwhile the passengers were bused 130 km eastwards to Warsaw, where they were put on another flight to Nottingham.

Other flights from and to Lodz were being diverted to Warsaw, and a bus service was provided.

Michael O'Leary will not be pleased tonight...

The Emerald Islander