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 The people who make a difference in the Canary Islands Ryanair exclusive interview Cawley’s plans for the Canaries The Canarian government’s successful lobbying of Madrid to have airport charges cut for airlines flying to the Islands has been warmly welcomed by low-cost carrier Ryanair, who have been quick to capitalise on the concession.  Deputy chief executive Michael Cawley, who unveiled the new flights during a fleeting visit to Tenerife, predicts that Ryanair’s operations in the Canaries will grow further if the charges stay low or are eliminated permanently. In an exclusive interview with Island Connections, Cawley spoke of his company’s plans for the holiday region, while also giving interesting insight into the airline’s approach to its business. The key to unlocking new routes is to cut the cost of flying to airports Perhaps inevitably the interview began with an update on the controversy surrounding the decision not to reinstate the flights to Fuerteventura, which were withdrawn on 31 January. According to Cawley, there is no prospect of the routes reopening until a local business consortium honours its contract with the airline. The dispute has developed into an acrimonious legal battle in the English courts and the Ryanair No. 2 is understandably cautious when speaking about it so as not to jeopardise his company’s position: “I am just sorry that we are announcing routes to three, not four, Canarian airports. But there is a legal dispute with the AIE consortium over its breach of contract with us and until that is settled we cannot consider returning to Fuerteventura. We still have not been paid but if the dispute were resolved this week I would have no hesitation about putting on 14 routes to the island. We’d be very happy to fly there, but if we cave in we will only encourage other people not to pay their bills and we are not in the forgiveness business, we are an airline. We flew without being paid by the AIE for a long time and it was expensive for us because at times fuel was $140 a barrel. I am absolutely certain there is a great market there and we would be only too happy to step in to it.” As for the other Canary Islands, Cawley is optimistic that Ryanair can go from strength to strength, although he warns that if the airport-charge incentive disappears he will pull the planes off immediately. “The key to unlocking new routes is to cut the cost of flying to airports. Spain has some pretty good airports but they are not cheap to fly to, so this decision by the government is the right one. Airports are publicly-owned and the authorities now realise that sacrificing around nine euros per passenger in charges can generate up to 1,000 euros in spending by that passenger in the destination. Britain and Ireland have done just the opposite and have increased air passenger duty, despite the damaging effect it has on travel.” We do three flights a day to Malaga from Dublin alone on many days so why not to the Canaries? Cawley also feels that the Spanish decision is a good example of properly targeted market support, which is often poorly used: “The millions of euros spent on some government campaigns could be put to better use. Much of it is contracted out expensively by people who simply don’t have solutions. Take Andalusia, for example, which has the biggest budget of any regional tourism authority in Europe. They pay full rate for mass advertising and if you drive through parts of Ireland you see giant boards advertising a brand nobody knows. Everyone knows Marbella but who is familiar with ‘Andalusia’ as a tourist brand? They need to redirect their marketing support to achieve a more direct impact.” If things go to plan in the Canaries, Ryanair will set up a base in at least one of the local airports (and could even operate inter-island flights), which would mean having cabin crew, engineers and pilots permanently posted here as in Alicante and in Girona, the Spanish airport that has most benefited from the carrier’s presence. “In 2002 Girona was a small regional airport with just 300,000 passengers a year. It now has 6.5 million, of which 5.5 million are ours. That shows what can be done.” Cawley does not feel that expanding routes at this time is a risky business given the economic downturn. “We continue to grow, by nine million passengers this year, because our fares are low and there is a huge market out there if you cut fares. We have become Spain’s second biggest airline in terms of numbers carried. In times of recession, the firms that grow are the likes of McDonalds, Ikea, Lidl etc. People want to spend less but get better value for their money and that’s why we will continue to expand. We do three flights a day to Malaga from Dublin alone on many days so why not to the Canaries?” People who save on their flights have more discretionary spending money available Those plans do not include Tenerife North for the moment, which is a little ironic bearing in mind that the first Ryanair flights from Dublin to the island landed there. “We would be happy to return but for the moment we will concentrate on Tenerife South. This is just the start of a big push and we believe we can bring almost 10 million passengers to the Canaries within a few years,” a staggering forecast for a region that receives a total of 12 million visitors annually. The news that the routes to Lanzarote and Gran Canaria could bring 600,000 and 700,000 additional visitors every year respectively has been welcomed by the industry, and revenue predictions put the amount of extra spending by the new passengers at 250 million euros. However, some concern has been expressed at the type of holidaymaker likely to use the routes. One contributor to an on-line discussion in a Canarian paper warned that low fares attract low spenders and the boost for the economy may not be that noticeable. Another alerted to the danger that the Canaries might suffer the problems suffered by Prague, Riga and other low-cost destinations, which are used for short ‘partying’ trips, particularly stag and hen nights involving binge drinking and anti-social behaviour. Cawley disagrees: “The debate on how much stays in the local economy has been going on for ages. Trieste in Italy knows that half the passengers we fly there head straight across the border to Croatia but the locals are still happy with the routes. Independent travellers are good for business especially in the Canaries because they stay longer due to the distance involved. Our typical flyer is not just a low-spending young person, the second big category is the older, more discerning generation. People who save on their flights have more discretionary spending money available and use it to go out more. The Catalan authorities say that Ryanair passengers spend more than anyone else. If you come on a package deal you tend to stay in and around the hotel but if you are on a flight-only basis you explore more. Market studies in many areas we serve show that visitors on short breaks spend around 450 euros while at the destination and that figure will be double in the Canaries because the stays will be longer.” The Ryanair boss is also at pains to stress that the new flights as of the autumn will benefit ex-pats who want to return home more frequently, as well as the growing numbers of Spaniards who hope to visit countries such as Ireland. “A significant percentage of our customer base is Spanish already and the figure will increase with these new services, so all sides should benefit.” Needless to say, the conversation got around to other aspects of Ryanair’s business, including a discussion of some of the criticism received regarding the airline’s customer service. Much-publicised gripes in the past from passengers include paying for Priority Boarding only then to find they have to board by bus so the advantage is lost. The problem should not arise in the Canaries, Cawley emphasises, given that one of the pre-conditions for opening the new routes was that the airports would guarantee walk-on, walk-off facilities at the airports. On-line check-in fees are another gripe, with the inevitable criticism that, if the airline forces people to check in from home as desks at airports are gradually phased out, the fee should be part of the price because check-in is a condition of carriage. Cawley defends the charge, however: “It is much smaller than the fuel charge other airlines are still forcing on their passengers even though there is no context for it at present now that fuel prices have fallen so much. In any case, the check-in fee does not apply to our very low fares, below 9.99 euros. Where it is charged, it is totally transparent and we are not duping anyone.” So why not build it in to the price and avoid the criticism? Is it just another ploy (like coin-operated toilets on planes or standing passengers on short flights!) to keep Ryanair in the headlines, i.e. ‘any publicity, however bad, keeps us in the news’? A wry smile and a No Comment… Another frequent complaint – the lack of pre-allocated seating – is dispatched swiftly by Cawley, who sees free seating as one of the keys to the airline’s success: “It actually speeds up the boarding process. When you have a seat you leave it late to head to the gate and you don’t necessarily board when you are supposed to under the ‘by row numbers’ approach. With us, if you want to pick your seat you need to be at the top of the queue, so you get there earlier. That means we can get the aircraft turned around in quick time. Southwest Airlines in the United States have proven that non-allocated seating is a faster process with the front and rear doors of the aircraft open. We believe it is true also.” With 13 years behind him at Ryanair, Cawley has seen many changes introduced, some more far-reaching than others but most of them quickly imitated by competitors. “We have brought in many small but incremental changes during my time with the company. We are criticised for the add-ons we charge for certain services but all we have done is to segment the flyer market, something nobody had thought through properly before. For years, passengers who carried a bag were subsidised by those who did not. Passengers who ran on first and got a good seat were subsidised by those who did not. Now we are saying, and many competitors have joined us in doing so, that if you want that extra you pay for it. Of my own daughters, one likes her comforts when flying and the other is happy to sit anywhere and does not check in a bag. With this system we let passengers opt out of things but we also cater for so-called price-insensitive passengers who are not driven by the absolute need to get the lowest possible fare and are prepared to pay for the extra services.” Despite the many regulars, there are no plans for a frequent flyer programme, Cawley’s argument being that it is not needed. “Southwest in the States openly admit that it was the biggest strategic mistake they ever made and they want to unwind it. Free seats push up the prices. If you are already getting the lowest fare around you should not expect to get freebies as well. We have just one trick to our business. We advertise a fare and if it does not generate enough interest we reduce it and even give the seat away free if necessary. The day passengers are not prepared to travel for free we will have a big problem, but it hasn’t happened yet!” Concluding the interview, Cawley comes back to the factors which the Canaries need to keep uppermost in mind to attract visitors. “Access costs are the key to growth in the tourism industry. It is remarkable how much money people will spend when they are not forced to do so. Do not underestimate people’s resistance to high air fares. The key is to get them here and the key to that is having low fares, through zero airport charges. Why should we, as an airline, be charged to bring people who spend 1,000 euros on the island? We can take them to Sicily for no airport tax at all. Politicians must realise that keeping airport costs down is crucial in this competitive business. The crisis is making people price-sensitive. The Canaries have a popular product but if people can’t get here competitively the islands will lose out. If the people come, they will come back. You can’t get here by road or train, so the attention must focus on attracting air passengers.” By Karl McLaughlin This article appears in the print edition 597 of Island Connections
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