I recently co-wrote a report on customer-centric strategy for NextTen – more on that later – that included Ryanair as a (positive) case study. The recent problems with pilot scheduling might cause me to make a hasty edit – but I think not: Ryanair is thoroughly customer-focused, but their low-cost approach illustrates the challenges of maintaining such a strategy when things go wrong. In fact, pursuing this strategy appears to be more likely to cause these problems.
Ryanair reported record earnings earlier this year, attributing this uptick to a increased focus on customer experience. However, what was described by CEO Michael O’Leary as a ‘boo-boo’ (may not have been his exact words) on pilot schedules caused the cancellation of 2,000 flights and has unleashed a storm of criticism from customers, staff and commentators.
So, what’s gone wrong? Leaving aside the technicalities of pilot rostering, the issue that’s surfaced shows that, when your customer proposition is low-cost, you walk a tightrope between delivering against that proposition and driving the model too hard with no slack for when cock-ups happen. Ryanair’s been an acknowledged leader in driving down costs in an industry where being perceived by your customers as lowest cost represents an enviable position to occupy. O’Leary’s acknowledged that their crew costs are about €5 per passenger (versus an alleged €9 by Easyjet) and this gives little room for manoeuvre when you ask your pilots to go the extra mile and forgo some leave, even when there is a financial reward. Ryanair is raising pilot pay in some centres, but whether this is enough to stop the defection to other airlines remains to be seen.
For those who like to indulge in schadenfreude, the travails of Ryanair are a boon, and rivals such as Lufthansa have lost no time in capitalising on their misfortune. Meanwhile it’s provided the humorous end of the commentariat with another opportunity to sneer and roll out the old jokes about Ryanair’s destination airports’ distance from the actual destination, surly staff and so on. But none of this is likely to matter in the long term: Ryanair will continue to have a reputation for low-cost travel and customers will continue to put up with some inconvenience in their search for a bargain.
That said, some of the customer experiences when their flights were cancelled were not a shining example of customer care. I heard many accounts in the media of long-planned special trips that were not happening and, whilst Ryanair are offering standard compensation, this will probably not be sufficient for those whose desired outcome was more than ‘get me from A to B for least cost’.
Maintaining a laser-like focus on its core, low-cost customer proposition is what Ryanair does very well and if that focus has blurred a little in recent weeks with a consequent impact on share price, it’s unlikely to dent their performance in the long term. I see no need to change my view that Ryanair remains thoroughly customer-centric.