Ryanair in the Middle East? Never say never

Ryanair

Early indicators suggest quarterly results for Europe’s major air carriers will be positive. This news will be music to the ears of CEOs battered by the fraught pandemic period.

Nevertheless, in the world of aviation, there is always a cloud looming on the horizon. This week’s challenge has been the wildfires that threaten summer demand in Europe. 

But despite this force majeure setback, one airline is continuing to soar ahead of the rest: Irish low-cost carrier Ryanair. While the airline has been much maligned for its thin-on-the-ground customer service, it continues to outperform competitors.

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Last week, Ryanair published its latest figures: 50.4 million passengers flown and €663 million in profit after tax during Q1 2023 – almost triple last year’s numbers.

One potential dampener on the airline’s growth is the projected delay in the delivery of some B737-10 (Max) aircraft at the end of the year.

However, plane supply chain issues are likely to coincide with a softening of the market, so a little less capacity certainly will not be an issue. 

Put simply, Ryanair is a machine. This ethos may explain its “less is more” stance on customer service: for the machine to generate the cheapest seat costs, it needs to slash costs and continually increase its operations through new planes and routes.

In January 2019, Ryanair operated 62 percent more capacity than the UK’s EasyJet and three-and-a-half times more than Hungary’s Wizzair. 

All three carriers dramatically cut capacity in the first half of 2019. EasyJet stopped flying for a period in May that year, while other airlines cautiously rebuilt capacity.

In contrast, Ryanair soared back into the air as soon as possible, with capacity moving from one million seats operated in April 2019 to over five million a month later.

This represents an extraordinary bounceback, even for the not-so-shy Ryanair.

300 new planes

Another typical Ryanair strategy has been to order substantial numbers of aircraft when the industry is at its lowest points. For example, it placed a very large order when the aviation industry was ailing just after 9/11.

In May this year, Ryanair placed a huge order for 300 B737-10 (Max) aircraft for delivery between 2027 and 2033. Some 150 of those are firm orders and the remainder are the buy-one-get-one-free offer that comes with any major order at Boeing or Airbus. 

No doubt, some of the planned aircraft will be earmarked to replace older models and that will certainly appeal to the sustainability story for the airline. After all, using new modern fuel-efficient aircraft is something to which every airline aspires. 

But what will Ryanair do with those new aircraft that are not earmarked for fleet replacement purposes?

Could those spare planes be destined for the Middle East? Perhaps we will see Ryanair CEO Michael O’Leary hosting a press conference in Dubai or Riyadh in the not-too-distant future.

The transatlantic market has always intrigued Ryanair. The airline has long explored opportunities and partnerships with other carriers and, ultimately, concluded that it is not a compatible operating model. That is likely to remain the case. 

Extended range technology means most aircraft are more than capable of reaching deep into the US. However, long flight times are not particularly productive and overnight crew costs can suddenly become expensive.

Instead, I predict that the Middle East will be much more interesting for Ryanair over the next few years, compared with US markets.

Silent expansion 

In an almost quiet expansion – at least by normal Ryanair standards – the airline has been operating in the Middle East region (as defined by IATA) since 2015, when its first scheduled services were launched to Tel Aviv, Israel. 

Three years later in 2018, services were launched to Jordan’s capital Amman and, more recently, secondary destinations have been added to the Jordanian city of Aqaba and Eilat in Israel. In total, Ryanair operates more than one million seats in the two markets (although in both cases, it currently has a relatively small market share of around 5 percent).

Ryanair’s development strategy has always been to “join the dots” of its network – a strategy of creating a critical mass from base airports to numerous destinations and then over time turning those destinations into bases. 

In the cases of Tel Aviv and Amman, these network “dots” are connected to Cyprus, Vienna, Budapest and Milan. It would be fair to say the airline has already increased the local demand between these destinations. 

Interestingly, all the Ryanair base airports serving Tel Aviv and Amman are potential markets that can also operate flights to Dubai or Saudi Arabia. A Milan-Riyadh leg, for example, is comfortably achievable in under 5 and a half hours.

For many years, the Middle East market seemed a step too far for Ryanair. The Gulf and its surrounding areas threw up too many challenges, such as regulation, protectionism, and a conventional market where travel agents held considerable influence. 

However, all of that is now changing. In some regions, international airlines are being actively courted to start new services. The market is pivoting quickly towards younger travellers with credit cards, internet access and deep pockets.

If ever there was a time for Ryanair to seriously look at the Middle East market, it is now. 

John Grant is partner at UK consultancy Midas Aviation