Some CEO interviews at industry conferences are bland affairs with evasive, nondescript answers to anemic questioning. Not this one. Interrogated here at last month’s GBTA Europe conference by Global Business Travel Association senior vice president for global development Paul Tilstone, Ryanair boss Michael O’Leary took potshots at numerous targets, including global distribution systems, Google, the International Air Transport Association’s New Distribution Capability and, above all, himself. But, while all good knockabout fun, what really caught the eye was the strikingly similar radical vision laid out by both O’Leary and Emirates chief Sir Tim Clark for drastically more direct, personalized distribution strategies made possible by digital platforms and big data analytics. Both men made it clear they will work in a very different way with all players in the distribution chain henceforth. Excerpts follow.
Paul Tilstone: Why is now the right time for Ryanair to go for the corporate market?
Ryanair chief executive officer, Michael O’Leary (Image credit: Ryanair)
Michael O’Leary: We woke up to the idea that 27 percent of our passengers travel on business despite the fact that we’ve pretty much gone out of our way over the last 25 years to ignore them. Our attitude was: If you want to fly with us, fine, but we’re not doing anything for you. We’re not providing lounges, we’re not giving you anything free, and we’re not bending over backwards for you or your travel agents. And yet this year we’ll carry more than 20 million businesspeople on our flights. Why? Because businesses save lots of money and they don’t want to be delayed. They don’t want to be hanging around in stupid lounges when they’re just on one-hour flights.
And I think we woke up late to the fact that this is a market we should be serving, particularly as we have 380 aircraft on order for the next 10 years—probably nearly as many as Tim has. We’re going to fly to many more primary airports because they are begging us to fly there, and the more we do that, the more businesses we will serve.
Tilstone: So you do recognize that business travelers are going to require in most cases to fly from centrally located airports? Isn’t that going to increase the cost of business for you?
O’Leary: It’s an astonishing misperception which keeps getting trotted out that airports are in central locations. Heathrow is out in the middle of [the county of] Middlesex, and yet the way they go on you’d swear it was in Pall Mall [a road close to Buckingham Palace]. But we want to break into the business market, and that means changing things I’ve held dear for many years. I said that over my dead body would I go back on not having a [global distribution system]. … I’m now on three of them [Note: Ryanair fares currently are available in Amadeus and Travelport]. I said: “We’ll never again deal with a bloody travel agent; you should take them out and shoot them” … and here I am kowtowing to the GBTA conference, which really goes to prove that you can never believe a word I say.
Tilstone: Yes, because in 2012 you said “The Pope will turn Protestant before we work with the trade again. It took me 10 years to get out of the grip of the bastards, and we’re never going back.”
O’Leary: One of the reasons airlines were loss-making in our early days was that we paid 20 percent for our distribution. The GDSs nicked 10 percent for doing nothing, and the travel agents generally got 10 percent for doing absolutely nothing. Thankfully, that model has now changed. We’re now on the GDS, which has become a more efficient and lower-cost form of distribution, and the travel agency model has generally changed away from charging huge percentages on ludicrously high airfares to much more working on a fee for the corporate. And what we’re saying is that if we save you 20, 30, 40 percent on your business travel, share some of those savings with the corporate travel agent, which is a compelling model for both businesses. The way to save 40 or 50 percent is to switch your short-haul flying to Ryanair. You’ll save a fortune, and the business travel agent should be sharing in that revenue saving.
Tilstone: Tim, do you see your relationship with the travel distribution chain changing in the future?
Sir Tim Clark, Emirates president and CEO (Image credit: Emirates)
Sir Tim Clark: I do see it changing. I am not convinced GDSs are doing the job that the airline community needs. I have a concern about the intermediaries. I always have, and I’ve been trying to ‘disintermediarise’ the business. We are currently looking quite seriously at building our own platforms in an open architecture form, so we will then distribute our own products. I know other carriers are interested in that.
I’m not necessarily taking on the great and the good of the GDSs, but I had difficulties in the early years because they charged us so much to do, as Michael said, not that much value-added. And they went off-message when the airline community passed them into the IPO era, and a lot of hedge funds and banks bought them up, and then the agenda started to change. I want them to do a better job. The way the smart mobility revolution is hitting us, we want to communicate directly with our consumers, including the business community, without having to go through a number of players. It’s going to take time. They still add value, and we are still in them and with them, but I want to see another way. The digital revolution is going to strip out from our businesspeople who are trying to get in the middle of the supplier trying to work with its consumer. That’s probably heresy, but there we are: burned at the stake.
Tilstone: Michael, you have announced an arrangement with Google. Can you explain that to us?
O’Leary: Google wants to set up Google Flight Search here in Europe, which is something it has established quite successfully in the U.S., where it is aiming to be the flight-comparison tool of choice for short-haul flights. Price comparison websites drive me nuts. I don’t mind the honest ones where you book through into the airline’s website. We license those without a problem. But there are so many masquerading as price-comparison websites when all they are is mis-sellers. They get the punter in, and by the time he or she has made the booking, they’ve paid some entirely different price with hidden handling fees. We’ve got to get rid of those, and I think the best way to do that, as Tim has already mentioned, is engagement.
It was blindingly obvious once the Internet came along 15-to-20 years ago that this was the way out of the hell of GDSs and the way to distribute across Europe. Ninety-nine and a half percent of all our sales are directly on our Internet site, but there are niche parts of the marketplace which I can reach through channels such as going back into the GDSs and working with corporate travel agents, and with Google Flight Search to get rid of the mis-selling intermediaries.
Now Google is equally dangerous. What I’m not going to have is, in 20 years’ time, Google turning round and saying: “We account for 40 percent of your sales.” But Google recognizes that it cannot operate in Europe without our price inventory. So I think there will be a healthy relationship between us.
One thing we are developing on our own website for the first quarter of next year is a price comparison, hopefully fed by Google. So confident are we our pricing is lower than everyone else that we’ll shove on everybody else’s prices. So I want to work with Google, but I don’t want to be owned by Google.
Tilstone: So, Sir Tim, in the legacy airline world is that what IATA’s New Distribution Capability is going to do for the likes of Emirates? Are you welcoming it with open arms?
Clark: In my view, NDC doesn’t go nearly far enough. It’s tiptoeing in the park as far as I’m concerned. I don’t want to be disingenuous towards my IATA friends who are working so hard on it, but it needs to go much further and quicker. You have to trust in the brand and the product, and if you believe you are the best proposition, whether through price or product or a combination of both, travelers will go to your website first. So I’d like to think the digital portal that people will go to when they are traveling long-haul is the Emirates website. We have to have control of our own destiny. We have to engage and strip out anyone who is getting in our way and impeding our ability to do that. We have to go back to the people who have been wagging the dog for a long time and tell them: “This is a partnership, and if you are going to involve us in your digital distribution, then you’ve got to play it our way and let’s share the booty,” because at the moment it’s a one-way street and has been for too long.
O’Leary: I share Tim’s view, by the way: Whatever IATA is developing will probably be far too late, far too slow and will have been reinvented by some scuzzy 18-year-old in a desert in California two and a half years before some well-meaning but ultimately middle-aged guy in IATA comes up with the idea. Everybody is going to be on a mobile phone.
Tilstone: How important is mobile for your distribution strategies?
O’Leary: I think it’s the most exciting part of our business at the moment. We set up an operation called Ryanair Labs at the end of last year, not just to develop the website, but to develop the mobile platform, the digital platform and big data analytics, and also the way we communicate with customers. The business is going to revolutionize over the next five years. One of the challenges I think for the GDSs and also for the business travel agents is that clearly we don’t need them to sell our cheapest fares. We all know those customers will come to us anyway because they are price-sensitive. But as the business grows, and we add more and more customer data to our database, I will know who they are.
My big joke used to be: Who is my ideal customer? Answer: someone with a pulse and a credit card—and actually the credit card was more important than the pulse, because if you died you weren’t getting a refund. I have completely revised that view, because over the next five years I will know exactly who each one of my 90 million passengers is. I know you’re married, you have two children, where you travel, when you travel, who you support [in soccer]. We have all that information on you, and we can actually communicate with you now as an individual: You’ve traveled with us four times this year; you’ve been to your apartment in Málaga twice, you’ve been once on business and once for something else. Your kids have gone back to school: I’ll send you a direct offer for you and your wife—25 percent off, take a weekend break.
I think it’s going to be the big challenge for business travel agents in the future because we’re also building individual digital portals for our bigger corporates. We will do that with the corporate travel agents, but if they don’t want to work with us, we’ll simply bypass them as we have in the past. That is such an exciting development within our business, and it gives us an opportunity to work with business travel agents but to target the businesses who want a package of services. It’s one of the reasons why the GDSs need to significantly up their game.
The clever airlines—which is usually a contradiction in terms, because if we were clever we wouldn’t be working in the airline business—working with those business travel agents who get it are going to make a fortune in the next 10 or 15 years, working together to deliver our customers real value but at a much lower price.
Clark: Listening to Michael, this is the script that I follow. We will build, using big data capabilities, to drill and mine every single passenger that contemplates entering our network. Today, upwards of 50 percent of our PNRs are lost to us, and we don’t use them intelligently. I am changing that as we speak, so that every PNR in our system will be interrogated and given a separate identifier. It will allow us to track that person when they return to the system, build up our data and start using mobility platforms to talk to them in real time and do all sorts of things to win their business.
All this is moving at a pace. It’s happening in every sector of the economy. This is not about marginalizing the importance of business travel agencies. It’s about building on the value they can bring us but also us doing a better job for them, so we can talk to them in far more specific terms about a deal and how it’s going to be worked in multiple markets at the origin points and how we can change the structure of commercial arrangeme
• This article by Amon Cohen first appeared in The Beat, a travel business newsletter, part of the Northstar Travel Media Group.
• Featured image credit (passengers in airpor): egdigital/iStock
