February 1, 2004

Magic Bus generation holds key for Ryanair

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The Ryanair Generation – remember them? Well, they’re still around.Those born in the late 1960s who had a “made for export” stamp for a birthmark and who emigrated in their hundreds of thousands in the late 1980s.They were the first of the Ryanair generation.


They were the first generation to know their way around Luton and Stansted Airports, and the first to come back home in the mid 1990s.They are inextricably linked with Ryanair.They have their Ryanair stories – both their delay nightmares and their �1 ticket steals.

Whatever you make of the company, its methods and its business model, Ryanair, like no other, is the brand that symbolises a generation.The question posed this week, after Ryanair’s share price fell 30 per cent, is whether the O’Leary bubble has burst.

Has the business model that allowed Ryanair to grow exponentially run its course, and will the various low-fare imitators gradually chip away at Ryanair’s market share?

You can’t question the durability of Ryanair’s business model – unless, of course,value for money becomes secondary for tomorrow’s consumer.To substantiate this assertion,we have to forecast what will be the behaviour of the consumer over the next few years.

Who exactly is she? Where does she shop? What does she wear? Might she stay in the poshest hotel in Barcelona for her weekend break, yet fly there for �10 on Ryanair? How many of her kind are out there? These are the big questions that will determine whether Ryanair’s share, at �4.60, is a steal or a dog.

If the original Ryanair generation were hungry to travel at discount prices, it appears that subsequent travellers will do the same.The only difference – and this is good news for Ryanair – is that there are more, lots more of them.

The latest census figures reveal that,out of a total population of 3.9 million,1.2 million are under the age of 19.This is an extraordinarily high proportion.There are a further 960,000 people between the age of 19 and 34.Well over half the population is under 34, and only 290,000 people are over 65.This population structure remains unique in Europe.

While there is no suggestion that the over-65s refrain from travelling (in fact, the evidence is the opposite), it is clear that,with a population pyramid as skewed as ours, there is a huge and growing market for low-fares flights out of Ireland in the years ahead.

The second question is whether they will fly Ryanair.The simple answer is yes. Younger people always choose cheaper modes of transport over more expensive ones.

Anyone who travelled in the 1970s and 1980s on Magic Bus overland to Greece rarely encountered anyone over 30 on their spliffed-out journeys through the formerYugoslavia. (We’ll be back to the Magic Bus generation later.)

So while the younger travellers will always go for the Ryanair-type option,what about Miss Weekend Break in Barcelona? Will she be prepared to slum it with the students?

A few years ago, Miss Weekend Break in Barcelona wouldn’t have touched Ryanair with a bargepole. However, Ryanair andthe explosionoftheweekendbreak market are umbilically linked. Anecdotal evidence indicates that people’s buying behaviour has changed enormously.

A few years ago, rich people flew a certain way, holidayed in set destinations, wore certain types of clothes and always ate in upmarket places.Today it is different. A couple will now go away to Barcelona for the weekend, flying on Ryanair, yet will stay at the swankiest hotel.They might wear Prada but eat in McDonald’s. He may read the sport in the Star yet she’ll browseVanity Fair.The consumer has changed, and is difficult to pigeonhole.
The reason appears to be that some types of purchases are hierarchical and others are not. Fortunately for Ryanair, the mode of travel is not hierarchical, but the best hotels are.

This is why you do not get Conde Nast magazines writing about the best shorthaul flying experience, but you do find them writing about the best hotel to chill out for the weekend.You don’t read ads for the British Airways’ experience any more in glossy Sunday supplements, but you do read about shoes. So, yes, the evidence is that Miss Weekend Break in Barcelona buys Prada,wears Manolos and flies Ryanair.

This trend is likely to remain the case, and is reinforced by the Aer Lingus announcement this week that premier flights will no longer be available from Ireland to many of its European destinations.

They have simply packed in posh seats in the face of the low-fare revolution.The destination and what you do there is now considerably more important than how you got there.Twenty years ago the opposite was the case.

But what about our old hippie friends – the Magic Bus generation? Could they be flying Ryanair in the future?

You remember the early 1970s lads with their PLO scarves, massive spliffs, Little Red Book and one-way tickets to Ios? Those fellas are now moving into their 50s. In Ireland, there are 440,000 of them. To get an idea of what they are up to and might be spending their cash on, the foreign property pages of the papers and trends in the US prove instructive.

The US evidence suggests that the Magic Bus generation holds the key to the second house market.

In the States last year, this generation bought 400,000 second homes in the sun. The surge in older Americans buying second homes in Florida, Nevada and Arizona has been one of the most significant characteristics of the US housing market in the past few years.

If ads in papers here are anything to go by,we are seeing similar trends in Ireland. This will lead to a big demand for cheap flights from northern to southern Europe as our Magic Bus generation migrate to the Med in increasing numbers.

Will Ryanair take these scalps? It is hard to see why not, because there are demographic reasons to back low fares.The question is whether Ryanair rather than Aer Lingus, or other low or lowish fare operators,will predominate? History would caution against writing off Michael O’Leary and his top brass.

Maybe behind all the headlines there is a crafty overall game plan here. Possibly, in the face of stiffer competition, O’Leary has decided to meet his opponents head on and out-low-fare them all.

He has built up an impressive war chest of cash (e1.15 billion in the bank) and might be intent this year to sacrifice profit growth for market share.

In the process, he will drive fares even lower, taking a hit on each seat but bankrupting some of the operators going headto-head with him, because his costs will almost always be lower, his bank balance always bigger and his major shareholders more experienced.Time will tell.

Even if he loses hisWaterloo with the EU commission on Tuesday, it’s far from guaranteed that the Napoleon of the Airways, his company and its share price will end their days languishing in financial Elba.


  1. Lydia

    Hear Ryanair boss Michael O’Leary’s views here

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