An abstract graphic showing Ryanair planes.

Europe’s Walmart in the Sky

Gordon Smith and Jay Shabat
May 2024
32 min read
An abstract graphic showing Ryanair planes.
Image created by Vonn Leynes and Midjourney

Pushing Back: Inside the Issue

Three of the world’s most exciting, ambitious, and successful airlines reported earnings last week. Ireland’s Ryanair, Turkish Airlines, and India’s IndiGo are all playing at the top of their game, becoming larger and larger with each passing quarter. Wizz Air deserves mention as a success story too, especially now that operating metrics are getting back to where they were pre-Covid. All four carriers are buying planes in enormous quantities. IndiGo, for its part, is transforming itself into a premium global airline, with A350s just ordered, a new business class product just announced, and a new loyalty plan coming.

Singapore Airlines, another airline success story, dealt deftly with the aftermath of a frightening and fatal inflight incident last week. Saudia, with high hopes of becoming an airline success story, placed another big aircraft order, this time alongside its low-cost unit flyadeal.

In other news, Azul and Gol agreed to a… no, not a merger, but rather a codeshare deal, which is still significant in a market with just three carriers. In the U.S., Southwest is exploring new distribution options. Spirit Airlines followed Frontier in dropping change fees. And JetBlue is exploring a new codeshare with British Airways.  

To end here on a slightly downbeat note, Turkish joined Singapore in flagging yield declines as global competitors catch up on restoring capacity removed during the pandemic. International demand for air travel, however, appears set to remain strong this summer. 

Airline Weekly Lounge Podcast

In part one of this week’s episode, Gordon Smith and Jay Shabat discuss the latest earnings from low-cost giant Ryanair. In part two, our focus turns to the upcoming summer travel season and what it means for the big U.S. airlines. Listen to the episode here, and find a full archive of the Lounge here.

Weekly Skies

Turkish Airlines: “Risks to the Travel Appetite” 

  • As Ireland’s Ryanair continues to dazzle from its HQ in the far western reaches of Europe, Turkish Airlines continues to do the same from the continent’s far east. The airline started 2024 with a small Q1 operating loss (much smaller than Ryanair’s, in fact). And that’s a good sign for Turkish, which routinely produces extraordinary profits during the summer peak. 
  • Unlike some of its Gulf rivals including Emirates, Turkish Airlines continues to aggressively expand capacity. Measured by ASKs, capacity grew 13% y/y in Q1, making Turkish nearly 40% larger today than it was on the eve of the pandemic. It’s at the same time developing a fast-growing LCC that was recently rebranded with the name A-Jet, with bases at Istanbul’s Sabiha Gökçen Airport and Turkey’s capital Ankara. Turkish itself is now flying to six continents, having just launched service to Melbourne, Australia, via Singapore. Denver and Santiago (in Chile) will be its newest routes to the Americas. The company also has large cargo and maintenance subsidiaries that could be good candidates for a future public stock offering (IPO)—the same is true for A-Jet. 
  • To be sure, Turkish isn’t problem-free. It’s an airline after all. Its A320/21-Neos are Pratt-GTF-powered, and 20 are currently grounded for inspection—this number might reach as high as 45 by next year. It’s at the same time struggling to reach a deal with Boeing and its engine partners for the additional orders it wants to place. Conflict in the Middle East and Africa have disrupted some markets, notably Tel Aviv. Management noted that Saudi Arabia’s airlines and their “aggressive” pricing and capacity hikes have “had a negative impact” on traffic in North Africa. 
  • More generally, Turkish sees the past two years as unusually benign in terms of demand and capacity. “We know that this year is going to be different than the last two years where the yield environment was extra comfortable. We know that the competition is back, and we have to be prepared for it. So, we will start working on some cost-cutting initiatives to increase our efficiencies.” It also noted “higher interest rates and geopolitical conflicts are posing… risks on the travel appetite.” 
  • That all said, the airline does expect another strong summer, boosted by Turkey’s booming inbound tourist sector. Connecting traffic through Istanbul is growing at a healthy pace too, helped by visa policy relaxation in several countries including Saudi Arabia and Egypt. Connections to India and southern Europe are notably rising. Demand is recovering, furthermore, in Jordan and Lebanon. This year, Turkish expects to receive about 60 new planes while retiring 20. Of those 60, 22 will go to A-Jet.

Another Building Block for IndiGo

  • There aren’t too many airlines growing as ambitiously as Turkish Airlines. But here’s one: India’s IndiGo. Already the dominant domestic airline in India, with a fast-growing network to the near-abroad, it’s now planning to conquer intercontinental markets. It will do so with newly-ordered A350s, plus a new business class product announced last week (see Fleet news). That, it says, will be the carrier’s latest “building block” towards creating an airline well-placed to serve India’s expanding economy. The new product will debut this year, with more details coming soon. The next announcement might involve a loyalty program. 
  • In the meantime, IndiGo continues to produce robust profits, underscored by a 13% Q1 operating margin. As executives like to highlight, its global expansion will rest on India’s enormous potential. It’s already the largest country in the world by population. It’s on track to become the world’s third largest economy after the U.S. and China. Per capita incomes are rising, and so is tourism. IndiGo, with its huge fleet of Airbus narrowbodies, now moves more than 100m people annually. “Our current pending order book of a little short of 1,000 aircraft to be delivered up to 2035 gives us long-term visibility well into the next decade.” 
  • The airline is also signing codeshare partnerships, including one with British Airways. Soon, it will get XLR Neos to reach new destinations abroad. It wasn’t long ago that international routes accounted for just 10% of IndiGo’s capacity. That’s on its way to more like 30%. But domestic remains a critical source of profits, and there are media reports that it might soon order more ATR turboprops to serve smaller cities, some with airports not developed enough to handle A320s. 
  • IndiGo does face GTF engine disruptions with its Neos but has been leasing additional capacity in response. “With these additions, the aircraft and lease extensions that we’ve carried out, we were able to mitigate the adverse situation well.” That’s allowing it to maintain double-digit ASK capacity growth. But for now, demand remains strong and industry capacity muted, thanks in part to the recent collapse of rival GoFirst. On the cost side, IndiGo says maintenance and airport fees are the two categories where it’s facing the most inflation.

Wizz Air Getting Back to its Old Self

  • Wizz Air, an eastern European clone of Ryanair, isn’t nearly as large as its Irish rival. But it’s certainly not small. Wizz now serves nearly 200 airports in more than 50 countries, from more than 30 operating bases. It even operates a joint venture in Abu Dhabi. It was on its way to achieving Ryanair-like levels of profitability before the pandemic. But it’s had trouble getting back on its feet following the pandemic’s end. One problem was all the NEOs it had grounded for GTF fixes—45 at the start of this quarter. This impacted Wizz Air’s fleet utilization, a key driver of its success.
  • During the calendar first quarter, utilization improved to targeted levels, helping the carrier achieve a surprising offpeak operating profit, and a strong one at that—operating margin was 10%. But caution: Like its sister airlines Frontier and Volaris, Wizz is an active user of sale-leaseback transactions that in some quarters, anyway, inflate its profitability. More importantly last quarter, profits seemed to have benefitted significantly from compensation for the GTF issues paid by Pratt & Whitney. The terms of airline compensation agreements with Pratt are confidential. 
  • Operations are improving too, and as CEO József Váradi said, “All in all, we’re seeing that the fundamentals of the business are back in place.” He added the claim that Wizz today is the “lowest cost producer in the industry, on par with the previous cost leader.” (He’s talking about Ryanair). That gives him enough confidence to declare: “We think we have a significant runway in front of us when it comes to margin expansion.” Demand, he said, is “very robust.”
  • Wizz has no doubt that it can find market opportunities for all the new planes it has on order. Aside from its core eastern European strongholds, it’s been expanding in London, Italy, and Austria to the west, and in markets like the Gulf region and Israel to the east. It’s getting large enough now where even disruptions like the war in Gaza aren’t causing too much of a problem. It was able to navigate the onset of the Russia-Ukraine war as well. 

Singapore’s Social Media Savvy

  • Singapore Airlines Flight SQ321 made headlines around the world last week. The carrier said a Boeing 777, flying from London to Singapore on May 21 hit “sudden extreme turbulence,” over Myanmar. One person died, and many more were injured, some seriously. The flight crew made an emergency landing in the Thai capital Bangkok, where the plane landed safely. Investigations involving a range of international stakeholders have begun.
  • With such a hard-fought reputation, the horror flight had the risk of damaging Singapore Airlines’ highly polished brand, one that is emblematic of the well-tuned city-state it serves. However, rather than attempting to bury the story, or minimizing its potential reach, the airline delivered a masterclass in media transparency. It worked at speed and scale to counter the information vacuum that can befall such events.
  • On May 22, as the incident continued to make headlines around the world, the challenging job of communicating the company line didn’t go to a PR underling. Instead, Goh Choon Phong, the airline’s CEO stepped up. He took to social media in a three-minute video message and delivered the facts in an authoritative, but emotionally aware way. It was controlled, but not robotic, with empathy threaded throughout. The clip was soon picked up by major news outlets, further increasing its reach. 
  • Goh’s video was the latest in a string of updates from the airline. Notably, these weren’t hidden away on a corporate communications page or in-person news conference but proactively shared across all of its primary social media platforms, including Facebook and X. Each update was numbered, allowing users additional context and easy access to earlier announcements. Every message ended with an assurance that additional details would follow. The airline’s first post on X about the incident gathered more than 4.1 million views in less than 24 hours.
  • Last week’s display of greater transparency and media aptitude is in stark contrast to the company’s handling of an earlier tragedy. On October 31, 2000, a Singapore Airlines Boeing 747 crashed into construction equipment on a closed runway as it attempted to take off from Taipei’s Taoyuan International Airport. Of the 179 passengers and crew onboard the flight to Los Angeles, 83 died and a further 71 were injured. In what later became a notorious example of poor crisis communications, an airline spokesperson initially told the media that there were no fatalities. Further comments from the carrier dismissed early speculation that its aircraft was on the wrong runway. The company later apologized.

Jay Shabat and Gordon Smith

The Stock Take

Airline Performance

May 20-24, 2024

What am I looking at? The performance of network and low-cost airline sector stocks within the ST200. The index includes companies publicly traded across global markets.

The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more hotels and short-term rental financial sector performance.


Saudia’s Record Breaker

  • The Saudia Group has placed a major new order for Airbus aircraft. The company includes the national carrier of Saudi Arabia as well as its low-cost subsidiary flyadeal. The transaction is the largest aircraft order in the country’s history. It covers 105 additional planes and complements existing orders between the airline and European OEM. Of the 105 units, 93 will be of the largest A321neo variant. A further dozen will be the smaller A320neo. The deal brings the total order backlog at Airbus for the Saudia Group to 144 A320neo Family jets.
  • The company flies an all-Airbus narrowbody fleet, but its larger twin-aisle jets are made by Boeing. It isn’t immediately clear how the 105 aircraft will be distributed within the airline group. Flyadeal is currently an all-A320 operator, however, it does have A321s in the pipeline. Airline Weekly recently sat down with Steven Greenway, the new chief executive of flyadeal. He described the challenges and opportunities associated with such ambitious growth (see Airline Weekly, May 13) .
A computer rendering of two new planes for Saudia Group
How the new Airbus jets are due to look in Saudia and flyadeal liveries. Image: Airbus

IndiGoing Premium

  • India’s largest airline has announced a radical shake-up of its operating model. IndiGo says it will debut a business class product by the end of this year. CEO Pieter Elbers announced the change during an earnings call on May 23 (see Weekly Skies). Elbers highlighted the increasing demand for premium travel and expressed confidence that the new offering would cater to the needs of corporate travelers. “We will be launching a tailor-made business product on the busiest routes and [business] routes of the country before the end of this year,” said Elbers. He indicated that further details regarding routes and launch timing would be unveiled in August.
  • With India poised to become the world’s third-largest economy by 2027 and a growing appetite for diverse travel experiences, IndiGo sees its expansion into the business class segment as a strategic move to prepare for future demands. The announcement comes as IndiGo embarks on ambitious international expansion plans. It recently launched several new routes and aims to bolster its global presence. Since taking the helm at IndiGo in 2022, Elbers has been vocal about the airline’s ambitions for international expansion.
  • To help the airline towards its internationalization goals, IndiGo recently placed its first-ever order for widebody aircraft. It plans to offer nonstop connectivity from major Indian airports, removing the need for travelers to transit elsewhere. In separate developments, IndiGo placed an order for 500 narrowbody aircraft with Airbus last June. The airline has the longer-range XLR variant in its fleet pipeline and has purchase rights for an additional 70 aircraft. Both the plane orders form part of a wider strategy to achieve the airline’s vision of making IndiGo a global aviation player.

Gordon Smith

Routes and Networks

Brazilian Buddies

  • Two of the biggest players in Brazilian aviation have agreed to a major new commercial partnership. On May 24, Azul and Gol said they will begin a cooperation agreement — one which looks set to shake up the country’s air market. The codeshare deal connects both of the airline’s domestic flight networks. It covers all routes within Brazil that are operated by one of the two companies, but not the other. Its scale is huge. Alongside Latam, Azul and Gol comprise the three largest airlines in Brazil. The new partners operate around 1,500 daily departures — the vast majority of which are domestic routes. The companies said the agreement will create more than 2,700 flight options with just one connection.
  • Abhi Shah, president of Azul, said the two airlines had “significant non-overlap service offerings,” and that the move would “bring enormous benefits” to customers. The partnership also means changes to the airlines’ respective frequent flier programs. Azul Fidelidade and Smiles members will soon be able to earn points or miles within their preferred program when taking one of the new codeshare flights. Azul confirmed to Airline Weekly that the new codeshares will begin from the end of June. Celso Ferrer, CEO of Gol sought to contextualize the deal, adding that the airline already has more than 60 commercial agreements with global airline partners including American Airlines and Air France-KLM. He said Gol was “eager to extend these benefits within Brazil.”
  • As we’ve previously reported, the South American duo have recently been subject to heightened industry chatter about a potential merger. When asked earlier this month about the likelihood of a more formal tie-up, Azul CEO John Rodgerson simply said: “We’re big fans of consolidation.” In April, Bloomberg said talks between the two companies had “gained momentum,” with Azul reportedly working with Citigroup and Guggenheim Partners to explore a possible bid. Given their dominant positions in the Brazilian airline sector, any merger would require the approval of regulators. 
  • Both Gol and Azul are currently enjoying favorable market conditions, helped by the fact that just three main carriers serve Brazil’s population of more than 215 million people. Gol and Azul also have portfolios of profitable side businesses, including loyalty programs, cargo handling, maintenance shops, and tour packages. But it’s not been entirely blue skies. Gol is still restructuring its financial obligations in bankruptcy, as Azul did outside of bankruptcy. Gol has sufficient cash to continue flying without disruption thanks to support from its parent company Abra, which also owns Colombia’s national carrier Avianca.

JetBlue to Strengthen British Ties?

  • JetBlue is seeking a codeshare with British Airways, which would allow the two carriers to significantly expand their networks in the U.S. and Europe. The proposal, filed with the Department of Transportation on May 22, would allow the two to codeshare flights for 92 destinations, including 39 from New York and 36 from Boston. There are also 17 European destinations listed in the agreement, which include Munich, Stockholm, Oslo, Lisbon and Copenhagen. The developments were first reported by Paxex.Aero.
  • If approved, the codeshare would give JetBlue significantly more access to Europe. The New York-based carrier had expanded its presence in recent years, with flights to London, Paris, Amsterdam, Dublin and Edinburgh. While executives previously said transatlantic flights have been successful for the company, the airline is now cutting winter capacity in the region under new CEO Joanna Geraghty’s leadership. JetBlue already scrapped winter flights to London Gatwick and plans to reduce capacity between New York and Paris. Services to Dublin and Edinburgh were already seasonal. 
  • Geraghty has not indicated whether JetBlue plans to add more European destinations to its network. “Now that we’ve kind of cycled through the markets that are large European destinations that we did not serve out of New York and Boston,” she said at the JPMorgan Industrials Conference March 12, “I think we’re going to be far more opportunistic in terms of what we’re doing.” 
  • The proposed codeshare comes after a federal judge struck down the Northeast Alliance, JetBlue’s partnership with American Airlines where the two coordinated schedules and routes. American also has a decades-old codeshare with British Airways. Since American has a relatively limited presence in the New York area, a JetBlue codeshare could allow British Airways to expand its Northeast offerings. 
  • Even though the Northeast Alliance was struck down, neither JetBlue nor American have ruled out a similar partnership in the future. Geraghty said a potential alliance, whether with American or a different carrier, “may be something we’re interested in somewhere down the road.” 

Scandi Surge Incoming

  • We all know that Santa Claus comes to town in December – but this winter it seems the town is coming to Santa Claus. Hundreds of new flights will serve the European Arctic region this year, collectively offering tens of thousands of additional seats. In recent weeks major airlines from across the continent have announced a flurry of routes to destinations deep within the Arctic Circle. Notably, many of the services will be operated for the very first time, suggesting a new shift in travel demand and broader consumer behavior. Here are some of the highlights announced in the past few weeks:
    • Lufthansa: Frankfurt to Rovaniemi, Finland
      From November 30, Lufthansa will fly twice a week from its Frankfurt hub for the first time. Alongside Rovaniemi, the German flag carrier already serves the northern Finnish destinations of Oulu, Kittilä, Ivalou, and Kuusamo, as well as Helsinki. 
    • British Airways: London Heathrow to Tromsø, Norway
      From December 1, British Airways will add Tromsø as the most northerly destination on its global route map. It will be the first time the airline has served the Norwegian city. Flights will operate twice a week until March 27. 
    • Iberia: Madrid to Tromsø, Norway
      Joining its IAG partner in Tromsø this winter is Iberia. The Spanish flag carrier will begin flights from its Madrid hub on December 1, with twice-weekly frequencies on Thursdays and Sundays until March 2. A total of 9,000 seats will be available during the three-month season. As well as Tromsø, Iberia is bringing back its Rovaniemi service. The airline, which described the route’s performance last year as “very successful,” is ramping up capacity for the coming winter. Flights will start on November 30 and end on March 1, representing an extra month of flying compared to a year earlier. The peak holiday period in December will see four weekly flights, with more than 12,000 seats on offer overall. This marks a 74% increase compared to winter 2023-24.
    • SAS: Five New Nonstop Routes
      By definition, SAS Scandinavian Airlines already had a robust presence in key winter markets. But the Nordic carrier is proving that even incumbents have room for expansion in the coming season. Responding to what the carrier describes as “increasing demand from travelers seeking winter adventures in the north,” the airline is adding five new nonstop routes. Tromsø and Rovaniemi will see new flights, alongside Kiruna and the aptly named ‘Scandinavian Mountains Airport’ in Sweden. 
    • Air France: Paris to Kiruna, Sweden Kiruna will join the network from December 21, with weekly flights from the French capital. The Swedish town joins Rovaniemi and Kittilä in Finland, as well as Tromsø and Narvik Lofoten in Norway on the Air France route map.
    • Finnair: Flights to Lapland ‘Every 30 Minutes’ Finnair is no stranger to Lapland and other Arctic destinations, but this winter’s program looks set to be one of its largest ever. The airline will offer up to 63 weekly flights to Rovaniemi – a 20% increase from last year. During peak hours on select Saturdays, there will be flights to Rovaniemi every 30 minutes; described by the airline as ‘Santa’s Shuttle’. A Rovaniemi to Tromsø service will operate six days a week, building upon a successful introduction in December 2023. The intra-Arctic services are operated as tag flights: Helsinki-Rovaniemi-Tromsø and Tromsø-Rovaniemi-Helsinki. Finnair has 14 destinations in Finland and 25 destinations in the wider Nordic region.

Gordon Smith and Meghna Maharishi

Distribution & Sales

Southwest Smashes Sales Model

  • Something that was once seen as unlikely now seems to be a reality: Southwest is on Google Flights. Southwest fares began popping up on Google Flights on May 22. The carrier has been long known for not listing its fares on Google Flights or online travel agencies as a way to cut out distribution costs and to build loyalty among its customers.
  • Southwest said it wanted to increase its visibility on the travel platform. “We’re extending the reach of by giving users of Google Flights enhanced visibility into our available flights, fares, and the benefits of our products and services,” the carrier said in a statement. “In our initial piloting of this partnership, we’ve made it possible for Google Flights users to compare our different fare options and click directly into to book their selected itinerary.” 
  • It marks one of the biggest strategy shifts in Southwest’s history as the carrier looks for ways to remain competitive amid an international and premium travel boom. Besides a change in consumer preferences, the airline has also been affected by Boeing delivery delays as it cuts capacity and pauses pilot and flight attendant hiring. The carrier’s flights also started appearing on Chase Travel’s booking portal, but so far, other credit card companies don’t have access to Southwest flights. 
  • Southwest may also have a benefit with displaying fares on Google Flights, according to travel blog View From the Wing. The new Department of Transportation rules require airlines to disclose all ancillary fees associated with purchasing a ticket, even on third-party sites. Southwest already didn’t have change fees or checked bag fees, so displaying fares on Google Flights may make it look more attractive compared to its competitors.
  • Southwest is currently conducting an in-depth study into consumer preferences as it debates making more major changes to its model. The airline hasn’t conducted such a study in several years, CEO Bob Jordan said during a call with analysts April 25. In particular, Jordan said Southwest is weighing whether to implement assigned seating and to add premium cabins to its fleet. These changes would be some of the biggest for Southwest, which has used its economy seating and open boarding process to differentiate itself in the industry. “We remain committed to our industry-best, customer-friendly policies, but we are also committed to understanding and meeting customer expectations,” Jordan said during the call. “We have transformed before, adding things like Wi-Fi, larger bins and in-seat power, and we will continue to adapt as needed.”

Spirit Scraps (Most) Change Fees

  • Spirit Airlines has become the latest U.S. ultra-low-cost carrier to shake-up its fees policy. The carrier quietly removed most change and cancellation fees from its website earlier this month. Spirit said in a statement that it started implementing a new policy on May 17. Now, Spirit doesn’t charge any change fees for any fare classes, except for group bookings. Before, the airline charged anywhere from $69 to $119 to change or cancel a reservation, depending on the number of days before a departure.
  • Dropping change fees has become a more permanent trend in the industry. During the pandemic, the Big Three U.S. carriers — American, Delta and United — scrapped many charges, except for their cheapest and most restrictive fares. Southwest is long-famed for not charging any change fees. Spirit’s changes come as its biggest competitor, Frontier Airlines, removed most change fees just days earlier as part of a major overhaul of its pricing structure.

Meghna Maharishi and Gordon Smith

Feature Story

Europe’s Walmart in the Sky

What’s the world’s strongest and most successful airline today? The answer is easy. It’s the airline that everyone seems to hate.

Everyone, that is, but the 184 million passengers who flew on Ryanair in the past year. Europe’s largest low-cost carrier doesn’t just move massive numbers of people. It has a balance sheet that’s the best in the business. Its operating margin for the 12 months to March topped 15%, rare for an airline its size. Even better, Ryanair’s growth opportunities, after all these years, remain plentiful. No, nobody ever said they love the inflight comforts. But on flights of 2.2 hours—that’s Ryanair’s average flight duration—people love what it provides: low fares. As Ryanair’s mastermind Michael O’Leary once said, people will crawl naked over broken glass for a cheap airline ticket.

O’Leary is still in the captain’s seat, some three decades after becoming CEO and adopting the business model pioneered by Southwest in the U.S. Last week, during Ryanair’s latest earnings call, he was his usual self, hurling insults at rivals, bad-mouthing politicians, and complaining about online travel agencies that “want to keep scamming consumers.” More importantly for investors, he delivered a mostly upbeat assessment about the future. Yes, the January-to-March quarter produced heavy losses, with operating margin at negative 15%, similar to what EasyJet reported. But that’s nothing unusual for what’s the worst quarter of the year, in Europe’s highly seasonal market. O’Leary also said that pricing in the current April-to-June quarter is somewhat weaker than expected, separate from the Easter calendar effect. He speaks about “some degree of consumer resistance” and a “recessionary feel.” It’s especially true for offpeak shoulder period bookings. Ryanair is nevertheless “cautiously optimistic that fares will be flat to modestly up this summer.” Travel demand across Europe this summer, he assures, looks strong. “When we stimulate, we see very strong volume growth.”

The airline, of course, is deeply frustrated by Boeing’s inability to deliver B737-Maxs on time. These “game-changer” machines, as O’Leary calls them, are a key component of Ryanair’s plan to depress unit costs, something it does better than any other airline in the world. The delays, therefore, are hurtful. But as of April 1, it already had 146 of the 210 Max-8200s it ordered. Last year, it added another 300 Max-10s, a version with even lower unit costs—O’Leary thinks they’ll start arriving in time for 2027’s summer peak. Unusually, Ryanair plans to take some -8200s between July and September this year—it typically takes deliveries in advance of the summer peak, so that they’re not sitting on the ground all winter before entering service. In the meantime, the airline also extended the leases on some older A320s flown by its Austrian subsidiary Lauda; it said the lease rates didn’t increase.  

Disruptive as the Boeing delays are, they don’t change one of Ryanair’s most important competitive advantages: Its massive size and scale. It began this quarter with 584 planes, on the way to crossing the 600 threshold this summer. That’s almost double what rival EasyJet has. It’s more than triple what rival Wizz Air has. Ryanair is far and away the largest airline flying within Europe, by any and all measures of capacity.

Many of Ryanair’s rivals are facing far more disruptive aircraft supply shortages. Wizz Air’s operations are greatly affected by Pratt & Whitney engine work required for A320/21-Neos. Wizz is hardly alone, and Ryanair expects to operate in a capacity constrained environment for at least the next two or three years. Consolidation will further tame capacity growth, with IAG seeking approval to buy Spain’s Air Europa, Lufthansa seeking approval to buy Italy’s ITA, and Air France/KLM investing in Scandinavia’s SAS. O’Leary, by the way, says he supports E.U. approval of such deals… “as long as there are appropriate competition remedies.” He mentioned slot divestitures at airports like Madrid and Milan Linate.

As many airlines sign expensive new lease contracts as they scramble to overcome capacity shortages, they’re also often raising expensive new debt as they scramble to ensure sufficient capital. As their interest payments balloon, lucky Ryanair is merrily earning income from interest—roughly $70m net last year, all falling to its bottom line.

Boeing, for one, knows Ryanair would be the last customer in the world to default on a payment or walk away from an order. The aircraft maker, furthermore, can count on it to buy hundreds and hundreds of planes—if it offers highly favorable terms and conditions. If it hadn’t over the past two-decades plus, a lot of that business might have gone to Airbus. Recall that in 2011, unable to squeeze Boeing for the deal it wanted, Ryanair signed a “memorandum of understanding” to help China’s Comac develop a B737 competitor. Negotiating bluster? Surely. In any case, the two companies came to terms on a big 737-800 order in 2013, with Ryanair securing “a net effective price not dissimilar” to what it negotiated in a 2005 contract. The airline placed another giant Boeing order in 2014, this time for up to 210 Maxs. As mentioned, it placed a big Max-10 order last May.

If Ryanair’s negotiating clout with Boeing is one of its superpowers, so too is its negotiating clout with airports within reach of its Boeing planes. Gone are the days when the LCC would only fly to secondary airports mocked as remote cow pastures. It flies to some of Europe’s busiest airports today. But now as much as ever, it wields its planes like carrots and sticks, rewarding acquiescent airports with capacity growth—and punishing uncooperative ones by removing flights (and pilot and flight attendant jobs). On a slow-growing continent heavily dependent on tourism, Ryanair flights—it’s not too hyperbolic to say—can make or break a local economy.

For example, unhappy with rising costs at Bordeaux Airport in France, Ryanair will close its base there. It’s reacting to a new tourism tax in Venice. In its home country Ireland, it’s moving planes and jobs elsewhere due to policies it finds distasteful, including a cap on Dublin Airport traffic. As O’Leary scowled in March, “While Spain’s traffic, tourism, and jobs grow thanks to Ryanair’s investment in new aircraft and new routes, Dublin Airport stagnates under a 15-year-old, outdated, traffic cap, and the idle failure of Transport Minister Eamon Ryan to take any action to deliver his own aviation growth strategy. Green Minister Eamon Ryan won’t intervene, won’t grow, and his inaction means four years of stagnation in Irish aviation and tourism while Spain and other EU airports continue to grow, thanks to Ryanair’s investment.” If you ever wondered how O’Leary gets away with such irreverence, it’s because Ryanair really does have the power to create jobs and grow economies. And that translates to political power. Last week, in case anyone in Ireland failed to get the message, Ryanair warned, “We’ll probably see airfares spiral this winter because we’ll be unable to put in extra capacity for key events such as Christmas.”

Spain is indeed one place where Ryanair is growing. It also sees lots of growth opportunities—and lots of willingness to offer low airport costs—in eastern Europe, including Poland. Comparing this current quarter (April to June) with the same quarter five years ago (pre-Covid), Ryanair’s total seat capacity is up a remarkable 41%, according to Cirium Diio schedule data. But it grew at an even faster clip in markets like Italy, France, and Poland, while shrinking dramatically in Germany. It exited some airports entirely, like Frankfurt and Munich. In other cases, capacity is down but because of geopolitical disruptions, i.e. Kyiv and Tel Aviv.  

Every year in its annual reports, the airline includes the phrase: Ryanair strives to reduce or control four of the primary expenses involved in running a major scheduled airline group. Two of these, sure enough, are aircraft and airport costs. The other two are labor and customer service costs. The company, to be clear, does not offer comparatively low pay. Instead, it does things like outsource crews during peak times, so that it’s not overstaffed during offpeak times—that’s something by the way that no major U.S. airline union would ever allow. Crew pay, furthermore, is linked to productivity—if pilots fly more, they get paid more; if flight attendants sell more, they get paid more. Some of Ryanair’s ground labor at airports, meanwhile, is outsourced to external contractors. 

Are there other secret sauces that flavor the Ryanair success story? Yes, including its prolific ancillary selling, its religious devotion to cost control, and its predator instincts (look at what it did to Alitalia). Free publicity from O’Leary’s antics doesn’t hurt. What other airline CEO can get away with saying things like, “If drink sales are falling off, we get the pilots to engineer a bit of turbulence. That usually spikes up the drink sales.”

On the other hand, there’s one famously powerful airline weapon that Ryanair doesn’t wield. It doesn’t have a loyalty program. “If you want loyalty,” O’Leary once said, “get a dog.” Last week, he told investors that neither is he interested in the packaged holiday business, despite EasyJet’s success with that.

Since becoming a low-cost airline in the early 1990s, Ryanair’s incessant growth and muscular profits ran into just one unbreakable barrier: Covid-19. It’s on the other hand overcome wars, recessions, political unrest, labor strikes, fuel shocks, natural disasters, adverse government policies, environmental campaigns, and now aircraft supply disruptions. Not even “pirates”—its characterization of some online travel agents—can stop it. Call it the Walmart of Europe’s skies—but without an Amazon breathing down its neck.

On the contrary. Ryanair says its cost gap with rivals is “widening significantly.” It’s heavily hedged on fuel. “Labor inflation among our competitors,” it claims, “is materially higher than it is [for] Ryanair.” And O’Leary isn’t going anywhere anytime soon. His contract runs through at least the summer of 2028.

Jay Shabat

Airlines Sector Stock Index Performance Year-to-Date

What am I looking at? The performance of cruise and tours sector stocks within the ST200. The index includes companies publicly traded across global markets including network carriers, low-cost carriers, and other related companies.

The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more airlines sector financial performance

Read the full methodology behind the Skift Travel 200.