A Valuable New Airline Service You May Not Have Noticed

The last time I flew on Ryanair, Europe’s scrappy low-cost airline, I sensed some message confusion. Its garish blue-and-yellow planes and spartan terminals bear slogans such as “The Low Fares Airline,” “The On Time Airline,” “Fly Cheaper,” and even one that read “Europe’s Favourite Airline”—an obvious dig at its larger rival British Airways, whose longtime slogan was “The World’s Favourite Airline.”

Ryanair gets its share of bad press, and while I’ve never had an unpleasant flight on the airline, I’ve never had a particularly pleasant one either. It is a truly no-frills experience—no window shades, no reclining seats, charges for checked luggage, everything on the plane for sale. So can it really be Europe’s favorite airline? Can it be anybody’s favorite airline? Apparently not. Last fall, TripAdvisor ranked Ryanair as the world’s least favorite airline, citing “unfriendly staff . . . delays and poor legroom.” The website Ryanair Campaign reprints unverified but believable firsthand accounts of lost baggage, uncompensated delays, excess fees, distant airports, and other customer-service woes. A campaign to unionize the airline camps out at Ryan Be Fair.

But then again, perhaps Ryanair is Europe’s favorite airline—not based on who attacks it with a website or who disapproves of it in a survey, but based on travelers in seats. Ryanair claims to have carried 3.26 million passengers in August 2006, over British Airways’ 3.10 million. Ryanair’s CEO Michael O’Leary said, “That is why Ryanair is now the world’s favourite airline, and BA are now officially just the second choice.” In 2006, even with the August terrorist plot which snarled British skies for days, Ryanair carried over 40 million passengers, putting it within striking distance of the world’s top ten largest airlines.

This favorite/least favorite business brings up the crucial question of price. Discussions of consumer goods and services often ignore the fact that price is a form of customer service, and that low prices usually translate into lower levels of what is usually thought of as “service.” Travel reporters and airline consumer advocates usually focus on premium service: Who offers the best first class lie-flat bed? Whose lounges are the most luxurious? When these journalists do attend to economy class and low-fare airlines, they tend to lament the “race to the bottom” on service, as airlines drop amenities or charge for them, leading to a lamentable decline in the perquisites of travel journalism.

Most airlines sell tickets on a unitary fare, which includes all the costs of the flight and service, including (of course) landing fees, crew salaries, and fuel, but also luggage, onboard entertainment and meals, and a number of other services. If one airline charges less than another, it is reasonable that some of the ancillary services will not be offered. Low-fare carriers have moved in the direction of true fare transparency—letting passengers know exactly what they’re paying for. The essential cost of the transportation is the base fare, and any ancillary services can be tacked on at will.

Air Canada, for example, has a four-tiered fare level system for making clear how price affects the level of service. At the lowest level, one can get fare rebates for not checking luggage or collecting frequent-flier miles, and there are additional charges for seat selection and itinerary changes. This sort of innovation allows passengers to see exactly what their fare buys. It also allows the most price-sensitive customers, those who in the past were completely priced out of air travel, to buy the less expensive tickets. As Craig Winneker pointed out in The American, low-fare airlines have transformed European tourism, migration, jobs, and more, making air travel no longer an exclusive province of business professionals and once-a-year holidaymaking families.

So who would want to throw a monkey wrench into these improvements? The government and consumer advocates, for two. Winter travel problems instigated calls for a “Passengers’ Bill of Rights,” legislation for which is pending in Congress. Recently, USA Today reported that members of Congress want the Department of Transportation to more closely oversee airline customer service. Regulators, however, will discover that attempts to mandate a particular level of service inevitably induce fare increases. Regulations to mandate particular forms of service will affect low-fare carriers most severely, since they generally offer fewer frills, which will in turn restrict price-sensitive passengers’ travel options more than any others.

The tip of this regulatory iceberg first collided with Ryanair’s wheelchair fee. Although it used to charge £18 for the use of a wheelchair, a 2004 court decision held the airline responsible for providing free wheelchair service at its London Stansted base. Since then, Ryanair has passed these costs on to customers, adding a 33p “wheelchair levy” to each ticket. Without commending Ryanair’s insensitivity to the disabled, this is the future of airfares when particular levels of service are mandated.

Governments and consumer advocates would do well to keep in mind that air travel price competition is thwarted by snowballing customer service requirements. More service equals higher fares. The cheap airlines—“Europe’s favourite” or not—should be encouraged, not regulated away.

This article was originally published on American.com on April 10, 2007.