Casestudy Nofrills Ryanair faces test with Business Plus There are no flat bed seats, no free cham pagne and no left turn. But Byanair still claims it is offering a business service. On Wednesday the low-cost Irish airline unveiled Business Plus, a service designed to lure the famously bare-bones airline passengers who usually fly business class on other carriers and are used to cur tain dividers, hot towels, free meals and other perks. None of those frills will be part of the Byanair package. Instead, according to Kenny Jacobs, the airline's chief market ing officer, what potential business class travellers want are flexible tickets, multiple sameday return flights, fasttrack secu rity, priority boarding and seats near the exits and over the wings, which have more legroom. In other words, Business Plus will be business class flying Byanair style. 'There was no demand for some of the tradi tional trappings of the business class product the bad sandwiches, the bad coffee,' says Mr Jacobs. 'What [passengers] wanted us to do was to tweak the schedules to make them more businessfriendly. This is a big segment for us, and we want to tailor that service to the needs of business passengers. The numbers stack up from our point of view.' Byanair is playing catch-up after admitting that rival easyJet has taken the lead in attracting business passengers. The Irish airline is trying to make inroads into the lucrative market as part of an overhaul to increase its appeal and soften its image for poor ser- vice and peremptory treatment of passengers. The 'caring, cuddly, sharing' Byanair includes offering allocated seating and mobile boarding passes, revamping its website, as well as giving fami lies some incentives such as discounts and warming babies' bottles. Enticing business class passengers from their cosseted ways is tough, as easyJet has found. It has lifted the proportion of business travellers it carries from 18 per cent to 20 per cent over the past few years. Stephen Furlong, an analyst at Davy, the Dub lin brokerage, says that for low-fares airlines, win ning business passengers 'is a slow, incremental grind'. Moreover, some airlines are moving in the EZ/g' -' I ' j/Ifrh (R'LF opposite direction. Aer Lingus and 8A8 no longer offer the full business class service on shorthaul flights. Mr Jacobs says a quarter of the 86m passengers Byanair has carried over the past year are 'business travellers', but they are paying standard fares, which start at 19.99. Byanair will have to convince more of them to pay the higher fare the cheapest Business Plus ticket will cost 69.99. That is less than the business ticket on traditional carriers, but it does not include incentives such as loyalty programmes. 'It will be tough to get business class passen gers on the flag carriers to come across to Byanair,' says David Holohan, who follows the company for Merrion Capital in Dublin. He says that if the Byanair offering succeeds in luring more higher-paying pas sengers, the rewards could be significant given the gap between Business Plus and regular fares. But he says the airline would be doing well to get 5 per cent of its passengers to pay the higher business product fare regularly. One factor that may count against Byanair is that it often flies to outoftheway airports. EasyJet has been building positions at primary airports for years; they now account for 70 per cent of its destinations. Byanair is trying to increase its share of primary airports, and says it will move from 35 per cent to 45 per cent within two years. But Michael O'Leary, chief executive, says Byanair will not y to Europe's three main business hub airports - London Heathrow, Paris Charles de Gaulle Continental Airlines In 1993, making almost 12 times and Frankfurt. The toughest challenge then for Ryanair his original investment. may be to make its business product work even if it Back in 1996, Ryanair's founders managed to does not serve Europe's main business airports. get Mr Bonderman to drop a planned venture he Oliver Sleath, airlines analyst at Barclays, says: was negotiating with Richard Branson to back their 'Ryanair is coming at this with a brand that will take company instead, writes Siobhan Creaton in her some time to improve, and a network/frequency book, 'Ryanair. How a small Irish airline conquered offering that is fundamentally less attractive, although the world'. The financier participated in a refinancing evolving quickly.' of the company and bought a stake alongside the Wait and see if easyJet can materially drive up family and the management their share of business passengers before assuming A year later, Ryanair became a public company Ryanair will be successful.' and Mr Bonderman's stake was worth 260m. Since Mr O'leary does not sound entirely convinced that then the company's share price has surged from being nice will make Ryanair more money, but he is 60.4 to $7.1, bringing its market capitalisation to willing to give it a try. In Dublin last week to announce 69.6bn. The US financier, whose private equity firm new routes, he said his staff had assured him that if is now seeking $10bn for a new leveraged buyout he kept up his efforts to be 'caring, cuddly and shar- fund, has since sold down his stake to 0.55 per cent, ing', Ryanair would win more business passengers which is worth 654m. from Aer Lingus, its local rival. However, addressing the International Air 'So I am doing my level best, and funnily enough Transport Association in 2006, Mr Bonderman said: it's working,' he said. It's time to sell, ladies and gentlemen,' he told his That boast is about to be put to the test. audience in Paris. 'This is as good as it gets in the airline industry. It's only going to get worse.' Ride of private equity heavyweight Bonderman Sourcer from 'No-frills Ryanair faces test with Business Plus', Financial David Bonderman, the 71-year-old chairman of Times, 27/08/14 (Boland, V. and Wild, J.). Ryanair, has been an ever-present figure at the Irish low-cost airline The co-founder of Texas-based buyout group TPG Discussion questions Capital, who has chaired the company for 18 years, personally invested $1m for a 20 per cent stake in the 1 What is the rationale behind Ryanair's low-cost airline in 1996, when the founding Ryan fam- decision to compete in the business segment? ily was looking for a partner to boost the company's 2 How attractive do you assess the business expansion internationally. segment to be to Ryanair and why? Airlines have always been the sweet spot of the 3 What targeting strategy is Ryanair trying to private equity financier. The former lawyer rose pursue? What difficulties do you anticipate to prominence in the US with the tumround of Ryanair will face in following such a strategy