Ryanair’s crisis shows the true price of the low-cost revolution
The airline’s cancellation fiasco is just one example of how companies such as Amazon and Uber are unbundling their costs – and their responsibilities.
Ryanair chief executive Michael O’Leary, in his cheerfully blunt way, frequently used to assert that the only customer service that really counted was getting passengers to their destination on time and for the cheapest fare. That definition appeared to have softened when in 2013 it promised to be nicer to its customers: a bit more leeway with the bags, smaller fines for a lost boarding pass. Why not, O’Leary mused, stop “unnecessarily pissing people off”. Yet now, by whatever standard, customers are ill-served: thousands of flights cancelled, more than 700,000 passengers disrupted, and now a belated, grudging acknowledgment of statutory compensation rights.
The Irish airline, with typical bravado, put it down to a management cock-up: messing up the rotas, not paying attention to the piffling rules, and suddenly finding itself short of pilots for a few thousand flights. D’oh! But that show of transparency shouldn’t persuade anyone that this is an aberration rather than a symptom, a visible culmination of the logic of low-cost economics.
Ryanair is a highly efficient business in an industry whose dominant vision is – in a phrase coined by the government’s airline commission – that “low-cost is king”. O’Leary, who keeps racehorses in his spare time, has bred and trained a generation of passengers to pay and expect little. Airline bosses have long talked about “unbundling the product”: the process that starts when a customer discovers a startlingly cheap fare on the internet, only to watch it double when adding baggage fees, paying a fiver to guarantee a seat, and so on. The components of the flight are effectively disassembled, and the headline price falls, but it will cost you ¤3 for a sip of water onboard.
Unbundling has become part of our world, and not just when we fly. It shows up in a host of what are billed as consumer choices, and increasingly in what were once public services. Utilities firms offer price bonuses to those able-bodied and affluent enough to read their own meter and pay upfront; in some areas, you have to pay for parts of the council recycling service.
If the effects of this unbundling are clear to those immediately disadvantaged by the new landscape of choice, the prospects of all of us are ultimately diminished. How this plays out is neatly demonstrated by what happens when airlines charge to reserve a seat. Before anyone paid for the privilege, travelling companions were seated together automatically at check-in by most airlines. Now that you can pay to bag a specific seat and so many passengers do, it becomes a racing certainty that non-payers will be separated, and so all parties must fork out if they want to stay close.
Effects like this aren’t unique to airlines. As consumers, we have been hooked by bargains that come at a cost. Sometimes that cost is directly visible to the passenger: toddlers dragging suitcases through security to save a few quid, increasing the general stress level. Other individual desires – stoked by cheap offers and unrealistic prices of an online flight deal or an Uber – have major impacts on social and physical networks beyond our screens.
Ryanair has nurtured the dream of flying to obscure cities for a tenner, because we can. Amazon Prime has made users demand impulse purchases be driven to their door the next day, ruining the ability of logistics firms to handle their whole inventory more efficiently, and with less environmental damage. And Uber has encouraged a swath of city dwellers to take taxis when before they might have used public transport, with thousands of extra private hire vehicles adding to congestion that slows everyone’s journeys. Yet the true price of a taxi is one that ever fewer people are willing to pay: 800,000 have signed a petition demanding that Transport for London reinstate Uber, even though the regulator has stated that the firm was not a “fit and proper” operator, and risked passengers’ wellbeing.
As Theresa May lauded the free market on Thursday as “the greatest agent of collective human progress ever created”, she did stress the need for regulation. But firms have increasingly sought to unbundle their own responsibilities – and staff have often borne the brunt. At tribunals this week, Uber argued against holiday pay or rights for its drivers. Ryanair, which boasts its staff costs per passenger are half those of even low-cost rivals, overlooked pilot leave, and has long relied on an army of pilots hired and paid through third parties, some attracting tax investigation.
And this champion of EU membership repeatedly swerves the European regulation it doesn’t like. Ryanair’s routemap across the continent is dotted with yellow bases, where staff and planes legally reside. There is no yellow in France, where courts demand that employees abide by local tax and social security laws.
Cabin crew, of course, have it substantially worse than pilots, and not just at Ryanair. British Airways is derided by the Irish company for its high fares, but has in fact been dragged inexorably into its low-cost slipstream. A significant part of BA’s cabin crew has been on strike since January over low pay.
The mixed fleet, the only option for young recruits since 2010, is expected to be “flexible”, and make up their £12,000 basic pay to a living wage through bonuses and allowances for time in the air, frequently spending time unpaid on standby in case of a call. It’s a structure that looks increasingly apt for an airline carrying the flag for Britain. Complaints are shrugged off by BA bosses: customers want low fares.
In the space of a week, we have seen two regulators baring their teeth, against Uber and Ryanair. The Civil Aviation Authority professed itself “furious” that the airline had not informed consumers of their proper rights. Yet hope is now invested in an authority that, caught up in the vogue for cuts, has spent five years axing staff and trimming inspections of its own accord – and was recently denounced by Balpa, the pilots’ union, for its “light-touch” regulation.
Passengers are rightly outraged at flight cancellations. But the outrage is more at the breach of terms and conditions than at firms riding roughshod over the wider social contract. Did we really expect Ryanair to voluntarily rebook people on to other airlines? No one else flies for their price.
Ultimately, the cheaper deal is making us all pay. Unbundling doesn’t eliminate costs, it just makes them external. And they still have to be met by someone, somewhere. The unravelling of corporate responsibility that accompanies it, vividly evinced in the creative employment contracts now endemic in road, rail and air, could leave society with costs as small as the individual medical care of a burnt-out pilot or cabin crew member – or something far worse.