Monthly Archives: November 2009

Ryanair Prepaid Card: Mastercards Compared

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So Ryanair have just announced that they will no longer be accepting Visa Electron as a means of payment in order to avoid their £5 card transaction fee.

Does this mean the end of their famous 1p flights, or indeed of any of their lowest price offers, where on any given day it is usually possible to book a flight somewhere on their network for less than £10, without paying any additional charges at all?

Well, unfortunately, it no longer seems possible to get away from these fees completely. Ryanair will still accept fee-free payment for all purchases made using Pre-paid Mastercards, but what they have effectively done is outsourced the fee charging to another provider. I’ve had a look around, and I can’t find any company offering totally fee-free pre-paid cards – why would they – at least banks can find extra ways of making revenue from their customers (sounds familiar?), whereas pre-paid card issuers can only really make money from levying a fee for the card itself, and maybe a few extra pennies by selling on the data.

So what’s the best option? Really depends on how often you expect to fly with Ryanair,  whether or not the other airlines will follow suit, and of course – how long this particular loop hole will last. First there was no fee for debit card purchases, then there was only no fee if you paid by electron, and now there is only no fee if you load up a pre-paid Mastercard. But who’s to say they won’t switch their allegiances to Visa come the end of next year?

To Ryanair, this is a clever cat & mouse game of making sure the majority of their customers pay the £5 card handling fee with their bookings. As a one-off charge, this wouldn’t be so bad, but the charge is levied on each sector – yup, that’s £40 for a family of four making a return trip. We might have grown used to extra charges in the airline industry, but there’s something particularly irritating about being asked to pay a fee just for the privilege of spending your money with a company. At least with airport charges, you know the airport is doing something, and with Air Passenger Duty, you know it is a rip-off tax which has nothing to do with the environment, but the money is going to a good cause like bankers’ bailouts. Even when you pay £3 for a cup of muddy coffee, you can at least physically see that you are getting something in return. But shell out £5 just to pay for your booking, and what do you see? Nothing – and we know this transaction only costs the airlines a few pennies to process.

Now I’m not going to say that Ryanair should scrap the card handling fee – we know that it is only by levying these extra charges that they are able to offer the 1p flights in the first place – so all I can suggest is that if you fly with Ryanair regularly, it is worth looking for a pre-paid Mastercard which charges the lowest possible fees. This will depend on your usage levels – look out for:

Pre-paid Mastercard Fees

  1. Application fee – varies from zero to £29.99 – with corresponding increases in other charges.
  2. Load fee – avoidable, sometimes by paying in using a particular method.
  3. Monthly fees – best to avoid if you just want a pre-paid Mastercard for use when making cheap flight bookings.
  4. ATM fees – shouldn’t be relevant if you are just using this card for flights.
  5. Foreign fees – note that for some flight bookings, you might be charged in Euros or local currency, especially when booking flight legs to UK airports where you start your journey in another country.

I’ve checked out a few price comparsion tables, the most informative being What Prepaid Card - although as with many of these websites, other options may be available. For frequent Ryanair bookers (especially if you have a habit of booking loads of flights, but not always turning up), the CashPlus Premium account looks like the best deal – pay a one off fee of £29.99, and you can then enjoy free (1p) flights ‘forever’ – or at least until the next change of Ryanair policy.

Less regular users would be better off with The Sun Prepaid Mastercard – a much lower application fee of £6.49, but you will be charged between 50p and £1.50 per booking (2.95% of value within these limits). This is still much more acceptable than shelling out £5 a pop.

Cheap flights to Denmark – Copenhagen v. Billund?

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I’m flying to Billund next week, courtesy of those kind folks at Ryanair, who sold me a one-way flight to Billund from Birmingham for just 1p. There’s various places in Denmark, Sweden and Finland that I want to visit, and I’ll be flying back from Helsinki to Gatwick with easyJet.

A few weeks ago, my brother went to a wedding in Malmo, Sweden, which is just across the fantastic Oresund bridge from Copenhagen. He flew with SAS direct from Birmingham to Copenhagen, and was waxing lyrical about the service. That’s all well and good, but in these price conscious times, it isn’t surprising to find so many people grabbing the cheap flights with Ryanair.

Now I know that everyone’s motivations for travel are different, but if you wanted to visit three of Denmark top attractions, then you might well start in Billund, which is home to Legoland, before heading on to Copenhagen via Odense, which is the birthplace of author Hans Christian Andersen.

Personally, I’m off to immerse myself in Danish urban design, so Odense’s network of urban parks will be the highlight of my trip, but say you are visiting various different places in Denmark, and you have a choice between flying with Ryanair to Billund (flights available from London Stansted, Birmingham, Edinburgh and Dublin) or with another airline to Copenhagen (wider choice of different departure airports).

Which would you do?

Non-stop Australia flights to become a reality?

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According to this news winging its way over from Australia, V Australia, which is the international arm of Virgin Blue, are expected to announce new non-stop flights to Perth from London in 2011.

This route would be the second longest in the world, with flight times of just 16 hours – a saving of 5 hours compared to the current shortest times, due to the fact that current flights to Perth need a change of aircraft. Even compared to existing sameplane flights to Australia, the non-stop service still offers a huge time advantage, as the routing is direct and there is no need to re-fuel.

This move will see the Virgin group continue its advancement as a truly pan-global company – although I hesitate to use the term ‘network’, since the airlines are each operated independently. An additional non-stop route between Sydney and New York will also be offered – another interesting development, as the majority of USA-Australia flights operate to west coast hubs such as Los Angeles and San Francisco.

It will be interesting to see what sort of fares are offered on this route – the economics of operating these ultra-long flights aren’t as simple as just finding a way to avoid an un-needed set of airport charges. For this type of flight, aicraft don’t just need extra fuel - they also need extra fuel to carry the fuel that they will need later on in the journey. For this reason, Singapore Airlines, which offers the current longest flight in the world between Singapore and New York Newark, operates a business-class only service, thus cutting down on weight.

Is this the beginning of the end for bmibaby?

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Following on from yesterday’s news that Lufthansa can’t find a suitable buyer for bmi, we’ve had confirmation today that jobs are going to be axed, and that routes will be curtailed at Birmingham, Manchester and Cardiff.

So, is it wise for bmibaby to concentrate their efforts on one large base at East Midlands airports. They say that they want to concentrate on ‘growth routes’, but with growth comes competition, and Ryanair are already very well established at Castle Donnington. Right now, can bmibaby really push themselves as the ones who offer a ‘more pleasant’ experience over Ryanair’s cut-throat service, or will customers continue to vote with their wallets and choose the airline which gives them the cheapest fees? When going after business passengers, it is much easier to play on offering services which take people closer to where they want to go, but is this so important for the leisure passenger – especially when East Midlands airport itself is playing a hybrid game of serving the three cities of Nottingham, Leicester and Derby, and also trying to poach passengers from Birmingham, without being directly adjacent to any of these cities.

Easyjet might be out of the way at East Midlands, but there will have been obvious reasons why they made a commercial decision to pull out. Baby reducing their presence at Manchester leaves room for Jet 2 or Easyjet to add more services, whereas Ryanair and Flybe will swoon over any signs of weakness at Birmingham, and leave tiny with very little opportunity to come back in once the economy starts growing again. As for Cardiff? Not exactly Ryanair’s favourite airport a few years ago, but if baby reduce their presence there, Cardiff airport operators will have many more reasons to do a deal with Ryanair.

This scenario could easily see bmibaby exposed as a one-airport operator within a few months, with very few other places to go to. It would then be only a matter of time before Ryanair came in and made a pincer movement to finally kill off baby for good.

Why don’t no frills airlines offer more cheap flights to Greece?

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I was asked on twitter by @Korb0s why there aren’t any Ryanair flights to Greece. The question could of course be extended to why there aren’t more cheap flights to Greece from all of the budget airlines, with Easyjet and Jet2 perhaps being the main exceptions. I narrowed down the 140 characted twitter answer to two words (airport monopoly), and said I’d give a bit more explanation later. So here are the key reasons:

  1. Airports monopoly. Greek airports operate on a monopoly basis, and to paraphrase Ryanair’s route development manager, ‘they wouldn’t know a commercial deal if it came up to them and slapped them in the face’. One of Ryanair’s biggest driving factors in developing new routes is the ability to secure the best possible deals out of the airports it wants to fly to. This can make or break a route decision just as much as whether or not they actually forecast demand to be there. If they get their sums wrong about demand, they can quickly drop the route, if they can’t screw a good deal out of the airports, they are stuck with paying high handling fees forever – that is the crux of the matter.
  2. Seasonality - no-frills airlines prefer to operate routes which have demand throughout the year. The market for flights to Greece has traditionally been dominated by charter companies, who offer packages during the summer season. Greece is not typically seen as a winter sun destination, and unlike destinations like Barcelona (Girona) or Granada, there aren’t any Greek airports which are close to ski resorts.
  3. Dispersal - when no-frills airlines have competed well against charter operators, they have opened up routes where they can put on a reasonable frequency of flights, and where a good range of resorts can be accessed from the destination airports. Apart from the capital Athens, Greek destinations are scattered around a plethora of islands, making no-frills flight routes to any one island less likely to be viable.
  4. Distance – a flight from London to Alicante is 914 miles, whereas a flight to Athens is 1,485 miles. This extra flying distance doesn’t just burn up a lot more fuel, it also means more crewing time, and more usage of the aircraft. For example, Easyjet’s 6:20 flight from Gatwick to Athens doesn’t arrive back into Gatwick until 14:20 – effectively half the day gone to service just one route. Sure, passengers have a higher perception of value for the longer routes, but it is still easier to juggle slots around two shorter routes than one longer one. At a regional level, Flybe have opened up a number of routes into various regional airports in France, but Greece would simply be out of the range of the Bombardier Q400 aircraft that they use on these routes – although flights to Athens from Birmingham using their Embraer 195 jets would seem to make reasonable sense.
  5. Ancilliary revenue – this is just a theory, but I would guess that as many Greek island destinations are fairly small, a large proportion of passengers use transfer buses to get to and from the resorts they are staying at. There is less benefit from having a hire car, and people who do might be more likely to rent a car just for the day. If this is the case, it means less chance of earning extra money for the airlines – but they should at least sell a few more sandwiches onboard their flights.

As always, this is just my tuppence, but I hope it gives a few insights into why there aren’t more flights to Greece from the UK. James

What does Warren Buffett’s train investment say about airlines?

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So, Warren Buffett has invested some $26 billion buying American freight operator BNSF, with news commentators hailing this as an ‘all-in’ bet on the future of the US economy. But there’s more to it than that – it is, of course, a huge leap of faith into the future of railways, even if lumping coal isn’t exactly as glamarous as swish new high speed train sets. But Buffett has never been about style over substance, and trains in Europe are usually associated with massive subsidies.

In typical long-term Buffett style, he has talked about growth potential of rail in the USA over the next 3 decades, and even if this investment is in freight railways, there is no doubt that passenger rail networks will also see substantial development over this period.

Compare this to Buffett’s attitudes towards airlines, after he lost 75% of his $385 million investment in US Airways back in 1995. He pointed out that the he didn’t think the US airline business had ever made money – and this was in an industry without the kind of state carrier subsidies which were common elsewhere in the world. Buffett is quoted as saying, in respect of the Wright brothers’ first flight:

“If there had been a capitalist down there, the guy would have shot down Wilbur. One small step for mankind, and one huge step for capitalism.”

Has anything changed in the airline industry since 1995? Well, there’s been plenty of deregulation across the pond, and plenty of former big names are no longer with us. In Europe, we have Ryanair’s Michael O’Leary echoing many of Buffett’s sentiments, describing the current situation facing European airlines as a ‘bloodbath’, and the ‘perfect storm’. Of course, Ryanair are one of the few airlines to buck the trend, whereas this morning’s announcement from Lufthansa that they can’t find a suitable bidder for bmi, and that consequently bmibaby are shedding jobs hardly comes as a surprise.

Despite all this, Warren hasn’t been put off from investing in flying alltogether, having ditched his own private jet, aka ‘The Indefensible’ back in 1998, in favour of buying private jet hire company NetJets.

Where the hell is Ornskoldsvik?

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I like to consider myself at least reasonably geographically aware, but one of the advertisers on this website has gone for an all out push on cheap flights to Ornskoldsvik. Where, I here you ask – well, I was thinking exactly the same, and no, for once, this isn’t the latest obscure Ryanair destination.

It turns out that Ornskoldsvik, population 29,000 according to Wikipedia, is on the eastern coast of Sweden, about half way between Stockholm and the border with Finland. Flights to Stockholm are provided courtesy of Hoga Kusten Flyg – but unsurprisingly, there are no flights to Ornskoldsvik from the UK – yet!

I wonder if somewhere like Ornskoldsvik ever gets on Ryanair’s radar – technically, it looks like the runway, at 2,014 metres, is long enough to handle their Boeing 737-800 aircraft, and the airport even offers charter flights to Turkey during the summer season.