Ryanair Agrees New Deal at Stansted Airport

Irish budget carrier Ryanair has entered into a new long-term, ten-year partnership with M.A.G, the new owners of London Stansted Airport which will see the airline increase the number of passengers it serves at the airport from just over 13 million a year to more than 18 million by 2018 and then upwards to nearly 21 million passengers a year by 2023.

The new growth agreement comes just six months after M.A.G completed its acquisition of the airport from BAA and puts an end to a block on growth at the London facility after a new pricing structure was introduced towards the end of the last decade. "This agreement proves how UK airports can flourish when released from the dead hand of the BAA monopoly," said Michael O’Leary, chief executive officer, Ryanair. “This is the first dramatic initiative by M.A.G to reverse seven years of decline, during which Stansted’s traffic fell from 23.8 million to 17.5 million.”

“This agreement, which will create over 7,000 new jobs in Stansted, proves how UK airports can flourish when released from the dead hand of the BAA monopoly and is the first dramatic initiative by M.A.G to reverse seven years of decline, during which Stansted’s traffic fell from 23.8 million to 17.5 million.”

Michael O’Leary
Chief Executive Officer, Ryanair

Ryanair is Stansted’s largest airline serving over 140 destinations during the past 12 months and keeping its anchor tenant happy was a key first step for M.A.G when it took control of the airport. "We acquired Stansted in February this year believing we could significantly expand the services on offer by competing more effectively to make the most of the airport’s untapped potential and spare capacity,” said Ken O’Toole, chief commercial officer, M.A.G. “We were confident Stansted would grow if we offered great value to airlines, increased passenger choice and better services and facilities.”

According to O’Toole, a former employee of Michael O’Leary at Ryanair, the new long term agreement between Ryanair and M.A.G at Stansted shows that competition “really does work” and he believes it represents great news for both passengers and UK businesses. The details of the deal are unclear but it is thought Ryanair would be expected to hit certain targets in order to unlock cost reductions during the course of the deal. This deal will see our Stansted traffic grow by over 50 per cent, from 13.2 million in 2012 to over 20 million per annum in return for lower costs and more efficient facilities,” said O’Leary.

It is likely that Ryanair could only generate such rapid passenger growth by deploying a significant number of additional Boeing 737-800s at Stansted and by stimulating the market through lower fares so it is thought that passenger fees will have been reduced substantially as part of the agreement. It is also understood that Ryanair has been incentivised to boost flying at quieter times of the day, away from the peak morning rush, an arrangement that will help traffic flows through the airport. The airline has already confirmed it will base 43 aircraft at Stansted in Summer 2014, up from 37 this year.

“The deal secures a new and exciting era for both Ryanair and Stansted, and we're delighted to be supporting the airline's growth over the next ten years,” added O’Toole. "Today’s announcement, coupled with our £80m investment in the terminal, confirms that Ryanair shares our confidence, and shows how we are succeeding in transforming Stansted under new ownership. Stansted has a really bright future in providing international connectivity for the UK."

In the first stage of its development, Ryanair has revealed it will introduce four new routes from Stansted during summer 2014, all to destinations not currently served from the airport. These will be Bordeaux, France; Dortmund, Germany; Lisbon, Portugal and Rabat, Morocco: its schedule shows that some of these routes will commence from this winter. The carrier is expected to deploy a large number of the 175 new 737-800s it has on order at Stansted over the course of this agreement but it will also modify its flying schedule to have an increase in morning arrivals at the Stansted from its other bases to help flatten demand.

In the table below, using schedule data from OAG Analyser, we look in greater detail at Ryanair’s capacity at Stansted Airport over the past ten years and how its share of available seats may have declined from its high of 2007 and 2008, its share of total capacity at Stansted has actually risen to over 75 per cent. This highlights why this agreement with its largest tenant was so key for M.A.G.’s development strategy at the London airport.

As our analysis shows, after a negligible decline in capacity in 2008, Ryanair made more notable cuts to its network in the two subsequent years with capacity declining 10.3 per cent and 9.5 per cent respectively in 2009 and 2010. A further decline of 6.0 per cent in 2011 saw capacity levels return to the levels being recorded eight years earlier in 2003. However, the statistics show that Ryanair has already started to reverse the decline and a small capacity increase of 1.0 per cent was recorded in 2012, while an 8.2 per cent growth is forecasted for this year, returning annual capacity above the eight million seat milestone again.

The dependency of Stansted within the Ryanair network has also decreased notably during the past ten years as the carrier has expanded its network into new markets and opened new bases across Europe, and most recently into North Africa. Although the London airport remains its largest base across its entire network this year, it accounts for just 8.3 per cent of the airline’s total annual departures, down from 28.9 per cent in 2003.