When the chief financial officer of Brussels-based Virgin Express Airways Brett Godfrey talked Virgin group founder Sir Richard Branson into starting Australia’s Virgin Blue in 2000, they didn’t look to Europe’s rising star on the low-cost airline scene, Ryanair, for clues about how to run it.
Instead, they took their cues in formulating the Virgin style Down Under from America’s Southwest Airlines, which is now the US’s biggest domestic airline.
The jokey and irreverent attitude of the Houston, Texas-based Southwest Airlines was a good fit for the new little Aussie battler, which, with Branson’s gift for good timing, found itself the inheritor for up to half the Australian domestic air travel market after the collapse of the bloated Ansett Airlines, which had struggled to adapt to the new low-cost era.
Even the name Virgin Blue, with its red colour scheme, was a jokey Australian irony, being the terminology that applies to redheads.
The serious subtext to Virgin Blue’s decision to offer a unique style of customer service recognised the fact that it’s a very hard business to make money from; better to give customers a friendly experience if the only investment you have to make is attitude.
And so it became one of Virgin Blue’s – and now Virgin Australia’s – “one percenters”, although it has been modified over the years and is now much more subdued.
Well, blow me down if the same idea hasn’t just occurred to Europe’s biggest carrier Ryanair, which last year carried around 80 million passengers, compared with Southwest's 134 million.
Ryanair is lean and very mean. It employs just 8400 people, compared with Southwest's 45,800, it has one of the highest operating profit margins in the airline business, but it was also last month voted the worst of 100 consumer brands in Britain by UK consumer magazine Which?.
CEO Michael O’Leary wants Ryanair to be carrying 110 million people a year by 2019, but he now acknowledges that it is going to have to change its “abrupt culture” if it is to become something other than “code for consumer trauma”, as one writer recently put it in the Financial Times.
"We should try to eliminate things that unnecessarily piss people off," O’Leary told the company’s September annual meeting.
He says the company will revamp its website, set up a staff team to respond to emails and stop fining customers whose carry-on baggage exceeds minimum sizes by a matter of millimetres.
"A lot of those customer services elements don't cost a lot of money,’’ O'Leary told the annual meeting. “It's something we are committed to addressing over the coming year.’’
Shareholders have been happy to sit back and enjoy the ride with one of the airline industry’s sexiest brands as it racks up profitability year after year that behemoths like British Airways can only dream about.
But at last month’s get-together, there was a feeling that change was needed if Ryanair was to continue its stellar trajectory.
"I have seen people crying at boarding gates," shareholder Owen O'Reilly reported. "There is simply something wrong there that needs to be addressed."
O’Leary once taunted a passenger complaining about not being able to get a cup of tea during a delay: “You only paid a fiver, buy your own tea.”
But he now admits his confrontational style might not be the customer service brand the airline needs in order to grow.
"I am very happy to take the blame or responsibility if we have a macho or abrupt culture,” he told the AGM. “Some of that may well be my own personal character deformities.”
Interestingly, when it was set up in 2004, Jetstar went the Ryanair route which aimed to keep operating costs as low as possible and eschewed any idea of customer service to give customers a “one percenter”.
Its growth path is very much focused on foreign markets as it tries, against considerable odds, to establish itself in the giant Chinese market through a hub in Hong Kong.
Meanwhile, Virgin Blue has become a fully-fledged business airline, which has acquired the equally vanilla Tigerair to do its bidding in the low-cost airline space.
Is customer service style something that you demand or prefer? Or are you happy with low fares and for cabin staff to do the bare minimum? Leave a comment below.