Southwest Vs Ryanair – Which Carrier Has The Best Low Cost Strategy?

The world’s two biggest and most well known low-cost carriers are Southwest Airlines and Ryanair. Both operate a no-frills, low-cost service and in many ways are very similar. However, there are some striking differences in their low-cost models too, so which is better?

Ryanair vs Southwest
Ryanair vs Southwest – who does low cost better? Photo: Simple Flying

Yesterday I discussed the way in which Southwest had pioneered the LCC model, and had become a template for the LCC market the world over. Southwest remains the biggest low-cost carrier in the world today but is only slightly larger than European rival, Ryanair.

Over the course of 2018, Ryanair flew 139.2m passengers and Southwest just over 134m, so in terms of passenger traffic, the two airlines are very similar. However, there are some marked differences in how they deliver their low-cost strategy too; so which does it better?

Prices

Ryanair has unbeatable prices, literally. They’ve frequently been criticized for irresponsibly low fares, often flying people short-haul for EUR 10 or less. As Martin Gauss, airBaltic CEO, recently pointed out to Simple Flying, this is not representative of the cost of operating the flight.

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Quite often, Ryanair fares will not even cover the airport tax cost to the airline. Ryanair is literally hanging everything on passengers paying for ancillary services like checked bags, buy onboard food and drink or seat selection. But it seems to be working for them.

Ryanair 737-800s
Ryanair offers unbeatable low fares, but still makes a profit. Photo: Ryanair

Their recent earnings call saw a posted profit of $270m, which although down year on year is still a healthy margin. It seems that, thorough the low ticketing prices, Ryanair has succeeded in encouraging passengers to pay for ancillary services often enough to make their flights profitable.

Southwest, on the other hand, while still undercutting the competition significantly are managing to make their flights pay for themselves. While you’re unlikely to find a $10 flight on Southwest, they still come in far cheaper than competitors. Picking a date around two weeks away, for example, a return from Seattle (SEA) to San Jose (SJC) will cost from $207 on SWA, compared to $228 with Alaska and $261 on Delta.

Although Southwest is absolutely competing on price, they are not doing away with every single frill in the way Ryanair does. Their lowest ‘Wanna Get Away’ fare includes two free checked bags, complimentary snacks and drinks as well as free live TV on this particular service.

Southwest 737 MAX
Southwest strike a balance between cheap and good service. Photo: Southwest Airlines.

Clearly, Southwest is all about striking a balance between lower fares and good customer service, whereas Ryanair is happy to make a loss on the fare itself as they’re banking on you buying some of their other services to actually pay for the trip.

For the passenger, the Southwest experience is probably more hassle-free, but if you can beat the system and buy nothing from Ryanair, you’re going to get a bargain flight. However, what we’re talking about here is low-cost strategy, and in my opinion, making the fares a loss leader is not a sustainable strategy by Ryanair; I prefer the Southwest way.

Fleet

Both airlines have the same low-cost strategy of using a single fleet type. Both rely on the Boeing 737 as their workhorse of choice.

Boeing 737-700
Southwest’s Boeing 737-700s will fly a little bit longer. Photo: Southwest Airlines

Southwest has a fleet of Boeing 737-800s numbering 207, as well as 513 737-700s, some of which are over 20 years old. These were due start being retired this year, to be replaced by the 737 MAX 8, of which SWA has 241 on order. However, due to the grounding of the MAX, the airline is still operating many of these older airframes for the time being.

Ryanair Boeing 737 MAX
Ryanair is still waiting for its first MAX. Photo: Boeing

Ryanair has a fleet of 419 737-800s and one 737-700. Some of their 737-800s are getting on a bit, with the oldest coming in at just over 16 years. They too were expecting to receive the 737 MAX this year, possibly using some to replace older 737-800s, but have had to shelve those plans in light of the current grounding.

Management

Southwest Airlines runs a very employee-focused environment. Its mission, as advertised on its website, is “dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.”

SWA does this by keeping staff happy and rewarding them well. Employees are entitled to unlimited travel for themselves and their dependents and are enrolled into a profit-sharing scheme which is noted to be the largest in the US. Last year, employees received a bonus equivalent to 10.8% of their income.

Southwest crew
Southwest aim to keep employees happy. Photo: Southwest

As well as this, they reward employees with wellness programs, medical cover, mechanisms for retirement savings and access to training and development opportunities too. Their Glassdoor reviews give the airline 4.3 out of five stars from staff, and a 90% approval rating of the CEO, Gary Kelly.

Ryanair, conversely, is infamous for not keeping their staff happy. Last year hundreds of flights were canceled due to strikes by pilots, and it looks like the same thing will happen again this year too. They’ve been berated for charging cabin crew for water, and then they sacked a team of crew for faking a photo showing them sleeping on the floor of an airport.

Ryanair pays by the hour, which means crew only get paid for the time that the aircraft is in flight. This means that, despite advertised high wages for pilots and crew, in reality, they’ll often struggle to make more than EUR 11 per hour, and sometimes much less (the Sun claim as little as £3.75 / EUR 4.10 an hour).

Ryanair crew
Ryanair struggle with industrial action. Photo: Ryanair

Cabin crew have also complained of not being fed, not being paid for overnight accommodation in the event of a delay and having immense pressure to ‘upsell’ to passengers, often being berated for not reaching daily targets. As a result, Ryanair’s Glassdoor ratings are just 2.9 out of 5, with just 44% approval for the CEO O’Leary.

So, it seems that, despite the cheery, clown-like demeanor of their CEO, Ryanair is a company very much focused on profits over people.

Overall

Both Ryanair and Southwest Airlines have a solid low-cost model that works well for them. Both carriers are profitable, and both maintain a consistently high load factor. However, Southwest does this by offering low but sustainable fares and ensuring a great customer experience, whereas Ryanair does it by offering unbeatably low fares and then doing everything they can to get passengers to pay for ancillary purchases.

Ryanair low cost model
Ryanair only works because it relies on you paying for more. Photo: Ryanair

In terms of low-cost models, I much prefer Southwest. They have an ethical approach to low fares, reflecting what the actual flight costs to operate while still undercutting the competition. Their staff are well looked after and passengers enjoy flying with them.

Ryanair’s management team are a shrewd bunch, even registering aircraft and employees in tax havens to avoid adding costs to the airline. If you ever needed an example of a carrier operating on a shoestring, this is it, and it shows in their profits.

Southwest Airlines low cost model
Southwest’s low cost model is more sustainable. Photo: Southwest Airlines

While I respect Ryanair for their business acumen and sharp eye for detail, they would quickly come unstuck if every passenger aimed to beat the system by purchasing zero ancillaries. Southwest Airlines have a more sustainable business model and have earned the trust of both their passengers and their crew as a result, so in this case, I believe they simply do it better.

What do you think? Let us know in the comments.

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Norman

Not just if passengers spurned the ancilliaries…what about an upsurge in Eire interest rates (currently at 0% I think), which would also make passengers less likely to spend on the extras as well? Maybe they will ressurect their idea of charging for toilet usage.

Zburătorul

200$ for return flight it’s not low cost, 50$, even 100$ is low cost

Rob

Although they are a decent organized airline with friendly crews, their fares are NOT cheap at all unless you buy way in advance.

Matt

Like most passengers, I would prefer to fly on the Southwest experience versus Ryanair’s. To say Ryanair’s model isn’t sustainable though is pretty crazy. They are one of the most profitable airlines in Europe. Clearly it works, whether we like it or not.

Caroline

Southwest is closer to European Easyjet for it aims at balancing reasonable ticket prices with good Customer Service wheras Ryan Air has Zero service but offers unbeatble low prices if you don’t check in bags ,choose your seat to be your companions,expect comfort etc. RyanAir targets the lowest income passengers ,students and people from Eastern Europe (Ukraine,Poland etc) and North Africa(Morrocco) and there are millions of them so RyanAir will not be short of passengers soon. Southwest does not target the lowest income passengers in my opinion but passengers who “dont’ want to spend a fortune” on flights but also… Read more »

Marcos

*Ryanair not Ryan Air…. Take a look at their quarterly reports. Their biggest markets by far are not area of “lowest income”. The UK, Ireland, Spain, Germany, Italy are their 5 biggest markets. Their strategy always seems to hint towards cheap weekends away or city breaks.

I dont think its fair to compare the two as the European and US markets are very different. Even comparing the likes of BA or Lufthansa with Southwest wouldnt look great. Im flying with Lufthansa in a few weeks and dont get a single check I bag with my economy fare.

AYL

southwest can no longer be considered low-cost after they jacked up prices to cover for their free baggage policy. they compete with low prices on certain high-visibility routes but overall, they’re no longer low-cost but maybe considered hybrid like Alaska or Easyjet

Norm

It was announced today, that Southern China Airlines has canceled 64 B737 MAX’s Order. Is this the beginning of the “Revenge of Montezuma” related to the Famous Trade disputes, or a reality oof BOEING’s/FAA wrong-doings in the B737 MAX Affaire?

Norm

It was announced today, that Southern China Airlines has canceled 64 B737 MAX’s Order. Is this the beginning of the “Revenge of Montezuma” related to the Famous Trade disputes, or a reality oof BOEING’s/FAA wrong-doings in the B737 MAX Affaire?
Wish Boeing Good Luck in the future.

Vee

Nah… A company with a profit over people model deserves to die.