Posted by: Bill von Achen | February 5, 2010

Innovate by Cutting Costs

Michael O’Leary, the outspoken CEO of Ryanair, Europe’s leading low-cost airline, has raised more than a few eyebrows in his relentless search to reduce costs, such as his plans to install pay toilets on board his aircraft.

But, in a recent interview published in the Wall Street Journal, O’Leary offers his insight into the thinking behind his cost-cutting initiatives that takes us all the way to truly innovative practices that have the potential to transform an entire industry.

Here are some excepts from the interview:

WSJ: Your costs are already low. Do you reach a point where it’s hard to keep cutting?

O’Leary: You do reach a point, but we’re probably twenty years from that. What you have to do is be more revolutionary…

Like, paying of checked-in bags. It wasn’t about getting revenue. It was about persuading people to change their travel behavior, to travel with carry-on luggage only. But that’s enabled us to move to 100% Web check-in. So we now don’t need check-in desks. We don’t need check-in staff. Passengers love it because they’ll never again get stuck in a Ryanair check-in queue. That helps us significantly lower airport and handling costs.

Now we’re looking at charging for toilets on board, not because we want revenue from toilet fees. We’d happily give the money away to some incontinent charity. What is means is, if by charging for toilets on board, more people would use the toilets in the terminals before or after flights, I could take out maybe two or three toilets on board, add six extra seats and reduce fares across the aircraft by another three or four percent.

So, there’s always new ways of lowering costs, but you have to come at it with some imagination and some passion.

The complete text of the Journal’s interview with O’Leary can be viewed at http://online.wsj.com/article/SB10001424052748704533904574547781071607354.html


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