Ireland Inc should learn from low-cost carriers

A couple of weeks ago a passenger was getting off an Airbus A320 in Medellin, Colombia, one of Latin America’s fastest growing economies.

As he went through the arrivals hall he heard someone opine “that is the airline used by the poor”. He told the stranger: “No, it is the airline used by the wise.”

I heard this story from the chief executive of Viva Colombia, a start-up low-cost airline launched last May. You might wonder why it is worthy of comment in this Munster newspaper but Viva Colombia has its roots in Ireland, and is the latest example of a low-cost revolution sweeping across global air travel.

Viva Colombia was launched with just two aircraft but is already cleaving fares on routes previously served by incumbent airlines who had grown accustomed to charging high fares. Its sister company — VivaAerobus — was launched in Mexico six years ago and now runs a fleet of 13 Boeing aircraft and is exhibiting consistent profitability.

These airlines are part of a revolutionary but simple theme in air travel — genuinely low unit costs can facilitate ultra low fares that create a profitable marketplace for new entrant airlines. The so-called “developing” world is experiencing this phenomenon as low-cost carriers show up in countries ranging from Colombia to Malaysia, and Ghana to Indonesia.

These countries offer access to huge populations on low incomes that depend largely on long arduous bus travel to move for employment purposes or to visit friends and family. In many cases the target passengers have never flown before. A hands-up survey on one of the Viva Colombia flights showed about 40% of the passengers were flying for the first time. This ground-breaking movement is already reaching critical mass in certain markets. Air Asia, based in Malaysia, is now carrying 18m passengers and operates a fleet of 100 aircraft. It has plans to double in size.

A lot of these airlines have important connections to Ireland. The Latin American and Mexican carriers are supported and energised by a low profile investment company — Irelandia — created by the family of Tony Ryan, the founder of both GPA and Ryanair. Air Asia has been guided through a rapid period of growth by PlaneConsult, an Irish company founded by Conor McCarthy. These apostles of the low-cost carrier religion have brought the low cost formula which has worked in Europe and the US to new frontiers where large populations, strong GDP performances and a burgeoning middle class have created a fertile ground for radically different forms of air travel.

The lessons for Ireland Inc from these successes should not be ignored. They show that; (1) Ireland has the ability to produce entrepreneurs that can bring skills to markets far from their home bases; (2) Irish expertise is valued and welcomed in fast-moving economies worldwide. Indeed, being Irish provides a perspective for young countries that are far different and more positive than those offered by former imperial powers; (3) this Ireland centric expertise creates a network of contacts and skill-sets that can be deployed in support of future endeavours in growing economies, and; (4) despite the economic struggles within Ireland it stills provides a base from which progressive business creators can flourish and expand.

Revolutionary ideas have always sat comfortably in the mindset of Irish people. Applying similar levels of out-of-the-box thinking to business can have equally spectacular results. What airlines like these tell us is that mass markets can be conquered by smart ideas. They also show that hard working Irish entrepreneurs have as much right, if not more, as any graduate of the world’s leading business schools to sit at the international table of success.