Ryanair Challenge: How would you make money if your business model is free?

Ryanair CEO Michael o' Leary has been known to say some pretty outlandish things when promoting his low cost airline. This is a guy who charges passengers to use toilets on flights if it meant reducing ticket prices. The reason? It's one less cost to factor into the price of a ticket and less toilets on a plane mean more seats. A few weeks ago, o' Leary made another intriguing statement at a conference in London. He said he wants to make air travel completely free in 10 years. Think about that for a moment. If the cost of buying a ticket on Ryanair is brought down to $0, how would the airline survive? Better yet, and this is the really creative challenge, if you had to give your business model away for free, how else could you make money? Let's take a look at Ryanair's business model on the Business Model Canvas to figure out what's going on. For starters, Ryanair works hard to decrease the cost of airline tickets by focusing on short haul nonstop flights that are geared to frequent travelers or travelers on a budget. These tickets are purchased via the airline's website to reduce the cost even further. Additional baggage, meals, drinks, priority seating and seat selection are extra a la carte charges for customers. Unbundling all of these fees and letting the customer choose what they want is how low cost carriers disrupted the business model of traditional airlines in the first place. Lastly, Ryanair also promotes hotel and rental car partner services, which probably results in commissions for the airline when passengers book via the Ryanair website. All of this supports key activities and costs associated with sales and marketing, fleet management, customer services, staff and airport passenger duties, or APDs, which Ryanair tries to decrease by landing in smaller regional airports rather than extremely busy major international airports. The APDs are something Michael O' Leary really wants to attack because they impact his ability to bring airfare down. So pay attention to that now. Without any revenue from ticket sales, how can Ryanair afford to keep flying? Let's put some tracing paper over the business model canvas so we can still see Ryanair's existing business model as a reference. Remember that airport passenger duty? That fee costs ryanair up to £20 per passenger just for landing. O' Leary wants to abolish that as a first step to bringing airfare closer to $0. But that's still not good enough. He wants to drive airfare all the way to zero. That'll mean a new value proposition to customers and saying bye bye to revenue via ticket purchases. O' Leary assumes that $0 airfare will be a popular value proposition that increases foot traffic to the less frequented, smaller airports that Ryanair lands in. The increase in traffic will in turn mean an increase in customers for airport retail experiences like shops, bars and restaurants. Here's the deal. O' Leary hopes that Ryanair can take a percentage of the sales enjoyed by businesses inside the airport in exchange for increasing foot traffic and bringing in customers. Of course, these are all assumptions, but the lesson here is that by questioning those underlying assumptions, you can think more creatively about how you create value for your company and and how your company creates value for the customer. Michael O' Leary believes a move towards $0 airfare will result in happy travelers with savings in their pockets, busy airports with travelers who want to eat and drink and shop while heading to their destination and a very happy Michael o' Leary who has found a new way to drive growth for his airline. So try it out. We encourage you to take our Ryanair challenge. Ask yourself if you had to give your business model away for free, and how else could you make money?

Sam. It.