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Ryanair turns customer-friendly on Easyjet threat

Friday, 22 Nov 2013 | 7:35 AM ET
Ryanair is 'friendly and cuddly': O'Leary
Friday, 22 Nov 2013 | 12:35 AM ET
Michael O'Leary, CEO of Ryanair, says the group has "always been friendly and cuddly" but was misunderstood, adding that it now plans to improve its communication strategy.

Budget airline Ryanair has announced a raft of improvements, in a bid to keep up with its main rival easyJet and the changing demands of consumers, the airline's chief executive Michael O'Leary told CNBC.

Lower fares, the introduction of allocated seating and more focus on customer care are just some of the ways that Ryanair is going to improve, O'Leary said on Thursday, speaking to CNBC at a press conference in which the airline announced new routes and increased flight frequencies.

"Fares this winter are going to be lower. It might be bad news for shareholders, but it's good news for consumers and it's great news for growth," O'Leary said. "We're announcing 12 new routes from Stansted (a U.K. airport predominately serving budget airlines), lower fares -- which mean we're going to grow faster over the next five years -- and we've just announced a big order with Boeing that will see us not just grow, but grow strongly."

"It's a very exciting period for Ryanair and I think it's going to deliver five years of exceptional growth," he added.

The strategy is a sharp departure for the airline known for its no-frills service, which once boasted of plans to get rid of seats and introduce pay-to-use toilets, in a bid to cut costs and maximize profits.

However, the move comes in the face of increasing European competition for passengers and subdued economic growth in the region. On Tuesday, rival airline easyJet reported a 51 percent rise in full year pre-tax profit of £478 million ($769 million), on the back of strong growth in European sales.

(Read more: EasyJet reports 51% rise in full-year pretax profit)

Ryanair, on the other hand, issued its second profit warning since September at the start of this month. It announced expected profit of between 500 and 520 million euros ($676-$702 million) for the financial year ending in March, down from a previous projection of 570 million euros.

Founded in 1985, Ryanair is still Europe's largest budget airline with around 80 million passengers a year. Easyjet, which began operating ten years after Ryanair, counts 50 million passengers a year.

(Read more: Ryanair shares plummet after profit forecasts slashed)

During a question-and-answer session at the press briefing, O'Leary said that easyJet was perceived in a better light than Ryanair. He added that Ryanair's decision to introduce allocated seating was in response to the success easyJet won with the same policy.

"[Easyjet] have clearly put clear, blue water between themselves and Ryanair in terms of their image of their customer service ," he said, adding that Ryanair would meet the demands of customers wanting more frequent flights to Europe and address the "prohibitive" charges for families using the airline.

"We're going to address those things, building on what is already Europe's largest and most beloved airline," O'Leary said.

He described Ryanair as the most "beloved" airline in Europe -- which could be a misnomer if several highly-publicized customer service disputes and a recent consumer poll are anything to go by. Indeed, the decision by Ryanair to improve its service follows a number of undiplomatic remarks by O'Leary regarding the airline's passengers.

(Read more: Ryanair CEO: 'Stupid' passengers deserve fees)

O'Leary once described passengers who forgot to print out their boarding passes (getting charged 60 euros by Ryanair as a result) as "idiots". In a separate incident, he said: "People say the customer is always right, but you know what - they're not. Sometimes they are wrong and they need to be told so."

Consumers beg to differ, voting Ryanair as having the worst customer service out of Britain's 100 biggest brands in a September poll. Compiled by U.K. consumer watchdog Which?, the league table showed that only 54 percent of Ryanair passengers were satisfied with its customer service.

(Read more: The latest air warfare: Seat sizes)

Defending the company's reputation, O'Leary said Ryanair had always been "friendly and cuddly and accessible, just slightly misunderstood."

"In the land grab [for passengers], it was all about pile it high and sell it cheap, and we won that comprehensively. But now we need to begin to communicate more with our passengers…and begin to manage those customers and deliver individually tailored service for them to meet their needs," he said.

-By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt

Follow us on Twitter: @CNBCWorld

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