...9-106-003 REV: MAY 15, 2006 MARK T. BRADSHAW Ryanair Holdings plc Ryanair is a low-cost, low-fare airline headquartered in Dublin, Ireland, operating over 200 routes in 20 countries. The company has directly challenged the largest airlines in Europe and has built a 20-year-plus track record of incredibly strong passenger growth while progressively reducing fares. It is not unusual for one-way tickets (exclusive of taxes) to sell on Ryanair’s Web site for less than €1.00. See Exhibit 1 for an excerpt of Ryanair’s Web site, where fares between London and Stockholm, for example, are available for 19 pence (approximately US$0.33). CEO Michael O’Leary, formerly an accountant at KPMG, described the airline as follows: “Ryanair is doing in the airline industry in Europe what Ikea has done. We pile it high and sell it cheap. . . . For years flying has been the preserve of rich [people]. Now everyone can afford to fly.”1,2 Having created profitable operations in the difficult airline industry, Ryanair, as did industry analysts, likened itself to U.S. carrier Southwest Airlines, and its common stock has attracted the attention of investors in Europe and abroad. Low-Fare Airlines Historically the airline industry has been a notoriously difficult business in which to make consistent profits. Over the past several decades, low-fare airlines have been launched in an attempt to operate with lower costs, but with few exceptions, most have gone bankrupt or been swallowed up by larger...
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...com/20131002214624535.pdf"] BS3100 Business Strategy Summary report “Ryanair – The Low Fares Airline” Ryanair – The Low Fare Airline Being founded in 1985 by an Irish businessman, Tony Ryan, Ryanair today is Europe’s first and largest low fares airline (Thomson and Bade-Fuller, 2010). Since 1991 with Michael O’Leary taking a position of CEO of the company, Ryanair in 2008 had served about 50.9 million passengers in around over 25 European countries with a total number of 163 Boeing 737-800 planes (ibid). The low-cost model airline is pursuing seem to be successful, resulted in continuously increasing margin rate and overwhelming competition with other major airlines, like easyJet and Lufthansa (ibid). The predominance of Ryanair as Europe’s largest low cost carrier is a consequence of the following cost advantage sources. Homogenous fleet, frequent short-haul flights, high seating density and planes filled to capacity due to cheap early bird tickets allow Ryanair to benefit from economies of scale (Thomson and Bade-Fuller, 2010). Standardisation and simplification of jobs results in economies of learning and residual efficiency. Process design, that includes 96% card only online bookings, fast boarding, short haul flights, use of homogenous fleet with simplified aircraft design, low number of staff, use of secondary airports and departures before 9pm leads to efficient service delivery (ibid). Ryanair product design is aimed at delivering customers no-frills service while...
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...Case study A : Ryanair Part 1 In November of 2006, the Irish Airline company Ryanair announced a record half-year profit of 326 million euros. In order to understand how they managed to reach such profitability in the overloaded European Airline industry, we will use the business model framework. First, Ryanair’s customers benefit from low fares and punctuality. Offering the lowest fares in every market is the company main goal. As no competitors manage to outperform Ryanair in terms of price, we can say that their value proposition is superior. The second step of the business model framework is to emphasize the architecture of the business and how it enables the company to achieve its aims. Let’s focus on each of the six components of the company infrastructure. ✓ Ryanair aims at offering the lowest prices of the market. Low fares are the main competitive advantage of the company, so whatever the context is they try not to raise prices. Even when fuel costs soared, the company CEO, Michael O’Leary declared that they would be “no fuel surcharges not today, not tomorrow, not ever”. ✓ Ryanair’s flights are point to point only, in order to reduce costs (fuel charges, airport cost…). On those flights, there is no business class. Moreover, the company chose secondary airports as airport charges are lower than in main airports. We can Ryanair also offers ancillary services including non-flight services such as hotels or car rental...
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...Chapter 1: Introduction Ryanair brings the lowest fare of air travel in Europe. According to them, they keep their cost low so that customers will also keep their cost low and also that they are committed on having an on-time flights among the competitors. Even having the lowest fare of air travel, they said that they do not compromise passenger’s safety, the “near-perfect” baggage handling and their efficiency in ‘green’ policy. Mission-Vision Statement The company does not have a clear Mission and Vision Statement but they answered the question: What is our business? It is, “to firmly establish itself as Europe’s leading low-fares scheduled passenger airline through continuous improvements and expanded offerings of its low-fares service. Ryanair aims to offer low-fares that generate increased passenger traffic while maintaining a continuous focus on cost-containment and operating efficiencies.” And what do we want to become? It is “To become Europe’s most profitable airline by rolling out proven low- fare, no frills service in all markets in which we operate to the benefit of passengers, people and stakeholders.” History of the Company Year Passengers Event 1985 5,000 Ryanair is set up by the Ryan family with a share capital of just £1, and a staff of 25. 1986 82,000 They obtains permission from the regulatory authorities to challenge the British Airways and Aer Lingus' high fare duopoly on the Dublin-London route. 1987 322,000 They acquire its first jet aircraft...
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...Case study 4: Ryanair and the revolution in low-cost air travel The low-cost airline, pioneered by Southwest Airlines in the US, offers the passenger a ‘no-frills’ service at a lower price than the traditional service with food and entertainment which has been the mainstay of the major airline companies. The two companies which have developed the low-cost model most successfully in Europe have been easyJet and Ryanair. Both have enjoyed phenomenal growth, building market share at the expense of the major flagship carriers such as British Airways (BA) and Lufthansa, in effect revolutionizing air travel within Europe. Low-cost travel now enjoys a market share of over 10 per cent of intra-European air travel. Of the two companies, Ryanair has been the more radical in its low-cost strategy, charging as little as under 10 euros for a flight. But how sustainable is this strategy in the long term? Ryanair relies on high volume, filling as many seats as possible on each flight, and also adding capacity to its network, which it has rapidly built up. Michael O’Leary, the CEO of Ryanair, says: ‘This is Tesco. How is Tesco cheaper compared with other stores? They buy more and sell it at low prices’ (Felsted, 4 November 2003). Ryanair flew 11.3 million passengers in 2003, 45 per cent up on 2002. ‘Load factor’ is the number of seats sold as a proportion of those seats available on each flight. Ryanair’s load factor fell from over 80 per cent in 2002 to 77 per cent in 2003 (which is still...
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...Case Study: easyJet and Ryanair Flying High with Low Prices Toifl Edith, Maike Klement Hamiyet Karaman, Tsolmonzul Erevgiylkham FK ABWL Marketing 040177/1 WS 06/07 Story - easyJet Founded in March 1995 by Stelios HajiIoannou - the family remains the major shareholder The airline is based at easyLand, at Luton airport 2 Concept - easyJet Reduction of costs through: - reduction of distribution costs No free lunch Efficient use of airports (fast turnaround terms - 30 min)) - Operations out of secondary airports main target group: business travelers 3 Story - Ryanair 1985 founded by the Ryan Family (with a share capital of only £ 1 Million) First route from Waterford in Ireland to London Gatwick 4 Concept - Ryanair Cheap point-to-point flights from secondary airport Single aircraft policy Fast turnarounds Main target group: leisure customers 5 1. How do easyJet and Ryanair achieve success using low-price strategies? 1. How do easyJet and Ryanair achieve success using low-price strategies? A new system allows airline seats to be priced according to supply and demand and achieve high occupancy. - how does it work? They start with low ticket prices, and raise it according to demand. Stelios from easyJet calls this system „yield management“ 7 1. How do easyJet and Ryanair achieve success using low-price strategies? Examples: Ryanair: Linz Stansted flight: 08.12.06 € 59.99 flight: 08.04.07 € 39.99 easyJet: Munich Stansted...
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...Ryanair Case Analysis 2012 Patricia Saylor EKATERINA KOUPRIANOVA Accounting June 2, 2013 From the perspective of Ryanair, the major issue facing the firm is its valuation in the long-term, known as its economic value. Although the firm maintains a bullish outlook, there are diverging opinions regarding the valuation of the firm among investors. The valuations of the firm vary widely, with stock price estimates ranging from 3.05 to 7.57 (fine facts, pg. 1, 2012). This range reflects discrepancies on whether Ryanair has solid business model and fundamentals as well as numerous issues that plague not only Ryanair, but the airline industry as a whole. These issues are as follows: · Competition: Regulation permitted the entrance of start-up carriers, which, when combined with the excess capacity and the potential for high returns, has led to increased competition. Increased competition has and will continue to force Ryanair to reduce fare prices. · Costs: Regulation, although beneficial in some regards (cut-price deals), has also been costly for Ryanair. An unfavorable ruling by the EU in February 2004 put pressure on Ryanair's stock price and raised uncertainty among investors. Of more concern are rising costs associated with labor and fuel, which could increase fares and reduce margins and overall profitability. · Macroeconomic environment: The airline industry has proven particularly sensitive to phenomena such as terrorist attacks, wars, outbreaks (SARS), drastic...
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...Ryanair – The low fares airline: Whither now? Main Problems Ryanair’s growth rate is affected by macroeconomic factors such as the recession, as seen in 2010 when Ryanair saw a 200% increase in profit and traffic growth, as the low fares became attractive for those suffering from the current climate. Uncertainty still remains regarding the economic climate; problems would arise if it continued, as passengers would reduce spending restricting the company’s passenger volume growth. If the economic climate was to grow, business and leisure passengers may choose to pay more and travel with a full service airline, this could consequently result in demand for low-cost flights to drop. One of the greatest concerns is fuel prices the ability to estimate future costs are limited due to unforeseen natural disasters and conflicts. Rising oil prices have had an impact on Ryanair, in 2008 Ryanair’s profit before tax was £439 million which fell down to £181 million the following year due to an increase in fuel costs by £100 million. As Ryanair’s declaration of ‘no fuel surcharge ever’, and its reliance on low fares limit its capacity to pass on increased fuel prices will inevitable result in low profits or ticket prices will have to rise. Ryanair faces stiff competition in Europe from a number of airlines including, BritishAirways, WizzAir, SkyEurope and EasyJet. In this competitive market airlines will need to adopt new strategies to avoid losing market share. Rivalry among existing...
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...DOG FIGHT OVER EUROPE – RYAN AIR Protagonist. Cathal and Declan Ryan of RyanAir. Macro & Micro Industry Analysis. * The aviation industry over Europe and Atlantic routes was a heavily regulated and subsidised by the respective governments. * Most were heavily ‘unionised’. * Recessions of 70’s and oil crisis lead to a period of losses in most operators and were borne by the state in one manner or other. * Gradual ‘privatisation’ of the operators was in progress and allowed introduction of some new players but the market was not ‘even keel’. * In the British – Ireland segment the larger player ‘BA’ and Irish carrier Aer Lingus were established. * BA had a large ‘ticket sales network’ and was effective in a large volume through such agents 83%. * Aer Lingus was operating in loss as far as Trans Atlantic segment was concerned but making a profit in non transportation businesses it had diversified in. * Competition also existed in form of ferry service which took nine hours but costed only £55 for a return trip as compared to I£208 for BA and Aer Lingus. Problem Identification * Evaluate the possibility of sustaining the operation of RyanAir with two routes. Observations. The problem of Ryanair is basically concerned with three major components:- * Defining the Value Proposition to the Customers. In this case the values of air travel in a country which typically does not lend itself to commercial aviation in comparison to a cheaper option...
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...Dogfight over Europe : Ryanair (A) 1. Assessment of Ryanair's launch strategy To analyze the launch strategy of Ryanair i.e. its direction & purview to achieve advantage over rivals by adapting with available resources & build competency we need to first look into the industry level analysis, profitability potential & competitive dynamics and then assess its launch strategy. PORTERS FIVE FORCES * COMPETITORS : * Deregulation-increased rivalry, Competition for marginal customers * Strategic Alliances eg - Aer Lingus & BA * Comfort & premium services to Business Class * Increased use of online ticketing Ryanair’s Perspective: Intense & increasing competition (Aggressive) * ENTRY BARRIER : * Rise of Charter flights in Europe * European Deregulation-New Competitors; Pricing, routing, pooling abolished * Huge financing to enter may cause high entry barrier for new entrants * High maintenance costs & personnel costs * Low/unstable prices & profitability Ryanair’s Perspective: Moderate threat of entry * SUBSTITUTE : * Accessibility: Other cheaper form of transports eg-fast rail & land travel * Charter flights for Holiday goers * Flights bundling ancillary services such as lodging along with cheap fares Ryanair’s Perspective: Low threat from Substitutes * BUYER POWER : * Increased customer base for air travel due to increased competition...
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...Low cost airlines Definition of low cost airlines Ryanair is a low cost carrier, well-known in Europe which started in 1991 as a ‘no-frills’ service airline between Ireland and the UK. By 1995, Ryanair spread to more European countries. Nine years later it carried 20 million passengers and 10 years after that, in 2010, the number of passengers doubled to 45 million. This low-fare short-haul airline was no\t the first airline was not the first airline with these characteristics. It was Southwest Airlines, an American airline which was introduced in 1967 and still going strong in 2016. (Quintano, 2015) Low cost airlines can be defined as being practical in a way that different low cost airlines offer different services. Some low cost airlines...
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...Dogfight over Europe: Ryanair (A) Case In 1986, Ryanair announced that it would begin flight service between Dublin and London. The founders of Ryanair are brothers Cathal and Declan Ryan who essentially grew up in the airline world. At this time, the company had already been operating for a year, flying between Ireland and London with their 14 seating plane. In terms of competition, these two locations did not pose a challenge. However, the Ryan brothers recognize the competitiveness and complicated industry as they attempt to enter the European aviation business world. The European aviation business environment has been heavily impacted by the European national government. Following World War I, several private commercial airlines arose carrying the flag of their nations. These “flag carriers” and other airways gradually became owned by or subsidized by their national governments. Governments began focusing on international routes from their respective capital to colonies and other areas of national influence. World War II brought several advances in the airline industry as air travel became increasingly economical for the average individual. The war also brought the threat of American dominance in the airline industry as efficient and privately owned carriers of the United States would have captured a large portion of the international market. As time passed, European governments continued to consolidate airlines, impose further restrictions on international routes, create...
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...underlying the concept of generic strategies is that competitive advantage is at the heart of any strategy, and achieving competitive advantage requires a firm to make a choice, if a firm is to attain competitive advantage, it must make a choice about the type of competitive advantage it seeks to attain and the scope within which it will attain it (Porter, 2004). The purpose of this report is to assess the key strategies chosen by Ryanair within cost leadership and that were likely to generate competitive advantages to the organisation. Furthermore, this paper will analyse the Ryanair’s decision to become a low cost airline through Porter’s five forces. It will help to understand the industry attractiveness and competitive forces. PEST analyses will be directed in order to analyse the business environment where Ryanair operates. SWOT analyses will be piloted to diagnose the strategic capabilities of Ryanair. Porter’s five forces will explain the strategic choice made by Ryanair. VRIO frame work deeply diagnoses the strategic capabilities of Ryanair, it evaluates and explains the reasons of choosing cost leadership and become a low cost airline. VRIO will evaluate...
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...Table of Content RYANAIR THE COMPANY 3 Section A 4 Slow Growth 4 The impact of slow growth on the industry 4 Taxation 4 ECONOMIC FACTORS 5 Unemployment 5 GNP trends 5 Inflation 5 Exchange rates 5 Interest rates 6 Security Factors 6 The Threat of close substitutes and rivals 7 HIGH FIXED COSTS; 7 AIRPORTS 7 PORTER’S FIVE FORCES 9 Threat of new entrants 9 Suppliers: 9 Buyers: 9 Substitutes: 9 Competitive rivalry: 9 Section B 10 Firm Infrastructure 10 Human Resource Management 10 Technology Development 11 Procurement 12 Inbound logistics 12 Operations 12 Outbound logistics 13 Marketing and Sales 13 Service 13 Margin 14 Joint Venture 14 SECTION C 15 Ryanair Business Strategy 15 Low Fares: 15 Customer service: 15 Frequent Point-to-Point Flights on Short-Haul Routes: 15 Low Operating Costs: 15 Taking Advantage of the Internet: 16 Commitment to Safety and Quality Maintenance: 16 Enhancement of Operating Results through Ancillary Services: 16 Analysis of the airline business models 16 Ryanair’s strategy in future: 17 Focused Criteria for Growth: 17 New Aircraft-markers: 18 New design ‘standing seats’ 18 SWOT Analysis 19 Strengths 19 Weakness 19 Opportunities 19 Threats 19 BIBLIOGRAPHY 20 RYANAIR THE COMPANY The company was incorporated in 1995 and became Ryanair limited, and in 1996 it changed to a holding company for Ryanair limited. Registered...
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...Ryanair – The low fares airline: Whither now? Main Problems Ryanair’s growth rate is affected by macroeconomic factors such as the recession, as seen in 2010 when Ryanair saw a 200% increase in profit and traffic growth, as the low fares became attractive for those suffering from the current climate. Uncertainty still remains regarding the economic climate; problems would arise if it continued, as passengers would reduce spending restricting the company’s passenger volume growth. If the economic climate was to grow, business and leisure passengers may choose to pay more and travel with a full service airline, this could consequently result in demand for low-cost flights to drop. One of the greatest concerns is fuel prices the ability to estimate future costs are limited due to unforeseen natural disasters and conflicts. Rising oil prices have had an impact on Ryanair, in 2008 Ryanair’s profit before tax was £439 million which fell down to £181 million the following year due to an increase in fuel costs by £100 million. As Ryanair’s declaration of ‘no fuel surcharge ever’, and its reliance on low fares limit its capacity to pass on increased fuel prices will inevitable result in low profits or ticket prices will have to rise. Ryanair faces stiff competition in Europe from a number of airlines including, BritishAirways, WizzAir, SkyEurope and EasyJet. In this competitive market airlines will need to adopt new strategies to avoid losing market share. Rivalry among existing...
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