...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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...Case Study – Dogfight over Europe: Ryanair Business Landscape Item | Description | Impact | Government Intervention | Market Deregulation: * Free to set fares * European airlines to fly any route between EU countries * Any intra-country route between two European cities | Open for new competition | | European Union eliminated duty free sales on intra-EU flights | Has to pay duties | Ryanair Challenges & Strategy Description | Cashflow problem, Funded by Ryan Family | Strategy | Low cost carriersCost side: * Cut loss-making routes * Eliminate in-flight amenities (such as: free coffee and snacks) * Renegotiate labor contract (e.g: flight attendants pay is a function of duty-free sales and the number of flights they flew, “Luv” – pay based on productivity) * Stop distribution of meal vouchers to travelers whose flights delayed by bad weather * Stop using “air bridges” that linked parked planes to airport terminals * Reduce travel agents commission from 9% to 7.5% * Serve at secondary airports * Use other parties to handle ground operations * Not allow check baggage throughRevenue side: * Ticket, in-flight sales, car rentals, charter sales * In-flight duty-free sales, beverage, and snacks * Lease space behind seat-back trays and headrest to advertisers, exterior of plane with a corporate logi, in-flight magazine published with full advertisement | Routes | * 150 flights per day, 13 locations in UK, 4 locations in Ireland, 16...
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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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...third lower than that of easyJet. Excluding fuel costs, the difference is even starker, with Easyjet’s cost per passenger 67% above that of Ryanair. This unit cost advantage against easyJet stems mainly from airport and handling charges. This, in turn, comes from Ryanair's use of smaller, lower cost airports with fast turnaround times, its bargaining power with airports and the impact of bag and check-in fees on lowering handling and check-in costs at airports. Costs per passenger (EUR, ex fuel) | Ryanair | easyJet | Norwegian | Air Berlin | Spirit | Southwest | Staff | 5 | 8 | 15 | 14 | 16 | 33 | Airports & Handling | 8 | 18 | 8 | 26 | 15 | 22 | Route Charges | 6 | 6 | 13 | 8 | - | - | Aircraft O’ship & Maint. | 6 | 8 | 17 | 20 | 16 | 17 | Sales & Marketing | 2 | 6 | 12 | 31 | 4 | 2 | Total | 27 | 46 | 65 | 99 | 51 | 74 | % vs Ryanair | - | +67% | +137% | +262% | +86% | +170% | Source: CAPA - Centre for Aviation and latest available accounts via Ryanair presentation 28 January 2013 Another important source of unit cost advantage is its labour force, which is more productive and flexible (around 50% of flight crew are contractors employed only when required). It also benefits from high seat density (189 seats per aircraft, compared with easyJet’s 156 on A319s and 174 on A320s), high load factors (82% for Ryanair in the year to December 2012 versus just below 80% for AEA carriers), a point to point strategy that allows high aircraft utilisation, a...
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...| |Strategic Management : Principles and Practise | |Case Study A : RYANAIR | | | | | | | | | 1- You’re invited to use the Value Chain framework so as to explain the extent to which Ryanair has been able to propose low fares to its passengers. In order to develop a competitive advantage - implementing low fares to its passengers - Ryanair offers a series of activities referred to as the Value Chain, as it is shown in the following diagram: |Firm Infrastructure | |Corporate partnerships | |Human Resource Management...
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...expanded offerings of its low-fares services. Ryanair aims to offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost-containment and operating efficiencies. A good pricing strategies had help Ryanair to achieve the objective and aims. Ryanair’s low fares are designed to stimulate demand, particularly from fare-conscious leisure and business travelers who might otherwise have used alternative forms of transportation or would not have traveled at all. Ryanair sells seats on a one-way basis, thus eliminating minimum stay requirements from all travel on Ryanair scheduled services, regardless of fare. Ryanair sets fares on the basis of the demand for particular flights and by reference to the period remaining to the date of departure of the flight with higher fares charges on flights with higher levels of demand for bookings made nearer to the date of departure. Ryanair’s tight cost control was the backbone of its low-price strategy. As a result of this cost focus, Ryanair had by far the lowest costs in Europe, about 40% lower than its closest competitors. One of the elements of Ryanair’s cost-control strategy is the use of secondary airports. Ryanair typically did not fly to the major “hub” airports in Europe but instead to secondary airports which were often located some distance away from major city centers. Secondary airport which located in economically depressed areas, Ryanair bargained hard for low fees. Rapid turnaround...
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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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...Company Ryanair started in year 1985 with only 57 staff members and with one 15 seater turboprop plane from the south of east of Ireland to London-Gatwick which carried 5000 passengers on one route (Harrison, 2002). In 1986, inspired from the story of David and Goliath the company go after the big guys for a slice of the action and end up smashing the Aer Lingus or British Airways high fare cartel on the Dublin-London route. The staff increased from mere 57 to 120 staff members and the plane carried for about 82,000 passengers on two routes. In 1989, the company employed 350 staff and their average maximum passengers increased to 600,000. In 1990-1991, the company has 700,000 passengers. However, despite of the increase of passengers, the company is not so good in managing cost that the company has lose its money. A new management team is brought in to sort it out and re-launch as a “low fares or no frills” airline, closely modelling the Southwest Airlines model in the U.S. And in 1994, Ryanair bought its first Boeing 737 aircraft which carried over 1.5 million passengers. In 1995, Ryanair is the biggest passenger carrier on Dublin-London route, the largest Irish airline on every route being operate and carried 2.25 million passengers in the year (Harrison, 2002). In 1997, the EU air transport deregulation allowed the airline for the first time to open up new routes to Continental Europe with over 3 million passengers on 18 routes carried. Ryanair launched services...
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...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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...BIRD’S EYE VIEW SWOT TEAM SWOT Analysis of Ryanair Air Scoop launches a new range of articles called ‘SWOT Team’. Each month, we will publish a SWOT analysis of an European low-cost carrier. In this issue, we start with a global SWOT of the market. The no-frills carriers have created new markets, and ope-ned up air travel. A greater proportion of their passengers are people who previously were using other modes of transport for travel, while a certain proportion are from traditional carriers. Relying as they do on linking region to region and by-passing ex¬pensive big-city hubs, low-cost carriers have caused rise in local employment. There is parallel growth in tourism; a rise in property investment and new businesses credited to good, cheap logistic con-nections. One of the strongest characteristics of the no-frills busi-ness model is the ability to adapt rapidly to circumstances. Cost savings of the no-frills business was achieved by ef-fectively supplying a single standard service on all routes and improving both labor and aircraft productivity. Ryanair’s Chief Executive, Michael O’Leary’s, once claimed that “Low-cost airlines are the new Europe». This seems to have been amply proved by the tremendous im-pact LCC have had on Europe. Ryanair and easyJet are the leading low cost players ow-ning around 50% of the share in the European LCC mar-ket. Ryanair is an Irish airline headquartered in Dublin. Its biggest operational base, however, is at London Stansted...
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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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...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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...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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