CASE STUDY: RYANAIR

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 A) INTRODUCTION

i. History & Background of The Company

A brief history of Ryanair is set out to provide a background of submissions.

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. In 1986, Ryanair manage to be the top of 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.

In 1997, the European Union 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 to Stockholm, Oslo, Paris and Brussels and took time out

to float Ryanair plc on Dublin and NASDAQ Stock exchanges. The company was awarded

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 as Airline of the Year in 1999 by the Irish Air Transport Users Committee.

In 2000, they announced the launch of 10 new European routes for the summer 2000 after

much deliberation and watching others burning money. The company has also jump onto

the internet with the launching of Europe’s largest booking website –

www.ryanair.com.which was launched within 3 months has taken over 50,000 bookings per

week. Hence, each year that came by subsequently gained more and more passenger growth

up to millions which is keeping Ryanair alive till now.

The mission of Ryanair is to offer low-fares that generate increased passenger traffic while

maintaining a continuous focus on cost containment and efficiency operation. And the

objective of Ryanair is to firmly establish itself as Europe’s leading low-fares scheduled.

ii. Problem Statement

However based on the background of Ryanair‘s success, Ryanair today is a ‘’monster’’ of

borderless Europe with its crowded population and vaguely defined political boundaries. But

the airline's success is also a product of O'Leary's genius. The Dubliner joined Ryanair in

1988 and became chief executive in 1997. He is famous today because he is recognized

worldwide since he managed to make small business into big player on the market.

However, Ryanair faced problems just like all airline business did. One of the most important

things in managing an airway company is to have all its operational features (such as

reliability, clarity of fees, availability of fares, on-board comfort, service, etc.) under control,

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which Ryanair cannot handle in various ways, resulting in negative thoughts of customers

about this company.

For example, Ryanair accumulates ‘hidden’ taxes and other fees, restricted customer

services, and deceiving advertisements. Ryanair imposes charges for anything from

checking bags. This creates an undesirable a feeling towards the customers of Ryanair.

In short, Ryanair’s journey has not been a smooth run for the company over the years.

Being in business since 1985, it has carved a niche market for itself in being the most widely

used low cost airline today. Global recession of 2008 definitely affected Ryanair in a huge

way. Its scope to increase fares and increase volume of passengers was hit hard. Since

economies collapsed spending power of the regular consumer collapsed too.

B) BODY CONTENT

This part will be answering the first hurdle right up to the fourth hurdle. In short the four

hurdles would be:

i. Competition

ii. SWOT Analysis

iii. The N(s)

iv. The IMs

i. Competition

Living is globalized and much competitive world to be the best among the best,

Ryanair should take in consideration to know their current standing among the

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 competing airline industry. Based on my analysis this is where Ryanair is at the

current perceptual mapping.

High Cost

(Premium Airlines)

British Airways

Budget Quality Luxury Quality

KLM Airlines

Lufthansa

(Bargain Airlines)

RYANAIR RYANAIR
Virgin Express

(Economy Airlines)
Low Cost

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 Figure 1 – Perceptual Positioning Map

Figure 1 shows the representation of similarities and differences between the different airlines

which are made available. As shown above, the service offered by British Airways a is of a very

high standard which is aimed at meeting customer expectations at a high level which known as

premium airlines. Therefore, British Airways have positioned themselves as high cost, luxury

quality. On the other hand, for the positioning of low cost, luxury quality has been taken by

KLM Airlines and Lufthansa.

At the lower scale as in low cost, budget quality, is where Ryanair and Virgin Express airlines

have position themselves. Focusing more on Ryanair airlines, I think the best position for a new

shift to a better success would to be at the maintain position of the low cost but luxury quality

as the new face axis. The low cost element axis is important to be maintained as that is what

Ryanair is known for and have established in the eyes of the consumer. Therefore, adding new

luxury quality but at a low cost is what is found to be ideal for it meets Ryanair’s vision which is

to be the most efficient low-cost carrier in Europe.

ii) SWOT Analysis

SWOT analysis is an important step in planning and placing its value is often underestimated

despite the simplicity in creation. The role of Ryanair’s SWOT analysis is to help identify and

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understand key issues that is affection their airlines business. The SWOT analysis will consist of

four components which are: S: Strengths, W: Weaknesses, O: Opportunities and T: Threats

STRENGTHS WEAKNESSESS

• Ryanair is the 1st to launch low cost • Earn publicity through negative press

flights in Europe and has continuously reporting which affect brand image.

maintained the low fare policy. • Very poor customer relations which is

• They have a strong brand image and damaging to the success.

strong bargaining power in airport • Low level of understanding for

deals. employees.

• New fleets results in maximum • Misleading advertisements about

aircraft utilization. ticket fares and destinations.

SWOT
ANALYSIS

OPPORTUNITIES THREATS

• Withdrawal of traditional companies • Upper middle class economy

from most of the less traffic intense travelers may seek greater value

point to point routes using regional proposition than just low fares.

airports. • Increasing Prices of Oil Markets and

• Industry growth in European air travel fluctuating currency issues

industry • Terrorism

• Being an fine choice of most of the • Impending legislations for

strategies can be used to decrease the weaknesses and avoid threats of the company and improve

its competitive upgrading.

Total Quality Management - The low cost strategy has hidden the quality of the service. To

attract and retain the customers Ryanair has to follow an effective total quality management

process. Efficient total quality management values could make a great difference in the service

quality. It will not only enhance the quality but also it will increase the productivity. Thus

effective quality management will make the brand identity stronger and make a more brand

loyalty with in customer base.

Customer Relationship Management (CRM) - In the service sector what is important is the

satisfaction of the customers. Due to poor facilities and services Ryanair has lost their customer

relationship. Therefore, a strong CRM strategy should be implemented to minimize the

weaknesses of the company. Apart from the CRM strategies Ryanair could move on to CSR

projects to draw the corporate position to the organization.

iii) The N(s)

Based on the actions taken by Michael O’Leary, who is consistently trying to cut cost in all ways

to maintain the cheapest and lowest airlines was seen in many ways. He turned all the negative

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odds that he faced to positive by slashing down all their expenses in order to maintain the

cheapest flight.

This can be seen, when Ryanair blamed the introduction of the teneuro tourist tax as a reason for

their need to reduce costs and keep their competitive edge in the market. In the following years

Ryanair cut further jobs as a result of this tourist tax. Ryanair’s aim is to keep costs minimum so

with continuing rising costs of production, Ryanair has to continue to reduce its staff numbers.

At the end of February 2012 Ryanair announced that it plans to cut 300 jobs in Edinburgh due to

the high airport charges there. Ryanair have cut up to nearly 2000 jobs since 2009. However with

the introduction of online check in, the need for employees has fallen. If Ryanair continues to cut

jobs in places where costs are rising they will continue to achieve their goals of low fares and

low operating costs. Ryanair as a company serves where costs are low so if price srise they

reduce costs in any way they can, whether it be cutting jobs or cutting routes.

Besides that, air’s stewards and stewardesses perform the basic cleaning duties in collaboration

with their normal everyday work duties. Another plan that Ryanair have discussed but have not

yet implemented was an idea to remove the toilet at the rear of the plane to insert 18 extra seats

(which could lead to an increase in profits) and charge customers 1 euro to use the toilet at the

front of the plane. The idea is to have more people in per flight with profit by paying to use the

toilet.

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iv) The IM’s

The marketing mix is “the combination of elements that influence a customer’s decision whether

or not to purchase Ryanair’s air fare. They need extended marketing mix to make sure they can

achieve the aims.

The products or service of Ryanair for the customer is just flying from A place to B place. The

customer just wants to spend less money to fly to another place, so the service for the customer is

basic. Fly-it-cheap do not supply food and drink, if the customer need we can sell them on plane.

The product that fly-it-cheap offer is very basic.

The price of Ryanair is the focal point for the customers. Most seats of Fly-it-cheap are sold

with the lowest price; however, if the customer wants a more comfortable seat or need extra

service, they need to pay more money

For place Ryanair, there is no travel agent and they must find a cheap airport to reduce the

landing cost. Budget airline use secondary airports that are farther away.

Promotion is price is very low, so they cannot put much money in promotion. Ryanair use

Internet site to promotion. Ryanair makes controversial statements to get into the news and

promote themselves. For example, they suggested charging to use the toilet in-flight.

People they use the young staffs and recently-qualified pilots and most staff from European

countries with lower wages than the staff from UK. This can reduce the income cost.

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Ryanair uses the process of online check-in, no seat reservation the people who first come in the

plane can choose the seat he\she like.

For Ryanair’s the most important physical evidence is the plane. They buy planes which are

good quality and cheap. The second-hand planes are cheaper than the new one. However, the

decoration inside is basic and they get the maximum number of passenger seats as possible to

make more money.

In advertising, the TV advertising is expensive and because Ryanair has low price, so they need a

low cost of advertising. They can use newspaper to advertise their service. For example, Ryanair

put their advertising on the newspaper. When people read the newspaper they can see that

advertising. This is a quick and effective way to advertise the service to a mass market. However

advertising is quite expensive and not targeted well. In the future , Ryanair can use the National

newspaper to advertise their service and not use TV. So it is cheap to do the advertising.

Despite their low costs, Ryanair‘s reputation is one that sparks controversy and a lot of bad

press. Michael O’Leary the company’s CEO is a hated public figure, often making

outlandish claims about his future plans for the airline. But because of his ability to stir up

trouble, he manages to attract a lot of free press (pr) & advertising for his brand and boasts

the lowest advertising costs compared to other market competitors. Despite keeping their

advertising budget as low as possible, O’Leary makes sure it grabs attention- with several

past ad campaigns being banned as create free publicity for Ryanair.

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Last but not least, I feel for the branding should be maintained as it is for the identity of Ryanair

to be known as the same – the cheapest airline fare. The branding part of the airlines is well done

for everyone knows that it is the cheapest flight which is available.

Other than that the product strategy, for Ryanair should be move from international strategy to

transnational strategy as this would create a need for the local responses.

C) Conclusion ( 5TH HURDLE)

The Ryanair is the cost effective leader in the European airline market. It maintains the lowest

operation cost, when compare with others. However, Ryanair should take the customer service

into consideration such as by increasing the customer service, increase customer loyalty. Besides

that, further reduce the cost could be a minor part to help attract more customers.

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Referencing:

Anon.( 2011). CWT Industry Watch. [Online]Available at:

Johnson, G., Scholes, K& Whittington, R. ( 2005). Exploring Corporate Stratefy. New Delhi: Prentice
Hall.

History of Ryanair. (2009). Retrived June 7, http://corporate.ryanair.com/about-us/history-of-ryanair/

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