RYANIAR: FLYING TOO CLOSE

TO SUN
 1. What is company’s vision statement
To become Europe’s only low cost airline.

2. What is the company’s mission

“To offer lowest airfares, to get a safe flight and on time flight, that generate increased
passenger traffic while maintaining a continuous focus on cost and efficiency operation.”

3. Pastel Analysis and any identify key factors and counter strategies

Pestle define Identify/ Reasons Actions/ Strategies

P How much the  Labor laws as

political continuous
environment strikes from
can affect the employees.
business  The uncertainty
environment of over Brexit
company challenge for
business
environment
 Frequent
terrorist attacks
in Europe will
have adverse
effect on air
travel demand
E How much the
economic  Oil prices are
factors (e.g. expected to
interest, prices remain around
 and taxes) will $50 per barrel;
affect the aiding
business operational
margins
 Weaker
GBP(pound)
post Brexit to
put pressure on
fare prices
S How much  Preference on
cultural, the websites as
environmental, Ryanair has
technological introduced their
and own website for
community booking.
may have  Consumer
influence on preference of
business high speed rail
over airlines on
short routes
 Consumer
willing to spend
more on
ancillaries if
ticket cost is
less
T The degree to  Enhancement in
which the digital platforms
change in (mobile and
technological website) to
factors will improve
have effect on
 business customer
experience
L How law  Raynair is
affects the way subject to
business lawsuit by
operates and European
customers commission for
behave to it receiving state
aid at certain
European
airports
 Brexit may
require Ryanair
to comply with
dual UK & EU
regulations
E How overall  EU regulations
business of emission for
environment airlines may
will have increase costs of
effect on their Ryanair
operations  Strong focus on
environmental
initiatives

4. Analyze the changing industry structure in which EACH Company is operating by

using Porter’s Five Forces Model. How did Company counter the changes and
challenges of the industry competitive forces in which Company is operating by
using Porter’s Five Forces Model? `

Five Define Identify/ Reasons Level Actions Strategies

Forces Are
Threat of Is the  High capital is Low  Maintaining the
new competitors required services and
Entrants can enter  Operating cost is qualities at higher
and exit very high level can make their
from the  Hard to achieve position in the
market economies of market more
scale. reliable.
Threat of Product  Subways, trains Medium  Decreasing cost in
substitute that can and buses are to high domestic flights and
replace our more modern in offering deals and
product this era offers can be
 Substitutes are effective
less expensive
Bargain Power of  Easily choose High  Maintaining right
power of buyers to another airline mix of quality and
customer affect their  Hard to maintain prices will increase
service lower prices customers loyalty
decisions  Customer more and will increase
prefer services switching cost of
with more customers
discounts
Bargainin Degree of  Only two High Maintaining sound business
g power of control that suppliers of aero relationship with suppliers
suppliers supplier planes are there will make their position
can exert (Boeing & strong
on its Airbus)
buyer  Switching cost is
high because it
needs a lot of
budget to retrain
the pilots.
 Fuel suppliers are
also less
Industry Intensity of  Number of Medium Right mix of quality and
Rivalry rivalry competitors are to High prices of their services.
among high Continue their expansion
competitors  Difficult to throughout Europe
of industry maintain cost
leadership

5. You are also advised to conduct a strength, weaknesses, opportunities and threats
(SWOT) analysis for the Company and provide strategic suggestions based on
analysis.

Identify Actions\Strategies
Opportunities:  Good scope to
increase ancillary
revenues through
myRyanair (Faster &
Simpler flight
booking app)
 Always Getting
Better (AGB)
program (Customer
experience
improvement
program)
 Opportunity in
declining charter
flight segment
Threats:  Weaker GBP post
Brexit to put
downward pressure
on prices
 Fluctuations in fuel
 prices can affect the
company’s
operational cost and
profits
 Big Competitors are
following low cost
model
 Increase in Irish
Corporation tax rates
 ATC staff shortages
& strikes in Europe
Strength:  Strong base –
Covering more than
200 destinations and
1800 routes in
European market
 Strong balance sheet
and consistent
shareholders returns
 Low cost competitive
advantage
 Point-to-point flights
within short distance
make their service
more efficient
Weakness:  Labor relations and
change in employee
compensation
arrangements
 Aggressive fleet
expansion may result
 in overcapacity in
near future

6. What are the Four Criteria of Sustainable Competitive Advantage which the
company uses its resources and capabilities to get competitive advantage and why is
it so successful in it?

 Valubale: Short haul flights (Efficient and time reducing flight timing)
 Unique: High frequency (09 flights per plane per day)
 Costly to imitate: Low fare
 Non substitutable. No-frills (No unnecessary extra charges)

7. Define the purpose and identify the activities of company’s value chain?

Inbound logistics

To strike advantageous deals with its suppliers with the goal of achieving the low-cost strategy.
Dependence on suppliers to supply fuel as well as food, beverages and duty-paid goods to be
sold on board; need to be processed, treated and monitored upon delivery Fuel surcharges are not
applied according to hedging strategy Choosing secondary airports away from urban centers of
reference

Operations

Implementation of a cost-cutting strategy on all fronts (no frills philosophy) Homogeneous

aircraft fleet (only Boeing 737) reducing costs for training, repair, procurement and storage of
spare parts. Fast turn-around times for aircraft that allow high point-to-point aircraft use to offer
direct non-stop flights, avoiding the expense of connecting services

Outbound Logistics

Check-in is almost exclusively online. Choosing secondary airports that guarantees a

quick turnaround time and provide a reliable service in terms of punctuality of flights.
 Minimize lost or delayed luggage. Purchase of the service almost exclusively through the
website Using very few advertising agencies doing internal management (in-house
advertising) Low fares promotions. Controversial advertising: disseminate declarations of
future controversial intent at issue is not actually brought to a conclusion, with the goal of
“making news” and then generate free publicity. Customer service simple and basic (low-
cost), which uses few resources additional services for a fee during the flight (food,
magazines, telephone, bathroom) agreements with hotels, car hire, insurance, guides etc.

Firm Infrastructure

In the 1991 Ryanair lived a big change of culture and structure, when Tony Ryan decided to
nominate Michael O’Leary such as new CEO who started to guide a young and expert team. He
has a great charisma and he brought innovative ideas that determinate the success of the
company. From that moment the strategy of Ryanair was very clear: do high profits minimizing
the costs (no frills), according to the idea that for the consumers the price is more important than
the quality. Continuing the policy of cost reduction, the company has reduced the cost of the
administrative offices in the area, lowering the number and the size.

Technology development

Ryanair is a leader in the implementation of new technologies, especially if they bring real
savings. Internet usage is a key element of its operation, and transactions are done almost
exclusively through its website, from the flight booking to the time of check-in. It also makes use
of modern technology (change tabs) to reduce noise emissions, which also guarantees a hi-fi

Human resource management

Ryanair currently employs a team of over 9,500 specialists.

Low cost staff training, aircrew limited, performance-based contracts pay. It does not give
employees discounts on the tickets and employees are paying some training costs, food, water
and uniforms. Ryanair has been several times accused of non-recognition of trade unions and
poor working conditions.

Procurement
The fleet consists of a single supplier (Boeing) aircraft which provides discounts on the price,
Ryanair purchases fuel. The price of that one increases from year to year, but despite this, the
company is making attempts not to increase the prices, trying to buy at a relatively fixed price
and cut the other costs. Therefore, the organization outsourced complementary operations.

8. How is the Company (each) using its resources and capabilities to get competitive
advantages and why is it so successful in it?

Cost leadership is a competitive advantage which allows Ryanair to push prices down and to
amplify the fiscal pain on higher cost competitors. Ryanair is especially known for its price
competition. Also, they outsource many of their operational services to keep their price low.

9. Describe Company Business Level strategy(s)

Their business level strategy is to maximize the value by minimizing the cost. One of their
marketing officer said “to cross and up-sell the products you already have to the customers you
already have”.

10. Describe Company’s overall Business strategies

 Lowest fares, highest frequency; lowest costs and highest productivity relative to other
airlines.
 Ryanair opened its new bases at secondary airports throughout Europe.
 Cost of employees is lower than their competitors because they fly point-to-point that
required smaller number of personnel.
 Majority of tickets for Ryanair is booked online through its website Ryanair.com which is
tied up with hotel chains, car-rental companies, life insurers, and mobile-phone
companies. With the launch of online booking services, almost 95 percent of bookings
were done online making the ticket booking process much easier and keeping transaction
 costs low. These benefits, approximately $ 6 million a year on an average, which was
ultimately passed on to the consumer in the form of lower ticket prices.

11. Who are Company’s competitors?

 AER Lingus (Irish flagship company)

 EasyJet
 Flybe
 Norwegian Air Shuttle
 Pegasus Airlines
 Vueling Airlines
 Wizz Air

12. Evaluate the overall attractiveness of the European airline industry

The Europe market is anticipated to register a CAGR of over 2.4% during the forecast period.

 Increasing air passenger traffic to and from Europe may generate demand for new
aircraft, as airlines look to expand and modernize their fleet.
 Due to the increasing pressure from the current government in the United States for
NATO members to achieve their defense expenditure target (2% of GDP), several
countries in Europe plan to increase their defense budget allocation in the coming years.
It is estimated that a major share of the allocation is expected to be for the development
of future military combat jets.
 Growing preference of people opting for charter and private jets to reduce their travel
time is driving the general aviation market in Europe.

13. Has the company influenced the development of the industry

Yes. Its core competencies like low fares, outsourcing airport positions led its competitors to
follow this strategy too.

Ans.02
The Ryanair Company is undoubtedly one of the most remarkable entrepreneurial stories of the
past 10 years in Europe. Furthermore that Ryanair has developed a very outspoken
communication style, using advertising and media to a great deal to publicize its ‘revolution’ in
air travel. Ryanair has great impact on the development of the airline industry. In the following
reasons;

Ryanair was Europe’s original low-fares airline and it is still Europe’s largest low-fares carrier.
In the current year Ryanair will carry over 35m. Passengers on 300 low fare routes across 21
European countries. Ryanair has 15 European bases and a fleet of over 100 brand new Boeing
737-800 aircraft, with firm orders for a further 125 new aircraft, which will be delivered over the
next seven years

14. How would you describe the company’s business model

The business model of Ryanair is based on a low-fare approach that involves main approaches to
adopt. Ryanair's plan was to offer cheap fares to compete on the market, to follow its low-cost
approach Ryanair offered fares that were almost 20 percent lower than its rivals ' cheapest price.

Ryanair also focused on standardization and in order to achieve this Ryanair flew a fleet
comprising only of Boeing 737s which simplifies the costs of maintenance of the planes, also the
bulk purchases of spares and other aircraft components also meant economies of scale. This
effort also saved the cost incurred in training requirements of Pilot and cabin crew as they have
to learn to operate a single type of plane. Apart from this Ryanair made a major portion of its
profits by flying to secondary airports which were outside the main city rather than the major
airports.

Major contributions to Ryanair's profit were the benefits of using the secondary airports located
outside the cities. The turnaround time for the aircraft is the "time required for the aircraft to be
ready for their next flight after landing" was much lower compared to the turnaround time for the
aircraft from any major airport. It used to take about 25 minutes to pl the Ryanair

15. What are the main challenges facing the company

Key issues was the capacity at the European airports which surged in air traffics and delays due
to air traffic control strikes and weather factors that affected the airlines.

Ryanair’s industrial relations with staff, especially its pilots, are fraught. The company has come
under fire for refusing to recognize unions and allegedly providing poor working conditions, for
example: staff are banned from charging their own mobile phones at work to reduce the
company’s electricity bill.

Ryanair has also bullied pilots to force them to agree to new contracts, where pilots would have
to pay costs of 15,000 for retraining on new aircraft if they left the airline, or if the company was
forced to negotiate with unions during the following five years.

And there are several cases going on in the court against the company for pilot victimization.
This problem is not only harming the reputation of the company but making the workforce
unhappy which is leading new talents of the industry to think once before entering or applying
into Ryanair.

17. What are the key issues?

 A key issue was capacity in European Airports which struggled with the surge in air
traffic control and delays due to weather problems.
 Lack of stand-by crew in Ryanair to accommodate the delays (because of change in Irish
Aviation Authority policy regarding employees’ holidays).
 Terrorist incidents in Europe had made a conflict in political alliance with UK. For
Ryanair, they were generating almost 25% of revenue from UK, which now was at stake.
The security compliances from both sides made the operations more complicated.
 Cancellation of flights without notification created negative word-of-mouth for the
company.
 The culture of Ryanair is neither welcoming for pilots nor aligned with his expansion
strategy. Pilots are switching to other airlines.

18. What is the market cycle of the case company?

 Ans: Given its recent strategic expansion and agreements with Boeing to supply aircraft, the
firm is expected to continue to expand. Such expansion plans will include expanded landing
spaces and more personnel.

19 . Exploration of various alternatives and effect in decision-making

 New Bases.
 Expansion of existing bases.
 More opportunities available as airlines close/ consol.
 Cost, cost, cost (long term minimization).
 Efficient facilities.
 Demographics.
 Geographic’s
 Strategic.

20.. Exploration of various alternatives and effect in decision-making

 New Bases.
 Expansion of existing bases.
 More opportunities available as airlines close/ consol.
 Cost, cost, cost (long term minimization).
 Efficient facilities.
 Demographics.
 Geographic’s
 Strategic.

21. It’s the basic question? How to do it – what to do when, or timing of

Action/implementation Plan
It is very important to take prompt decisions to determine all business dynamics and
developments and to evaluate all the action taken by your professional organization for the
efficacy of each strategy and action plan. Waiting for your opponent would make you more
vulnerable to a situation and potentially result in your losses as their moves do not have an
effect on you because they are low in scale relative to you. The organizations therefore need
a detailed action plan and emergency plans to cope and decide quickly on difficult
situations.Most of these choices are implemented at an organizational strategic level which
senior managers and department managers determine taking all the factors that lead to
emerging and potential problems into consideration. In order to make these decisions and
their implementation effective, employees should be well informed and active in this process,
as they can make a contribution that is important as they also serve to provide a timeline for
action plus monitoring and control in continuous ties with customers)