The document discusses the history and strategies of Ryanair, a low-cost airline based in Ireland. It describes how Ryanair was started in 1985 and initially struggled, but then transformed into one of the most profitable airlines in the world through strategic changes. Ryanair adopted strategies like operating from secondary airports, point-to-point routes, zero frills service, efficient aircraft utilization, and novel cost cutting measures to lower costs. It also pursued revenue enhancement strategies like ancillary fees. The document analyzes threats faced by Ryanair like increased competition, rising fuel costs, and potential price wars.
The document discusses the history and strategies of Ryanair, a low-cost airline based in Ireland. It describes how Ryanair was started in 1985 and initially struggled, but then transformed into one of the most profitable airlines in the world through strategic changes. Ryanair adopted strategies like operating from secondary airports, point-to-point routes, zero frills service, efficient aircraft utilization, and novel cost cutting measures to lower costs. It also pursued revenue enhancement strategies like ancillary fees. The document analyzes threats faced by Ryanair like increased competition, rising fuel costs, and potential price wars.
The document discusses the history and strategies of Ryanair, a low-cost airline based in Ireland. It describes how Ryanair was started in 1985 and initially struggled, but then transformed into one of the most profitable airlines in the world through strategic changes. Ryanair adopted strategies like operating from secondary airports, point-to-point routes, zero frills service, efficient aircraft utilization, and novel cost cutting measures to lower costs. It also pursued revenue enhancement strategies like ancillary fees. The document analyzes threats faced by Ryanair like increased competition, rising fuel costs, and potential price wars.
The document discusses the history and strategies of Ryanair, a low-cost airline based in Ireland. It describes how Ryanair was started in 1985 and initially struggled, but then transformed into one of the most profitable airlines in the world through strategic changes. Ryanair adopted strategies like operating from secondary airports, point-to-point routes, zero frills service, efficient aircraft utilization, and novel cost cutting measures to lower costs. It also pursued revenue enhancement strategies like ancillary fees. The document analyzes threats faced by Ryanair like increased competition, rising fuel costs, and potential price wars.
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IIM
RAIPUR
ACS ASSIGNMENT
Dogfight over Europe: Ryanair
Group Number : 3 Group Members Bir Bahadur Singh, 12PGP014 Rahul Khedkar, 12PGP022 Amit Singh Chauhan,12PGP060 Saif Uddin Shaik,12PGP092
Post World War I
Europe
Post World War II
Pooling arrangement Air France Alitalia Pool Capacities Divide their proceeds
Domestic Fares were set by government
1950 and Beyond
Highly regulated air market was criticized. Charter airlines grew rapidly 1978 U.S deregulated domestic airlines. By 1992 European airlines also gets deregulated.
RYANAIR Cathal and Declan Ryan Initiated Ryanair in 1985. 1986 started operation on London-Dublin route. BA and Aer Lingus reacted aggresively. Ryanair played price war. Losses kept on mounting. In 1991 on the verge of financial collapse.
By 1999 one of the most profitable airlines in the world.
Ryanair
How did Ryan air move from the blink of bankruptcy to become one of the most profitable airline in the world?
Ryanair Initial Positioning
Price Leader Premium Competitive
Features
Original
Customized
Basic
Quality
Excellent
Average
Acceptable
Support
Comprehensive
Standard
Minimal
Reputation
Prestigious
Respected
Functional
Ryanair Launch Strategic framework
External Consistency Internal Consistency Head-to-Head Competition Lack of knowledge of Industry Structure
Full amenities at low price
Dynamic Consistency
Unable to anticipate retaliation
NO SUSTAINABLE ADVANTAGE
Ryanair New Strategic framework
External Consistency Internal Consistency Dynamic Consistency Advantage of Deregulation Early Entry
Customer/Geographic Scape Smart destination Selection Standardised Fleet Productivity based pay Multi Revenue Sources Heavy emphasis on maintenance
Good job of anticipating future. Least overlapping route.
Ryanair Launch Strategic framework
Lower prices than competitors 50% below previous levels
Cost Reduction No frills Higher utilization of aircrafts Fewer personnel
Operation from Secondary Airports: Torp, 65 miles from Oslo; Char-leroi, 37 miles from Brussels; Beauvais, 35 miles from Paris. low airport charges. Some airports paid in return. less congested airports also helped the company to reduce turnaround time and increase airtime
Point-to-point Network: lower turnaround time No connecting flights, No flight transfers or luggage labelling
In-flight sales of Items : 5 -7 % of Ryanairs revenue
Ryanair Strategic framework
Zero Frills: No free food or beverages. Reduce per flight attendants from 5 to 2.
No frequent flyers miles/ loyalty programs or plush airport lounges Extra pay for food, drink No printed tickets and encouraged guests for online check-in No refund for any no-show of guests
Efficient Aircraft Utilization:
No Seat assignment Speed up boarding Stopped carrying cargo Turnaround time reduced from previous 45 minutes to 25 minutes 12 roundtrips a day Stansted-Dublin route
Ryanair Strategic framework
Simple Standardised Operations: Harmonized and streamlined operations Single type of aircraft. Replaced 14 types of planes to single Boeing 737s Reduced costs of training , maintenance, inventories of spares and parts Standard Operating Procedures (SOPs) ensured uniformity of services Single class seating plan Avoided expensive air bridges
Leaner Distribution System:
Direct bookings accounted 40% Avoided complex task of integrating sales offices, travel agents, online booking system
Current Positioning Price Leader Premium Competitive
Features
Original
Customized
Basic
Quality
Excellent
Average
Acceptable
Support
Comprehensive
Standard
Minimal
Reputation
Prestigious
Respected
Functional
What are the most serious threats that Ryanair face today?
THREATS Increase in competition due to Deregulation 131 carriers entered the european market from 1993 -1998 In 1996, Richard Branson purchased Eurobelgian airlines. In 1998, operated roughly 40 flights per day. Healthy Growth in revenues but profit remained a concern.
In 1995, Haji-Ioannoe founded easyjet. The company relied on third parties for most of the services. In 1999, easy jet operated on 29 European routes
In 1995, Franco Mancassola funded Debonair. Philosophy lowest fare with minimal restrictions and no compromise on comfort. In 1999, grounded its fleet and called for bankruptcy.
COMPARISON Ryanair Used secondary airport. Reduced commissions to travel agent Contracted ground work.
Virgin 40 Flights per day in Belgium 45% seats are purchased by Sabena Invested heavily to draw you Reservation through Call centres.
EasyJet 3rd parties managed all activities Operated from Luton Direct Selling Model Invested heavily on new route promotion.
Go Low fares combined with Style Used BAs muscles.
Debonair Lower fares with full comfort.
Operation
Marketing & Sales
No Advertising Yield Management
Extensive advertising and branding
38% tickets sold through own office. 58% Business travellers Decent Frills In flight entertainment system Frequent flyer program
Services
No Frills In flight sales Advertising in flight. Charter flights and car rentals
Minimum Frills
No Frills Culture Committee elected by staff.
Minimum Frills Seat Assignment High Quality Collaborators
Other
Chartered Flights
THREATS Rise in Fuel Prices Contributes 16% of total operating costs (Exhibit 2)
Terrorism & Security
9/11 Attack
No Brand Loyalty In the absence of any relationship management program it will be difficult to retain customers.
Poor On-time performance
High average arrival delay(Exhibit 5)
Industry Criticism Criticized in Media as Worlds least preferred air lines
THREATS Increase in Airport charges Secondary airport are also started raising their charges
Environmental Pressures low-cost airlines are a rapidly growing source of greenhouse gas emissions, as well as noise.
Involvement in Price war
Dropped fare to 22 destinations to fight with Go
Currency movements High proportion of Ryanairs costs are in US dollars, making it vulnerable to a strengthening of the dollar.
Substitute Transportation No Switching Cost
How serious is the challenge posed by GO?
Go In November 1997, British Airways(BA) unveiled Operation Blue Sky, a plan to launch a low-cost, no-frills subsidiary. Go Started operations in May 1998, with eight 737-300s. BA tapped Barbara Cassani, a long time U.S. general manager for BA, to head the new venture. Go received UK 25 million in startup funding from BA. BA and Go claimed that Go was on its own and separate from its parent.
Reaction of competitors to Gos entry
Haji-Ioannou, easyJet, claimed that they are copying us. They filed a case against Go, suit charged that BA supported Go indirectly by underwriting its airplanes leases and providing insurance, advertising and other services at a discount. easyJet claimed that Go will incur losses and BA intended Go to put other low-fare airlines out of business . Offered free tickets to people predicting Gos losses.
GOs Service and performance
Gos service is different from other low cost airlines: They gave seat assignments to passengers Gave food franchise to a upscale caterer Extensive advertising Tried to combine low fares with style and quality Performance: Incurred losses of UK20 million in 1st year Load factor was low Average arrival delay was low. 2001 was the only profitable year after the launch in 1998.
IS GO A THREAT FOR RYANAIR ?
Yes Go has got a strong parent BA with deep pockets
No Offerings of Go is not sustainable in highly competitive industry BA have experience of giving excellent service at high price and not of low cost service Since its launch Go is in losses High cost for Go in advertising/promotions/branding Go competes with Ryanair at only one route out of its 17 routes
Go's offering are "low fares with style and quality"
Competitors had to drop fares on launch of Go
Conclusion Go is not a threat for Ryanair as it has got more experience of running a low cost low fare airline.
And also Gos offerings are not sustainable and it will be in losses for a long time posing a threat for its existence.
What should Michael OLeary do?
Ryan Air Strategies
Try to expand its existing network by acquiring some local carriers Deregulation saw emergence of many new players. Out of the 131 new entrants only 57 survived. Ryanair can acquire some of the defunct and small players to strengthen their local presence in small pockets of Europe. Its presence in such small Hamlets of Europe might also give rise to increased air traffic in these regions
Ryan Air Strategies
Focus more on online booking: Ryanair should encourage booking of tickets online they may achieve so by providing special discounts. This would help them to reduce staff and maintenance of physical reservation kiosks. Moreover it would also reduce cost of information dissemination as they could do it through their websites.
Ryan Air Strategies
Novel Cost Cutting Measures: They should come up with novel cost cutting measures and pass on the benefits to the consumer.
Some of these novel cost cutting measures can be: No Window Blinds No Reclining Seats Velcro Headsets They can implement some of these techniques at a small level and if successful can scale them up
Ryan Air Strategies
Revenue Enhancement: They can come up with different techniques to generate revenue onboard. Paid Television, Internet or games for long distance flights. Charging for use of mobile phone on board.
Preferential Exits: In case a passenger has to catch a connecting flight or in a hurry he can pay extra so that when the plane lands he is given priority over other passengers.
Ryan Air Strategies
Improving Capacity Utilization: Over the years capacity utilization for Ryanair has gone down as depicted in the chart. 1992 80% 1993 79% 1995 76% 1996 73% 1997 72% 1998 72% 1999 71%
Special Pricing for the remaining seats can be done. Offers such as kids fly for free can be introduced.
