Ryanair, the first and largest budget airline in Europe, has enjoyed remarkable growth and success. The case illustrates how to analyse and deploy internal resources and capabilities to add perceived value to customers, thereby delivering sustainable strategic advantage.
It operates aircrafts over routes across Europe and North Africa from 31 bases. Throughout this essay the business strategy of Ryanair will be analysed and the sustainability of their model evaluated.
A major influence was the deregulation of the airline industry in which removed government intervention within the European continent. Under the new rules, routes and fare decisions were made by individual airlines which meant that they could compete on other factors besides food, cabin crew and frequency.
As a result of deregulation, a large number of new airline start-ups emerged within the EU and competition among airlines increased dramatically resulting in downward price pressures.
Ryanair was established to take full advantage of these market conditions. By offering low prices, Ryanair entered a huge and virtually unlimited market. Having seen the major success of the low cost carrier Southwest in the United States, Ryanair decided to follow in their footsteps by establishing a LCC for the European continent that targeted fare conscious leisure travelers and regular low cost business travelers.
By doing this Ryanair became the first low-fare airline in Europe. However, they took the Southwest model further by offering no drinks and snacks at all and abolishing the frequent flyer program which Southwest up to this day offers its customers.
The threat of new entrants is high within the aviation industry which meant that low fares would help drive away any further competition. The threat of substitutes to Ryanair had to also be carefully examined. Their primary market, Europe, had the availability of high speed trains and car holidays.
For Ryanair to be successful, prices had to be low to attract the public, and resist strong competition from substitutes like Eurostar.
This dictates that the company must minimize its own costs to ensure that they are able to offer customers the service at a price below their direct competitors.
The marketing strategy is perhaps the most obvious and significant functional strategy of Ryanair. Low fares are designed to stimulate demand, attracting fare-conscious travelers, those who may have used alternative forms of transportation or even those who may have not traveled at all. Penetration pricing as it is called helps gain market share and simply, more customers equals more revenue.
With ever increasing accessibility of the internet globally anybody with internet access can buy airline tickets from Ryanair, so distribution practically takes care of itself through this medium. It is the simplicity of this promotion which helps keep costs low since expensive advertising agencies can be entirely avoided and advertising can be dealt with in house.
This means the fare only includes the flight. There are however a number of other measures directly related to a no frills service. These include ticket-less boarding, unallocated seats, one class of travel, costs for check-in baggage, no refund policy, basic seats to increase aircraft capacity and charging for any additional service.
All this significantly reduces costs to Ryanair. The Achilles heel of Ryanair is their greater aircraft utilization through super quick turnaround times. Essentially this means the aircraft spends very little time on the ground, they achieve this through their human resource policies and by having none or very little cargo in the baggage hold to speed up loading and unloading of the aircraft.
Logistics strategy deals with the flow of products into and out of Ryanair.
Again there is heavy emphasis on cost saving and reducing measures. Ryanair fly to secondary airports which are potentially much further from the City centre but accessible enough by other forms of ground transportation.
At these airports Ryanair are able to negotiate extremely aggressively and demand the lowest landing and handling fees.
Additionally Ryanair is usually able to gain financial assistance with marketing and promotional campaigns at these airports. As cost leader Ryanair strives to undercut all its rivals but this means very low income per fare and requires maximum utilization of its resources.
Fortunately their financial policy ensures they are able to still profit handsomely from rock bottom fares. The aim is to break-even on fares but to make their profits out of ancillary charges and commissions from their partners.
Ryanair has a number of affiliates such as Hertz car rental, Acumus insurance and booking. Ryanair also generate income from advertising on board the aircraft. This is beneficial for a number of reasons all of which directly help cost saving measures.
Firstly, by being able to order same aircraft in bulk they are able to negotiate a better price per aircraft. Secondly, uniform aircraft mean that there are potential savings in staff training; air stewards being more familiar with all aircraft and maintenance will be simpler.
Finally by buying new, the company has safer, more fuel efficient planes with lower maintenance costs. Safer aircraft also means greater consumer confidence, equating to more fare sales.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 , Ryanair bought its first Boeing aircraft which carried over 1. million passengers. Ryanair Case Study. 20 Pages. Ryanair Case Study.
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case study Ryanair: the low-fares airline – future directions? Ryanair, the first and largest budget airline in Europe, has enjoyed remarkable growth and success. of IR£20 million. 1 Its fi ght to survive in the early s saw the airline transformed to become Europe’s fi .