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Ryan Air is an Irish based airline headquartered in Dublin with its biggest operational base situated in Stansted airport, London, UK. This is an aviation leader in low-cost air travel in Europe. A small company which started from a small airline flying a short hop from Waterford to London has converted into one of the Europe's largest carriers. Currently, Ryan Air is the Europe's leading low-cost airline with 437 routes in 24 countries making an annual profit of $306,712,000(Ryan Air, 2006). After 20 percentage of rise in passenger numbers, Ryan Air were re-set to raise with 17.5% to $326 million achieving bigger than their forecast of $305 million (Metro, 2007).
The brand was surveyed as the one of the best known brand in the world. Thus Ryan Air has become one of the most successful airlines whether in terms of profits, no. of passengers or number of flights taken. Ryan Air does not provide meal in the flight i.e. no frills service and they use the secondary airports and which are their most cost saving policies.
The company was establishes in 1985 and started flying it's 15-seat Bandeirante aircraft and entered in Dublin-London market in next spring competing with British Airways and Air Lingus. By 1988, company had grown its employees no to 600 and was fielding 40 flights per day .After the constant loses in the service from 1985 to 1991, the company was restructured under the new management in early 1990s.which closely followed the model of Southwest Airlines. Now the Ryan Air was operating as only and truly the low-fare airline in Europe. Further, the Irish mangers came with the idea with no frills i.e. no drinks and so snacks which already southwest Airline was applying (Gillen and Lall 2003).
Company achieved its success under the new management commanded by Michael O'Leary in 1993 as CEO of Ryan Air. at September 2002, company was standing on the strong base of 44 planes including 21 Boeing 737-200A jet aircraft and 23 Boeing 737-800 next generation aircraft, offering approximately 300 scheduled short haul flights per day into 11 locations in UK, two locations in Scotland, five locations in Ireland and 34 other locations in continental Europe. Sooner by the year of 2004, Ryan Air had 27 million passengers and was the second largest airline in Europe in terms of passenger traffic, it had left the traditional aircrafts like British Airways, Air France or KLM (Frederic Boesch;2007)
Ryan Air consistently defined the customer service in terms of price, safety and reliability and soon became the Europe's best airline for customer service in 2004.
Critical success factors
Ryanair encountered many problems in the past specifically in line with the structures of costs, however, the company was successful to survive and grow the marketplace. Company has implemented the different marketing strategies to keep competing and make it successful to be a leader in the air-business. Ryanair is regarded as the most punctual airline between Dublin and London. Thus punctuality is one of the most appreciable things of Ryanair. In its around 2o years of operations, Ryanair has not had a single major accident so far, thus their safety policy is what the customers rely on. Because of the well planned and organized management, a strong vision and the strategies, Ryanair is the second largest airline in UK and largest airline in Europe in terms of low fare with more than 1,400 staff and personnel.
Company is concentrating in providing the service in lowest price keeping itself at a safe place. Ryanair provides the minimum standards of service and the cheapest rates at point-to-point, short haul flights. Their success is no more a mystery as Ryanair is focusing on the strategy of lowest prices, reliability in the market place, comfort, service and frequency (Hoffmann, 2007). Ryanair is applying the no-frills policy in flights, no further advanced seat assignment, no expensive features like drinks. Attractive features like frequent departures, consistent on-time flights, advance reservations, baggage handling are the policies Ryanair is adopting ultimately reducing the operating costs.
Ryanair's aim is to be and remain a leader in airline business and to establish itself as a Europe's no. 1 low fares scheduled passenger airline offering the lowest fares service. A continuous focus on operating efficiencies and cost containment is a vital part of Ryanair's marketing policy. The variety of key elements of marketing strategy of Ryanair are as follows;
Low fares: Ryanair is applying the policy of low fare which is the most successful move ever. These are used to stimulate the demand, fare conscious leisure or business travelers. In September 2003, Ryanair launched a promotional offer for two millions of seats for 'free' on certain routes (excluding government taxes and passenger service charges) from September to 17 December 2003(www.breakingnews.ie/.../2003/.../ryanair-to-give-away-two-million-free-flights-113042.html). Such campaigns are very useful to bolster the Ryanair's low fare image.
Point-to- point flights on short-hauls routes: ryanair provides the frequent point-to-point services on short haul routes with the average flight time of 1.1 hr and average route length 746 km(2003). This short-haul route makes Ryanair to fly frequently. At the same time, it eliminates the necessity of frills, the baggage transfer and transit passenger costs for connecting passengers, in short distances.
Secondary airports: instead of using the main business airports of the town Ryanair prefers to use the secondary airports having the convenience access with major population centers e.g. London Stansted Airport. Since these airports are less congested and busy, there is fewer terminal delays, faster turnaround times and faster departures. This maximizes the aircraft utilization. Normal turnaround time is 60 minutes in traditional planes and Ryanair does only in 25 mins. This not only saves the time but also gives the tremendous benefits in revenues as they can make the more flights perday.
Low operating costs: Ryanair's operational cost is one of the lowest in the industryin Europe. Among them Ryanair has been maintaining to save the cost from the following main factors.
Aircraft equipment costs: the bargaining power of Ryanair is
appreciable thus they are saving the huge money while buying the aircrafts. moreover, Ryanair deals with the one party while buying the aircrafts and buying aircrafts from a single manufacturer is their major policy and it reduces the costs associated with it such as personnel training, maintenance and purchase and storage of the spare parts.
Personnel expenses: Ryanair controls the labor costs by continually improving the productivity of already exiting highly- productive workforce. The company pays its staff in modest salary but has setup a performance related pay structure which motivates and urges the employees to increase the productivity. Managing the marketing costs is another factor of Ryanair to reduce its costs down. Ryanair advertise on its website with its logo Ryanair.com, the "the low fare airline".
Customer service costs: in saving the further costs Ryanair is applying the policy in contracting the out services. Thus regarding aircraft handling, ticketing and other functions are contracted out by Ryanair to third parties. They have developed their own reservations centre and internet booking facility has reduced its travel agent commissions. Virtually all of its passengers book their tickets from direct telephone and Ryanair's website approximately 6% and 94% respectively.
Airport access fees: Ryanair endeavors to minimize its airport charges by opting, whenever possible, for less expensive gate locations as well as outdoor boarding stairs rather than more expensive jetways.
Safety and quality slogan: Ryanair shows the strong commitment in terms of the safety and the quality of the services. it practices safety by hiring and training the pilots, cabin crews and maintenance personnel up to the level of highest European airline industry standards. Fortunately, Ryanair has not experienced even a single incident involving the injury to the passengers and cabin crews in the 20 years of operating history.
Ancillary services: Ryanair applies many revenue-generating services on board e.g. on-board merchandising, selling foods and beverages and from its own website it is generating sales through accommodation reservations, advertising, travel insurances, car rentals, ticketing of bus trains etc. the ancillary revenue of Ryanair in 2007 was 362104 thousand Euros (www.traveldailynews.gr/.../021908AnalysisHYPERLINK "http://www.traveldailynews.gr/.../021908AnalysisRyanairAncillary2008"RyanairAncillary2008).
Porter's five forces: Analysis of Ryanair
Bargaining power of suppliers
Main supplier of Ryanair is Boeing and there are only two suppliers i.e. Boeing and Airbus; high bargaining possibility of supplier.
Switching from one supplier to another is costly as all the pilots and the mechanics will have to be retrained.
Bigger airports where its competitors operate have the high bargaining power.
Price of fuel is governed by world trade and Middle Eastern countries' dominance.
Bargaining power of customers
Customers are highly sensitive about price.
Customers are aware about the expenditure in supplying services.
Switching to other airlines is easy, relatively simple and is not related with high costs e.g. every airline has got internet facility.
Threats of new low-fare airline has some barriers on entry
High capital investment is necessary.
A possibility of price war with exiting LCC route immediately.
Flight authorizations are necessary and a starting base needs to be very low in terms of price.
Threats of substitutes
No brand loyalty of customers
Other modes of transportation available e.g. Road, Rail and to some extent boat service.
Customers needn't to pay any switching costs.
No "close customers relationship"
Low-fare-air-business market is highly competitive.
Not much differentiation in services, only the price is the main differentiating factor.
Demand for short haul flights around Europe is increasing.
SWOT analysis of Ryanair
Ryanair has the strong and well recognized brand name in the marketplaces through the 20 years in LCC (low cost carrier) business.
Ryanair benefits from low airport charges.
It has strong revenue growth e.g. high aircraft utilization.
Ryanair planes have high seat density thus can carry a large no of passengers.
90% of bookings are via internet which lowers the distribution costs (www.ryanair.com).
Fast turn- around makes Ryanair unique yet saving time.
Saves money from all Boeing aircraft in maintenance and training costs.
Service performance is high increasing the reliability of the company i.e. low baggage loss, punctuality, large no of flights.
Point to point to point service.
Less hedging risks on fuel and others.
Large no of customers (24 millions in year 2004)
Strong visionary leadership.
Small headquarters: low on overheads (Mayer, 2008).
Some secondary airports are too far away from the main cities and actual destinations. This makes a big inconvenience to the passengers.
Relation with employee as well as customers because of the poor treatment and service.
A bad image with press which makes a huge blow even for the minor incidents.
Poor service: people skills.
Its operating margin is declining.
Even a small increase in fare value badly affects the system: Ryanair is very sensitive in changes in charges.
Less expansion possibility because of its limited and small market.
Unnecessary additional charges to the passenger e.g. especial insurance levy (terrorism insurance levy) to keep the company's insurance down.
Demand of low fare airlines is increasing.
EU enlargement creates the opportunities for many new destinations to be opened.
Airlines market potential is high: Ryanair can capture more market share.
Economic fluctuation helps the airline: if the economy slows down people would prefer low cost airlines.
Monopoly market: people travelling from Ireland to UK have no option other than Ryanair (Morrell, 1998).
Web luggage check-in.
Recent acquisition with Buzz airline.
Fluctuating oil prices can be fatal: fuel costs depend on the oil market.
Dependence on economic cycle.
Low-fare competition is growing, market consolidation.
Growth in South European market of Ryanair is limited.
As more planes are flying in the sky, air traffic control charges increases.
Price sensitive customers.
One-man-vision. Company's success is very much dependent on the key personnel in senior management like O' Leary.
Failing to show the responsibility in fuel and environmental charges which may decrease the growth as it depends on price stimulation.
European court decision: may prevent Ryanair's expansion and costs may raise in future (Hoffmann, 2007).