Ryanair’s objective is to firmly establish itself as Europe’s leading scheduled passenger airline, through continued improvements and expanded offerings of its low-fares service.
Vision Statement: A world where passengers fly for free.
In the highly challenging current operating environment, Ryanair seeks to offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost-containment and operating efficiencies.
The key elements of Ryanair’s long-term strategy are:
Providing Excellent Customer services
Frequent point to point flight to short haul.
Maintaining Low operating cost
Making the use of Latest Technology.
Commitment to Safety and Quality Maintenance
Enhancement of Operating Results through Ancillary Services
Focused Criteria for Growth
Responding to Current Challenges
1.2 Undertaking evaluation of component parts of Strategic plan of Ryan Air
The components parts of the strategic plan are explained under.
Low Fares. Ryanair’s low fares are designed to stimulate demand, particularly from fare-conscious leisure and business travelers who might otherwise use alternative forms of transportation or choose not to travel at all. Ryanair sells seats on a one-way basis, thus eliminating minimum stay requirements from all travel on Ryanair scheduled services.
Ryanair sets fares on the basis of the demand for particular flights and by reference to the period remaining to the date of departure of the flight, with higher fares charged on flights with higher levels of demand and for bookings made nearer to the date of departure. Ryanair also periodically runs special promotional fare campaigns.
Customer Service. Ryanair’s strategy is to deliver the best customer service performance in its peer group. According to reports by the Association of European Airlines (“AEA”) and the airlines’ own published statistics, Ryanair has achieved better punctuality, fewer lost bags, and fewer cancellations than all of the rest of its peer group in Europe. Ryanair achieves this by focusing strongly on the execution of these services and by primarily operating from un-congested airports. Ryanair conducts a daily conference call with Ryanair and airport personnel at each of its base airports, during which the reasons for each flight delay and baggage shortshipment are discussed in detail and logged to ensure that the root cause is identified and rectified. Customer satisfaction is measured by regular online, mystery-passenger and employee surveys.
Frequent Point-to-Point Flights on Short-Haul Routes.
Ryanair provides frequent point-to-point service on short-haul routes to secondary and regional airports in and around major population centers and travel destinations. In the 2009 fiscal year, Ryanair flew an average route length of 409 miles and average flight duration of approximately 1.55 hours. Short-haul routes allow Ryanair to offer its low fares and frequent service, while eliminating the need to provide unnecessary “frills,” like in-flight meals and movies, otherwise expected by customers on longer flights. Point-to-point flying (as opposed to hub-and-spoke service) allows Ryanair to offer direct, non-stop routes and avoid the costs of providing “through service,” for connecting passengers, including baggage transfer and transit passenger assistance.
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In choosing its routes, Ryanair favors secondary airports with convenient transportation to major population centers and regional airports. Secondary and regional airports are generally less congested than major airports and, as a result, can be expected to provide higher rates of on-time departures, faster turnaround times (the time an aircraft spends at a gate loading and unloading passengers), fewer terminal delays, more competitive airport access, and lower handling costs. Ryanair’s “on time” performance record (arrivals within 15 minutes of schedule) for the 2009 fiscal year was 88%. According to comparative data from Aer Lingus, easyJet, and the AEA, Ryanair’s “on time” performance record exceeded that of its principal competitors, including: Aer Lingus (approximately 73%); Air France (approximately 84%); British Airways (approximately 78%); easyJet (approximately 71%); ufthansa (approximately 84%); and Alitalia (approximately 76%). (Data for Alitalia excludes the period from November 2008 to January 12, 2009, as data for this period was not published) Faster turnaround times are a key element in Ryanair’s efforts to maximize aircraft utilization. Ryanair’s average scheduled turnaround time for the 2009 fiscal year was approximately 25 minutes. Secondary and regional airports also generally do not maintain slot requirements or other operating restrictions that can increase operating expenses and limit the number of allowed take-offs and landings.
Low Operating Costs.
Management believes that Ryanair’s operating costs are among the lowest of any European scheduled-passenger airline. Ryanair strives to reduce or control four of the primary expenses involved in running a major scheduled airline:
aircraft equipment costs;
customer service costs; and
airport access and handling costs
Aircraft Equipment Costs. Ryanair’s primary strategy for controlling aircraft acquisition costs is to narrow its fleet of aircraft to a single type. Ryanair currently operates only “next generation” Boeing 737-800s. Ryanair’s continuous acquisition of new Boeing 737-800s has already and will continue to significantly increase the size of its fleet and thus significantly increase its aircraft equipment and related costs (on an aggregate basis). However, the purchase of aircraft from a single manufacturer enables Ryanair to limit the costs associated with personnel training, maintenance, and the purchase and storage of spare parts while also affording the Company greater flexibility in the scheduling of crews and equipment. Management also believes that the terms of its Boeing contracts are very favorable to Ryanair. See “¾ Aircraft” below for additional information on Ryanair’s fleet. Personnel Costs. Ryanair endeavors to control its labor costs by seeking to continually improve the productivity of its already highly productive work force. Compensation for employees emphasizes productivity-based pay incentives. These incentives include discretionary sales bonuses for onboard sales of products for flight attendants and payments based on the number of hours or sectors flown by pilots and flight attendants within limits set by industry standards or regulations fixing maximum working hours.
Customer Service Costs. Ryanair has entered into agreements on competitive terms with external contractors at certain airports for ticketing, passenger and aircraft handling, and other services that management believes can be more cost-efficiently provided by third parties. Management attempts to obtain competitive rates for such services by negotiating fixed-price, multi-year contracts. The development of its own Internet booking facility has allowed Ryanair to eliminate travel agent commissions and third-party reservation systems costs. Ryanair generates virtually all of its scheduled
passenger revenues through direct sales via its website.
Airport Access and Handling Costs. Ryanair attempts to control airport access and service charges by focusing on airports that offer competitive prices. Management believes that Ryanair’s record of delivering a consistently high volume of passenger traffic growth at many airports has allowed it to negotiate favorable contracts with such airports for access to their facilities. Ryanair further endeavors to reduce its airport charges by opting, when practicable, for less expensive gate locations as well as outdoor boarding stairs rather than more expensive jetways.
Taking Advantage of the Internet.
In 2000, Ryanair converted its host reservation system to a new system, which it operates under a hosting agreement with Navitaire that will terminate in 2013. As part of the implementation of the new reservation system, Navitaire developed an Internet booking facility. The Ryanair system allows Internet users to access its host reservation system and to make and pay for confirmed reservations in real time through the Ryanair.com website. Since the launch of the Internet reservation system, Ryanair has heavily promoted its website through newspaper, radio and television advertising. As a result, Internet bookings grew rapidly, and have accounted for approximately 99% of all reservations over the past several years. On February 22, 2008, Ryanair upgraded the reservation system to a more scalable version, which offers more flexibility for future system enhancements and to accommodate the planned growth of Ryanair.
In addition, in March 2006, Ryanair introduced its Internet check-in service and has since introduced kiosk-based check-in systems at its main base at London (Stansted) and its bases in Belfast, Frankfurt (Hahn), in Germany, and Girona, in Spain. It currently plans to deploy similar kiosks, with credit card and payment facilities, to the majority of its bases over the next year. On March 10, 2009, the Company announced that with effect from October 1, 2009 it will move to 100% Internet-based check-in and that airport heck-in facilities will no longer be available. The Company will replace these check-in desks with significantly fewer bag-drop desks.
Commitment to Safety and Quality Maintenance.
Safety is the primary priority of Ryanair and its management. This commitment begins with the hiring and training of Ryanair’s pilots, flight attendants, and maintenance personnel and includes a policy of maintaining its aircraft in accordance with the highest European airline industry standards. Ryanair has not had a single incident involving major injury to a passenger or a member of its flight crew in its 24-year operating history. Although Ryanair seeks to maintain its fleet in a costeffective manner, management does not seek to extend Ryanair’s low-cost operating strategy to the areas of safety, maintenance, training or quality assurance. Routine aircraft maintenance and repair services are performed primarily by Ryanair, at Ryanair’s main bases, but are also performed at other base airports by maintenance contractors approved under the terms of Part 145. Ryanair currently performs heavy airframe maintenance, but contracts with other parties who perform engine overhaul services and rotable repairs. These contractors also provide similar services to a number of other airlines, including British Airways and Aer Lingus. Ryanair assigns a Part 145 certified mechanic to oversee engine overhauls performed by other parties.
7. Enhancement of Operating Results through Ancillary Services.
Ryanair provides various ancillary services and engages in other activities connected with its core air passenger service, including non-flight scheduled services, the in-flight sale of beverages, food and merchandise and Internet-related services. As part of its non-flight services, Ryanair distributes accommodation, travel insurance and car rentals, principally through its website. Providing these services through the Internet allows Ryanair to increase sales, while at the same time reducing costs on a per-unit basis. For the 2009 fiscal year, ancillary services accounted for 20.3% of Ryanair’s total operating revenues, as compared to 18.0% of such revenues in the 2008 fiscal year.
8. Focused Criteria for Growth.
Building on its success in the Ireland-U.K. market and its expansion of service to continental Europe and Morocco, Ryanair intends to follow a manageable growth plan targeting specific markets. Ryanair believes it will have opportunities for continued growth by: (i) initiating additional routes in the EU; (ii) initiating additional routes in countries party to a European Common Aviation Agreement with the EU that are currently served by higher-cost, higher-fare carriers; (iii) increasing the frequency of service on its existing routes; (iv) starting new domestic routes within individual EU countries; (v) considering acquisition opportunities that may become available in the future; (vi) connecting airports within its existing route network (“triangulation”); (vi) establishing new bases in continental Europe; and (vii) initiating new routes not currently served by any carrier.
During the 2007 fiscal year, the Company acquired 25.2% of Aer Lingus. The Company thereafter increased its interest to 29.3% during the 2008 fiscal year, and to 29.8% during the 2009 fiscal year at a total aggregate cost of â‚¬ 407.2 million. Following the acquisition of its initial stake and upon the approval of the Company’s shareholders, management proposed to effect a tender offer to acquire the entire share capital of Aer Lingus. This acquisition proposal was, however, blocked by the European Commission on competition grounds. Ryanair filed an appeal with the CFI, which was heard in July 2009, and currently expects the CFI to announce its decision approximately nine months thereafter. On December 1, 2008, Ryanair made a new offer to acquire all of the ordinary shares of Aer Lingus it did not own at a price of â‚¬ 1.40 per ordinary share. Ryanair offered to keep Aer Lingus as a separate company, maintain the Aer Lingus brand, and retain its Heathrow slots and connectivity. Ryanair also proposed to double Aer Lingus’ short-haul fleet from 33 to 66 aircraft and to create 1,000 associated new jobs over a five-year period. If the offer had been accepted, the Irish government would have received over â‚¬ 180 million in cash. The employee share option trust and employees who own 18% of Aer Lingus would have received over â‚¬ 137 million in cash. The Company met Aer Lingus management, representatives of the employee share option trust and other parties. The offer of â‚¬ 1.40 per share represented a premium of approximately 25% over the closing price of â‚¬ 1.12 of Aer Lingus on November 28, 2008. However, as the Company was unable to secure the shareholders’ support (to sell their stakes in Aer Lingus to Ryanair), the Company decided on January 28, 2009, to withdraw its new offer for Aer Lingus.
Responding to Current Challenges.
In recent periods, and with increased effect in the 2008 and 2009 fiscal years, Ryanair’s low-cost, low-fares model has faced substantial pressure due to significantly increased fuel costs and reduced economic growth (or economic contraction) in the economies in which it operates. The Company has aimed to meet these challenges by: (i) selectively grounding aircraft, including 20 aircraft that the Company grounded over the 2008-2009 winter season; (ii) disposing of aircraft (increasing its disposals from six in the 2008 fiscal year to approximately 17 in the 2009 fiscal year); (iii) controlling labor and other costs, including through wage freezes, selective redundancies and the introduction of Internet check-in; and (iv) renegotiating contracts with existing suppliers, airports and handling companies. There can be no assurance that the Company will be successful in doing these things or that doing so will allow the Company earn profits in any period.
The Company has recently announced capacity reductions, primarily at Dublin Airport, the most expensive airport in terms of airport charges that Ryanair serves. As a result of this airport’s high charges, certain routes are not economically viable to operate during the winter when the Company typically experiences lower load factors and fares. In June 2009, Ryanair announced that it was reducing its fleet at Dublin Airport to 17 by summer 2009 and 16 by winter 2009 (down from 22 in summer 2008 and 20 in winter 2008) as a result of rising airport charges and the introduction of an Air Travel Tax of â‚¬ 10 on all passengers departing from Irish airports on routes longer than 300 kilometers. The Company has also recently announced that it plans to freeze all growth in the United Kingdom and to reduce capacity at its London (Stansted) base by 40% between October 2009 and March 2010.
Analyse the factors affecting the strategic plan
Evaluate alternative strategies to meet the desire future strategic position
1.2 Undertake an evaluation of the component parts of a strategic plan
Analyse the factors affecting the strategic plan
Factors affecting the strategic plans can be done by using PEST analysis of RYAN air
Increase trade union pressure
EU abolishment of duty free sale
Security measures and restrictions
Slot allocation problem
Unstable and tense Political problems in oil producing countries
Severe security measures and restrictions
Fuel price increase
Recession and stagnant economy
Depreciation of Pound against US Dollars.
Instant EU expansion
Europe: (Cars and High-speed trains)
Increasing travelling lifestyles
Increasing business travelling
Increasing in Migration
Use of Internet (broadband services)
High speed train technology
PORTERS 5 FORCES
PORTERS 5 FORCES OF RYAN AIR
Low cost leader
Innovative Cost reductions
Established market share
High Load factor
Strong public image
Range of Ancillary services.
Refuse to recognize unions.
Volatile customer relations.
Antagonistic relationships with competitors
Uncharacteristic Management expansion
Dependence of Key personnel (Michael O’Leary)
Shareholders dividend policy.
Advance cost reductions.
Offering free flights.
Expansion of ELFAA
New low cost entrants e.g. Easy Jet.
Alliance Mergers between competitors
Antagonistic Attitude of EU Commissioners.
Non Expansion into New EU States.
Fast and Easy Substitute Transportation (Cars, Busses, Speed Trains)
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