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Ryanair, an Irish airline with its head quarters in Dublin international airport, operates more than 800 routes to destinations in 26 countries; Ryanair started in 1985 with a 15 seater Banderante aircraft with only one route, flying between Waterford in the southeast of Ireland to London Gatwick airport (Ryanair.com 1985). Today, Ryanair is one of Europe's largest low-cost fares and no frills carries (Ryanair.com 2009). Its major objective is to establish itself as Europe's leading low-fares and low cost production and maintaining efficiency (Johnson et al 2008).
The aim of this study is to examine and analyze Ryanair's strategy and the competitive advantage Ryanair has gained over the years by looking into the key factors in Ryanair's internal environment and using existing models and theories to see how these factors has aided the competitive advantage of Ryanair.
RYANAIR'S INTERNAL FACTOR
The SWOT analysis model will be used in identifying Ryanair's internal factors to know how it has help to aid Ryanair's competitive advantage over its rivals.
SWOT analysis according to Johnson et al (2008) "summarizes the key issue from the business environment and the strategic capability of an organization that are mostly likely to impact on strategy development". SWOT analysis is the strengths, weaknesses, opportunities and threats that has effect on a company either by creating a competitive advantage, a deficiency, an opportunity or a threat (Pearce and Robinson 2007).
Leadership is one of the competitive advantages Ryanair has over its competitors. Michael O'Leary, the CEO of Ryanair, is a major strategy in Ryanair's competitive advantage over its rivals. Michael O'Leary is known for his outspokenness and arrogance and he has been credited for transforming European air transportation (Johnson et al 2008). Under the management of Michael O'Leary, the airline was awarded an international airline award for the best managed airline in 2001, also Michael O'Leary was given an award for the European Businessman of the year by Fortune magazine and named one of Europe's business star in 2004(Johnson et al 2008). Present and past employees see him as a good leader, a good motivator and an energizer and he is also a good public figure which has lead to a good marketing and publicity strategy for Ryanair (Johnson et al 2008).
Low-fares have always been Ryanair's strategy and competitive advantage over its competitors. Its Low-fares was to attract passengers and to encourage demand from fare conscious leisure and business traveler who would rather use other forms of transportation or would not travel at any point (Ryanair.com 2004). In 2008, passengers were not eager or encouraged to purchase tickets among the airlines industries because of the economic melt down, as a result of that Ryanair announced the sales of one million seats for Â£5 with the inclusion of taxes and surcharges in other to encourage passengers to purchase its tickets, with this Ryanair might have lost some money but accomplish their main aim which according to Michael O'Leary, the CEO of Ryanair, is to make sure that more than 80 percent of their seats is filled up in all their flight which analyst believe that its one of Ryanair's strategy to make the environment difficult for its competitors to work, in thereby giving up the business (Ebookers.com 2008).
Ryanair sell seat on a one-way direction price preventing stay requirement from all their travel services whatever the fare may be, they are also believed to be the only airline that operates a one-way pricing policy which gives them a competitive advantage over their competitors, Ryanair's Dublin to London route is its largest when it comes to the numbers of its passengers (Allé 2004).
Although, critics may have criticized Ryanair of treating their passengers poorly and not making them a priority, Ryanair has continued to grow and gain competitive advantage on its low-fares and passengers would ignore any inconvenience for Ryanair's low fares (Ryanair.com 2009).
Point to Point service and the use of secondary airports
Ryanair makes provision for point to point services on short routes and make use of secondary and regional airport destination in both population centre's and destinations in other to avoid congested airports and also reduce air port charges (Ryanair.com 2009). "At the end of the fiscal year in March 31 2004, Ryanair flew an average of approximately 1.83 round trips per route per day with an average route length of 49 miles and and an average flight duration of approximately 1.2 hours"(Ryanair.com 2004). The advantage of the short haul route is that it allows Ryanair to offer services on frequent bases with a no frill services which allows passengers to pay only for things they need which usually does not apply to passengers on longer flights (Ryanair.com 2009). Point to point flights prevents Ryanair from paying extra costs for connecting passengers and also prevent them from paying baggage transfer and transit passenger assistance cost (Allé et al 2004). Also, "check-in is quicker because point to point is less complex than the interline one" (Barret 2004).
It is believed that low cost carriers have a higher number of passengers in less congested airports while congested airports tend to have lower unit revenues particularly in the area of airport charges (Graham and Dennis 2007). As a result of Ryanair using secondary airports, which is usually less congested than major airports, it is expected of them to provide a higher rate on time departure, to spend less time at the gate loading and unloading, less time at the terminals and gain competitive airport access (Allé et al 2004). Ryanair's on time record is believed to be 89% exceeding that of its competitors, Lufthansa's 85%, British Airway's 83%, Air France 83%, and Alitalia 78% (Ryanair.com 2009). Also, shorter turnaround time's gives room for more journeys as a result of less time spent on loading and unloading (Barrett 2005).
By avoiding congested airports Ryanair can attract more customers to fly with them especially does who would rather take a train or other form of transportation in other to avoid congested airports or long wait on queue (Johnson et al 2008).
Low operation cost
In other to be able to offer the lowest fares, Ryanair has to minimize its cost (Allé 2004). It is believed that Ryanair's operating cost is one of the lowest among Europe's passenger scheduled airlines, Ryanair's low operating cost has lead to a reduction in their expenses such as avoiding excess spending on aircraft maintenance, customer service, self productivity and cost of airport access unlike traditional carriers who spend more on the maintenance of their aircrafts and make no profit (Allé 2004). Ryanair aims to improve the productivity of its labour force by controlling its labour cost, encouraging their employees by rewarding them, compensating flight attendance for sales made on board and paying pilots and cabin crew personnel on the bases of the numbers of hours flown (Ryanair.com 2009).
Most of Ryanair's customers now buy tickets online making it possible for Ryanair to eliminate cost given to travel agents or consultancy firms which in turn reduces cost for Ryanair, also, most of its passengers revenue is generated through direct sales with most revenue coming through sales generated through its Ryanair's website and telephone reservations which in turn prevent air port queues by checking in on line (Allé 2004).
In an attempt for Ryanair to control access fees in airports, they focus on airports that offer competitive cost terms and in other to control cost they use the same set of planes, the Boeing 737 planes, in other to keep the cost of training and aircraft maintenance as low as possible (Johnson et al 2008). Ryanair believed that it is as a result of them having a high growth in passengers that made it possible for them to have contracts that are in their favour in the area of cost which has been of benefit to them in the time of aggressive pricing, and to also have good relationship with airport operators and have access to the airports facilities (Ryanair.com 2008).
Ryanair in 2006 was announced as the most profitable airline in Europe by an Air Transport World Magazine based on its operating and net profit margins (Johnson et al 2008). In 2006 Ryanair experienced increase both in the number of passengers as well as in their profit in which most was from its ancillary revenue (Johnson et al 2008). In November 2006 Ryanair's profit was â‚¬329 million for the half fiscal year of 2007, the number of its passengers grew by 23 percent to 22.1 million passengers, their yields increased by 9 percent as total revenue rose by 33 percent to â‚¬1.256billion, its ancillary revenue grew by 27 percent and unit cost by 7.5 percent(Johnson et al 2008). The bases of Ryanair huge profit can be partially linked to its ancillary revenue, which as increased by 30 percent to â‚¬111 million in 2007 compared to 2006, based on its car-hire commission, checked in baggage charges and its priority boarding (Traveldailynews.com 2008).
Poor employee relationship
The relationship between Ryanair and its employee is believed to be shaky (Emeraldinsight 2006). Ryanair are more concerned with flying their customer from one point to another for cheap price than treating their employees with upmost respect like their rivals Southwest who give their employees due respect (Emeraldinsight 2006). Ryanair's does not give recognition to trade unions among its employees; also, employees were prevented from charging their mobile phones at work in other to reduce electricity bills (Johnson et al 2008).
Ryanair only hire people who prove how useful they are and make their cabin crew, who are employed on temporary contract of three years, pay cost of â‚¬1,400 or â‚¬1,500 with a deposit of â‚¬400 on training which usually takes place in Pisa, London or Frankfurt-Hahn while the remaining is being deducted from their salary (Blakemore 2007). Also in July 2006 it was discovered that Ryanair had bullied their pilots into signing new contract for the payment of â‚¬15,000 for retraining on new aircrafts if they ever have to leave (Johnson et al 2008). We think if an employee is not satisfied, encouraged or been nice too there is no way they are going to be friendly or threat their customers well.
Poor passenger treatment
Ryanair might the number one airline in low fears but their passengers see their staffs as unfriendly, complained of uncomfortable seats, believe they do not take proper care of their luggage's and do not provide their passengers with the proper amenities they are entitled to (Johnson et al 2008). In one of their flights, Ryanair charged a man with Cerebral palsy â‚¬18 to make use of wheelchair after wards Ryanair imposed a 50 cent wheelchair levy on all their passengers' ticket not considering whether they use it or not which makes Ryanair the only Major airline to impose a wheelchair levy charge (Johnson et al 2008).
Ryanair is believed to be one of the biggest airlines that cause its passengers inconveniences (Timesonline.co.uk 2002). In one of its passengers review, a passenger claimed that they have the most uncomfortable seats and the most unfriendly passengers but people will keep flying Ryanair because of its low price (Ryanair.com 2009)
Growth and Expansion of route
Ryanair has experienced growth in the number of its passengers over the years and they have expanded as a result of purchasing new aircrafts in 2008 adding to their fleet of of Boeing 737 aircraft and as a result opening up new routes (Ryanair.com 2009). In January 2009, Ryanair added new aircrafts at Alicante adding as a result adding 4 new routes, Bristol adding 12 new routes and in Edinburgh adding 7 new routes which increased the number of passengers for Ryanair and in turn increase their investments (Ryanair.com 2009). The number of its passengers has grown to almost 1.6million per annum (Ryanair.com2009) and it is believed that "these additional aircraft would allow Ryanair to double in size to 80 million passenger per annum by 2012" (Johnson et al 2008:697). With the passenger growth and expansion of new routes most of its competitors have been avoiding taking the same route as Ryanair which has given them competitive advantage (Johnson et al 2008).
Increase in fuel price
Ryanair is known to offer low fares no matter what the economy of the country is(Johnson et al 2008). Ryanair claim never to add fuel surcharges to their fares when oil prices rose in 2005 and 2006 unlike British and Lufthansa, carriers of long-haul routes who levy fuel surcharges from their customers (Johnson et al 2008). Because of Ryanair's low-cost fare model it will be impossible for them to increase their price or add fuel surcharges if the fuel price, which usually is unpredictable, increases which may have effect on Ryanair's investment (Johnson et al 2008).
RYANAIR'S STRATEGY AND COMPETITIVE ADVANTAGE
Different companies have different strategies that have given them a competitive advantage over their rivals. Strategy according to Johnson et al (2008:3) "is the direction and scope of an organization over the long term which achieves advantage in a changing environment through its configuration of resources and competence with the aim of fulfilling stakeholder's expectations".
Strategy is an important factor in every organization in other to archive their goals and objective. "Competitive strategy is concerned with the basis on which a business unit might achieve competitive advantage in its market" (Johnson et al 2008:224). The strategy clock analyzed how a company can achieve competitive advantage which will be used to analyze Ryanairs competitive strategy. As we have analyzed before, one of the major strategy of Ryanair is to offer the best service in low fares and low frills which attracts lots of passengers, especially those who are price sensitive or cannot afford expensive prices and those who really do not care about the services they get but only on the price, to fly with Ryanair (Johnson et al 2008). They also pursue a low price strategy which they can only gain from by producing a low cost base which has given them a profit margin advantage over their rivals (Allé 2004). They provide online services which makes it easier for their passengers to book tickets online, which saves time, and helps to avoid airport queues by checking in online and also cut cost by introducing online check-in and online clearing of luggage (Johnson et al 2008).
Ryanair has maintained its low-cost fare strategy, which has given them major advantage over their rivals, they are believed to be the best in punctuality, their website is believed to be one of the largest travel website in Europe and the number one most recognized brand on Google (Johnson et al 2008). They provide ancillary revenue where they charge passengers for non flights scheduled services which increases their investment and gives then a profit margin over their rivals (Johnson et al 2008). Ryanair may have been criticized by many but their strategy has made them one of the largest airlines in European (Johnson et al 2008).