The Leadership Through The European Budget Airlines Commerce Essay


Ryanair was the Europe's first leading budget airline and was founded in 1985 by Cathlan and Declan with the financial backing of their father Tony Ryan and they started their airline with just a share capital of $1 along with a staff of 25 employees. Ryanair started passenger airline services between Waterford and London with the single 15 seater .Ryanair model was actually built on south west airlines after the highly successful U.S carrier (Texas based operator).After 15 years, the Ryanair flew through a great deal of turbulence, in which company lost its five chief executive. In the early 1990's Ryanair survived and successfully restyled itself as a role model of south west airline and become a Europe's first budget airline, with low fares and no frills carrier with two classes of seating, more than two types of different aircrafts. After that Ryanair was led by Michael 'o' Leary, who was appointed by Tony Ryan in late 1990's.Later, Ryanair first floated on the Dublin stock exchange where it was admitted to the NASDAQ-100 in 2002. Subsequently Ryanair started its operations in 2006. During this Michael o' Leary implied many strategies to make their profit high while sticking to the low fares. They used many tactics like yield enhancing measures for passenger check in, using secondary airport to reduce the landing cost; they switched to the new aircraft which consumed less fuel, offered online tickets booking, discounts and on flight internet-gaming facilities.

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Analyzing the key factors of Ryanair- the low-fares airline internal environment on company's strategy and competitive advantage

2Internal analysis:

2.1 Strategic capability and competitive advantages:

Michael 'O' Leary effectively made the European airline cheaper, Ryanair was started with the very low share capital but after the few years Ryanair was on top for their resources and capability. In 2006 Ryanair aircraft had 103 routes which increased gradually (Ryanair operating statistics). Ryanair assigned itself as the 'world favourite airline' by taking into consideration its various strategies it presumed that it would be carrying 42 millions passengers in 2007. Ryanair announced that it flew out of 18 European bases with a fleet of 100 new boeing 737-800 aircrafts. Ryanair strictly maintained the low cost airline policy. Ryanair replaced its fleet of previous aircraft, with the new, advanced eco friendly aircraft, which produced 50 percent less emission, 45 [1] percent low noise emissions per seat and 2 percent reduction in fuel consumption. Further more Ryanair launched European largest website in January 2000. In the period of 3 months the website recorded 50,000 online bookings per week 1.(Box, Byus et al. 2007) "Ryanair is the southwest of Europe and they continue to take market share at phenomenal place" says Chrish Lozier when the Ryanair announced there order of 70 new boeing 737-800 aircraft.(Byron 2005)

In 2006 Ryanair's average staffs was 3063 from 25 different nationalities which rose by 18 percent as compare to year 2005 and the average staff cost 53,306 euro (Ryanair operating statistics).Ryanair reduced the airport charges by avoiding congested main airports and selecting the secondary airports for instance. Ryanair uses Torp, which is 100 kilometres away from Oslo. Ryanair flew for various destination and routes continued to be point to point only. Its low -fares policy attracted the customers with guarantee that they do not impose any fuel surcharges on its customers. Ryanair is famous as a 'no frills airline' in which there is no business class only single class aircraft polarization. Ryanair was the Europe's biggest low fair airline and only ryanair was offering lowest fares in the whole European market.(Hägele 2006) Michael O' Leary quotes that any company can sell at the low fares and lose money. The main thing is to sell at the lowest fares and make profits; you can't lower your airfares or invest in new aircraft. (To quote Michael O'Leary).Constantly decreasing the cost of fare was Ryanair's strategy to attract the passengers by offering them no surcharges ever. Ryanair in 2006 increased the market shares and left the competitor behind. Cost cutting method made the Ryanair unique with the other airlines; Ryanair plans to close the check in desk to reduce the baggage handling charge by 50%. Now Ryanair is currently negotiating with stansted owner BAA ltd for lowering the charges which is forced by the operator.(Niththyananthan 2009).Ryanair controls its cost to fly point to point for one way, it makes all booking separately with no baggage transfer, even to its own flights. Quietly but tightly Ryanair's warns the passengers on its official website that if they are taking a Ryanair flight for its base and then for taking another Ryanair flight onwards they should allow 3 hrs between the arrivals and departure and the passenger will have to collect their luggage and check in for the another flight. Like South west airline, Ryanair offer free for all no seating assignment.(Velocci Jr and Bond 2001)

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2.2 Critical key success factors of Ryanair's:

To continue holding position in the market, as well as to maintain the low fares strategy. Ryanair started online booking by issuing the discount and cutting down the distribution cost. In 2006 Ryanair claimed that the Ryanair official website is the largest travel website in Europe and the 5th most recognized brand on Google and offering huge power for ryanair to convert this web traffic into advertising revenues. (Furlong S. 2006) In addition to this Ryanair got free publicity through the media. Michael O' Leary pulled airline in an entertainment service in which they provide the internet facility and video games. New Boeing aircraft was the most successful key factor in the progress of Ryanair airline. It reduces the fuel consumption and noise emissions per seat as well as the eco friendly aircraft. Mainly all the companies fully concentrated by trying the less prices fares. Even though Ryanair reduces the on board meals and drinks and its major concern is market target like advance reservation, cargo safety and fast departures. Chief successive factor of Ryanair was its punctuality and less loss of baggage which attracted the customers to choose the Ryanair low fare airline. As well as Michael O' Leary who was credited for transforming European transport. In spite of these success factor if we talk about critical factor without which the Ryanair fails was only one Michael O' Leary who make the dream possible to fly cheap, without Michael's strategies and tactics the budgetary business module can't succeed.

3 Diagnosing strategic capability:

3.1 Value chain

Figure1 (Source)

Analyzing the aspects of case study Ryanair as a low cost fuel aircraft and low cost fuel supply, it also embraces the airport authority contracts and Ryanair's has a warm relationship with there suppliers. Ryanair has an outstanding record in punctuality for take off which make a prestigious in the airline industry. Ryanair luggage service provided to the customer was also best as compare to other airline and they also provide many entertainment amenities during on flight which attracted passengers and helped to switch to the Ryanair airline. Some famous incident made the Ryanair's unique value or frame in the market through the free media publicity. Through the survey passengers rated no. 1 airline on the prospects of there low fare, punctuality and less loss of luggage and also no. 1 for European routes (149) and bases (11).(O'Cuilleanain, della Falle et al.). Ryanair scored highest across all categories in its earning to revenue ratio. In creating wealth Ryanair was second to united parcel service based on net return productive assets compare to all airline companies." It remains our medium-term view that there will only be one or possibly two large low-fare airlines" we are determined that the biggest and lowest-cost of these carriers will be Ryanair," say company of official(Sparaco 2004)

3.2 Bench marking

In ryanair, there is no need for comparing with the rivals and start changing the strategies. Ryanair act as a market leader in the sector of European low fare airlines. All ryanair aircraft are advanced with the high capacity, low noise emission, eco friendly and less fuel consumption. In addition to this, ryanair has a maximum numbers of skilled employees, low fare charges, less flight cancellations, punctuality, least baggage lost and online booking discount.( 2010) All these qualities make the ryanair unique with the other and give an advantage to compete with there rivals.

3.3 BCG matrix

Figure 2 Source:

The analysis of BCG matrix in the case study of ryanair. Ryanair comes in third column of BCG matrix Cash Cows which means inflow is high (market share) and the outflow is less(limited investment). Ryanair generates huge amounts from the market by there low fare and domestic flight strategies .They only focus to invest in the domestic region rather than invest in other sectors, which means earning is high but no future growing scope.

3.4 Strength and weakness analysis:

Figure 3(source)

Ryanair Strength:

They have an unique capability of optimizing their production cost efficiency and co sequencing maintains the leading position among the European low cost airline and reduced the landing fees by avoiding the congested airports, choosing secondary regional destination airport and avoid the competition with big network carriers.(Mayer 2008). A low aircraft acquisition cost has made the Ryanair low cost airline. Ryanair low aircraft acquisition cost is the main factor of its low price policy. Ryanair purchased 21 second hand aircraft (737-200s) whose cost ranged between $5 and $9 millions with a comparison of $30 millions for new 737-800s. After that Michael O' Leary conducted the Ryanair's operation in 2006, in which ryanair replaced its old aircraft with the new more eco friendly which reduce the 45 percent noise emission and also reduce the 2 percent fuel consumption. Ryanair's reduces there distribution cost which means no travel agent, no commission. About 48 percent of Ryanair booking was done directly through the official sites and offering 5 percent discount for the online customers which cut down the travel agent commission around 7.5percent. They reduced its crew members or flight attendants while they used 130 seater aircraft, whereas in big carriers there were only five employees.(Sophister) Ryanair's was famous for there entertainment service by issuing rent game and internet services on flight. Ryanair has the outstanding record in punctuality and loss of luggage which gives a good image of the company reliability. Ryanair has developed the low fares product with the high employees productivity.(Barrett 1999).

Ryanair Weakness:

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There are many weaknesses due to which Ryanair may be perceived as an arrogant airline. Ryanair's was always surrounded by the issues which media highlighted in the news and the rivals took the benefits of it. Major weakness of Ryanair is poor management and lack of attention towards the customers. Bad industrial relations with there staff mainly their pilots. For Example Company banned there employees for charging there mobile phones because of electricity bills and the pilots gave extra money for their training on new aircrafts. Rowdy behaviour towards the government policy and statements, Michael O' Leary reacted after the minister speech that he was foolish and ill informed like other politician, minister Pearson talks a lot but does little.(Hall, b. 2007)and(, k. 2007). In addition Ryanair was against to pay any refund which was arising due to the cancellation or delays. Using of secondary airport or advertised destination sometime made big inconvenience for customers and the main weakness that has to be stressed is, its fully focus on regional airport not congested airports, which may result in a less ability to be a focus for certain customer group (Mayer 2008).

5 Leadership of Ryanair :

. Now Ryanair is the largest low cost airline in Europe and Great Britain and has modelled its operations (since 1991) on the very successful Southwest Airlines Low Cost Leadership model. Michael O'Leary, is an accountant by training but a combative entrepreneur by inclination.(Box, Byus et al. 2007) .Michael is genius in his ability to motivate and energise his employees. They operate a very lean operation for a company of its size and he was credited by various international awards such as European Businessman of the year Award by Fortune magazine in 2004 and business stars from one of the 25 European businessmen.(Groom2004). In 2007, he was Ryanair's largest shareholder with 4.53% of the share capital. Although Michael o Leary consistently praised his management team, Ryanair was inextricably with its dynamic chief executive. O Leary outspokenness attitude has made him a sign of public debate and he had many issues with trade unions and rivals with his "bare knuckle" but has achieved higher profitability status in the competitive airline market (box, byus et al. 2007).

6 Culture of Ryanair:

By the research on the case study , it is noticed that ryanair has a flat organizational structure which focuses on a lean business budgetary model. The board directors and managers are from diverse areas and bring in rich knowledge. Ryanair strategies are clear towards there no frills and low cost policies and the high productivity of its workers is a testimonial to its control and rewards systems. However different nationality workers work in the ryanair.(ryanair 2010)

7 Conclusions:

In conclusion, the uses of internal methods and models like value chain, resources and capability, action plan give us understandable view of industry. Furthermore the theory effectively offered more chances for growth and improvement of the airline. Continuous study and analysis of the internal factors can help the organization, for struggling competition and economic growth. Ryanair implies the cost reduction method to make there business budgetary model which destructed the European airline industry. The low fare airline which exploits the cost budgetary strategy to make a competitive place as well as build up its core competencies and capacity to boost performance those help Ryanair to get its major success. Thus, the competitive advantage and core competencies of the Ryanair make its competitive position in the cheap airline industry.