ryanair innovation case study

How Ryanair's Relentless Cost-Cutting Redefined the Airline Industry

Ryanair, Europe's leading budget airline, has seen an extraordinary trajectory of growth, outperforming its competitors by a wide margin in the airline sector. Its relentless approach to low-cost and operational excellence, combined with strategic route expansion, has undoubtedly played large parts in assuming a dominant role within the European airline industry. Let's delve into the factors that enabled Ryanair to become one of the few companies to generate substantial returns for its shareholders in an industry that's usually not lucrative.

Key Insights

Inspired by Southwest Airlines: Ryanair's transformation into one of the world's leading low-cost carriers was significantly influenced by CEO Michael O'Leary's insights gained from Southwest Airlines.

Relentless cost-cutting: Ryanair's exceptional growth and competitive edge are rooted in its status as the lower-cost provider, achieved through strategic initiatives such as negotiating lower airport landing fees and adopting a shrewd fleet acquisition strategy.

Spillover effects: The cost reduction strategies not only generate significant savings but also attract publicity, enabling essentially free marketing and word-of-mouth promotion.

Financial performance: Ryanair's relentless focus on low-cost operations has enabled it to expand rapidly, doubling its size and significantly increasing its market share since 2016.

Founding Story

Founded in 1984 in Ireland by the Ryan family, with Tony Ryan at the helm, Ryanair began its operations with a single small turbo-prop plane. The airline's initial aim was to disrupt the duopoly held by British Airways and Aer Lingus (both are now wholly owned by International Consolidated Airlines Group ) on London-Ireland flights by offering a lower-cost service.

Ryanair's early days were marked by significant challenges. The airline struggled to find its footing in a market dominated by established carriers. Its initial strategy focused on offering simple, low-price flights, but without a clear business model to sustain its operations, the early days were marked by financial difficulties.

The turning point came in the early 1990s when current CEO Michael O'Leary, who was initially hired as CFO in 1988 by the founder Tony Ryan, took a trip to the United States. There, he met with Herb Kelleher, co-founder of Southwest Airlines , and was inspired by Southwest's successful low-cost model. O'Leary returned to Ireland convinced that Ryanair could revolutionize air travel in Europe by adopting a similar approach.

The Southwest Airlines Inspiration

The meeting between Herb Kelleher and Michael O'Leary is a pivotal moment in airline history. The meeting was intended for O'Leary to learn from Kelleher's experiences and insights into the low-cost airline business model.

Southwest Airlines' model was straightforward yet revolutionary: use a single model of aircraft to reduce maintenance and training costs, focus on quick turnaround times to maximize aircraft utilization, offer point-to-point flights to avoid costly hub operations, and eliminate unnecessary extras that contributed to higher ticket prices.

Inspired by this model, O'Leary transformed Ryanair from a small, struggling airline into one of the world's largest. The "stealing of the idea," as it is sometimes dramatically phrased, was more about adapting a proven business model to a different market. Isn't it fascinating how a single event, leading to one crucial insight, can entirely rewrite the future for companies and even industries? Let's explore this low-cost model in depth.

Ryanair: Low-Cost Squared

Ryanair began its operations in 1988, flying between London Gatwick Airport and Waterford, Ireland's fifth-largest city, with a single turbo-prop plane. Initially focusing on the London-Ireland flight market, which was historically dominated by British Airways and Aer Lingus, the company spent the next 30 years expanding into markets across Europe, route by route. As of 2023, Ryanair operates over 3,600 daily flights across 94 hubs, carrying almost 200 million passengers annually – a doubling of numbers since 2016.

The bedrock of Ryanair's spectacular growth is its status as the lower-cost provider – by a wide margin – in an industry notorious for inefficiency and uneconomical operations. Ryanair exemplifies the benefits of a substantial cost advantage: aside from fuel, Ryanair’s unit costs are around half those of its closest competitor, easyJet , and significantly lower than those of other rivals such as Norwegian and Air Berlin. This cost leadership compels competitors to price their fares at double Ryanair's rates, which explains why Ryanair continues to take market share across Europe.

Ryanair's low-cost strategy is founded on extreme operating efficiency, with its greatest cost advantage being airport landing fees. Unlike the common industry practice, Ryanair traditionally operates from smaller airports where it can exert influence over airport owners rather than adopting a position of subservience. As a result, even when primary airports raise fees, Ryanair often secures concessions.

Its second biggest cost advantage comes from shrewd fleet acquisition strategies. While other airlines, influenced by pilot-focused cultures, prioritize diverse fleets of advanced aircraft, Ryanair has built a uniform fleet opportunistically. For instance, in 2003 amid an industry slump, it made a massive purchase of high-quality Boeing 737-800s at reduced prices. This bulk purchasing strategy not only yields volume discounts from manufacturers but also facilitates staffing an in-house maintenance crew, which proves to be vastly more economical than external alternatives.

These two cost advantages are mutually reinforcing, creating a deep and increasingly strong competitive edge. The acquisition of inexpensive planes enables Ryanair to operate profitably at low fares to smaller airports, allowing Ryanair to dominate traffic at these airports, which in turn leads to significantly lower landing fees. A recent order to double its fleet over the next eight years will not only ensure the continuity of these dynamics but may also accelerate them, as no other airline is expanding as rapidly as Ryanair.

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In essence, Ryanair is renowned for rethinking traditional aspects of the airline industry and relentlessly pursuing cost reductions. Its strategies are often controversial, yet rivals invariably follow suit to capitalize on similar savings. Examples from its extensive list include charging for food and beverages, imposing fees for luggage and airport check-in, abstain from frequent-flier programs, and avoiding the use of air bridges. Such bold initiatives not only allow Ryanair to sell seats at lower prices but also generate substantial publicity – much of it critical – which serves as an economical means of capturing the attention of potential customers. As CEO Michael O'Leary explained:

"As long as you run around generating noise, it drives people on to our website. And we don't spend hundreds of millions of dollars on marketing to do it. Charging for toilets continues to be the number one story that resurfaces in the press and it's the gift that keeps on giving. We've never done it, but it keeps coming up on social networks every three or four months, the media picks up on it and then someone writes a story on it." – CEO, Michael O'leary

Epitomizing the strategy of combining low prices with additional benefits, Ryanair continually leverages its competitive advantages. Several times, it has capitalized on the profitability and efficiency stemming from its cost-conscious operations to secure aircraft acquisitions at prices significantly lower than those available to rivals, burdened by higher structural costs. Moreover, Ryanair has started to make inroads into primary airports and the business travel sector, gradually supplanting Europe's retracting legacy carriers. This cultural commitment to low-cost operations has resulted in margins and returns on invested capital that are unparalleled in the airline industry, with operating income more than doubling between 2015 and 2023.

Ryanair's revenue growth from 1997 visualized:

In conclusion, Ryanair's remarkable journey from a modest operation with a single aircraft to becoming a dominant force in the airline industry is a testament to the power of innovation, strategic foresight, and a relentless commitment to cost efficiency. By challenging traditional business models and continuously seeking ways to reduce expenses, Ryanair has not only transformed itself but also the landscape of the European airline industry, ultimately benefiting both its shareholders and customers significantly.

Its aggressive expansion and low-cost strategies have made it a case study in business and aviation circles alike. As the airline looks to the future, with plans to further expand its fleet and reach, Ryanair stands as a shining example of how disruptive business models can lead to unprecedented success, even in industries facing naturally tough economic conditions.

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Ryanair: Flying Too Close to the Sun?

By: Ciaran Heavey, Dorota Piaskowska

Unlike any other European airline, Ryanair DAC had long experienced impressive growth and performance thanks to its well-designed and ruthlessly executed low-cost carrier business model. However, the…

• Length: 23 page(s)
• Publication Date: Jun 12, 2019
• Discipline: Strategy
• Product #: W19258-PDF-ENG

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Unlike any other European airline, Ryanair DAC had long experienced impressive growth and performance thanks to its well-designed and ruthlessly executed low-cost carrier business model. However, the limits of growth did begin to appear, at which time the company adjusted its business model with an increased emphasis on customer orientation. As a result, cracks in the business model appeared and labour issues came to the fore. While the media and industry analysts were focused on these challenges, Ryanair was undergoing a quiet digital revolution, shifting the airline's business model toward a technology-based travel platform. With the problems in the business model and a shifting business strategy, could Ryanair achieve the ambitious growth targets it set for 2024?

Ciaran Heavey is affiliated with University College Dublin. Dorota Piaskowska is affiliated with University College Dublin.

Learning Objectives

This case is suitable for an advanced undergraduate- or graduate-level strategy course (e.g., business strategy, economic foundations of strategy, or global strategy). The case could also be used in courses on business model design, business model innovation, and technology strategy. The learning objectives for the case include the following: Identify the main characteristics of the European airline industry and its macro environment. Diagnose the sources of Ryanair's superior performance and performance threats. Critically analyze and trace the evolution of Ryanair's business model. Recognize the stages of industry evolution and the strategic innovations required of companies in mature industries. Examine the transformation of Ryanair from a pipeline to a platform business model.

Jun 12, 2019

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Simple Flying

How ryanair is becoming a leader in new technology.

While Ryanair is known for its low-cost model , one thing the airline doesn’t cut corners on is safety. In fact, Ryanair is leading the way with new technology which will make flying safer than ever.

The carrier is investing in heavily in tracking technologies, which will allow the carrier to know where each of its aircraft is at any given time. This would mean a repeat of the MH370 incident would be virtually impossible. Additionally, pilots and training staff will be able to replay flights immediately after it has landed.

Real-time tracking

The first new technology to be implemented into the Ryanair fleet sees it being integrated with satellite tracking, according to AirlineRatings . The system will be primarily based on Flight Aware’s software, which is used by many in the aviation industry to track aircraft. This would tie into ADS-B data.

You may be thinking, “we can already track aircraft from the ground, that’s how Flight Aware works”. Well, yes, however, there are black spots where aircraft can’t be tracked. A great example is the Atlantic Ocean. Satellite tracking removes these blackspots as the entire globe has satellite coverage. Additionally, there are very few places where satellites do not have a direct line of sight to aircraft.

Real-time playback

Additionally, the carrier announced a new app which will allow flight crew to instantly replay any portion of a flight as an animation. According to Air Transport World , pilots will be able to select portions of their previous flight and replay them as an animation when completing a post-flight briefing.

Speaking of the new technology, Andy O’Shea, Head of Crew Training at Ryanair, told: "We are proud to initiate a change designed to revolutionize not only the debriefing and training culture within the company, but also for European aviation, thus making the sky safer"

The drawbacks

While the technology will undoubtedly make flying safer within Ryanair, there is also the potential that it could be used to "spy" on pilots. Key people within Ryanair will have access to the data and could use it to see how pilots are performing. Indeed, Ryanair's chief pilot said of the playback technology,

"Over the next 12 months we will monitor pilot performance based on an agreed set of KPI’s to ensure that our pilots not only deliver to the highest standards of safety and efficiency in the industry but set new standards of excellence for the years ahead".

Hopefully, the new software will be used for good and not bad. As they say, with great power comes great responsibility. Indeed, the intention is that it can be used as a retroactive learning tool.

What do you think of Ryanair's new technology? Will it be used for good or evil? Let us know in the comments!

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Lerne mit deinen Freunden und bleibe auf dem richtigen Kurs mit deinen persönlichen Lernstatistiken

Nie wieder prokastinieren mit unseren Lernerinnerungen.

Low fares, made simple. "(Ryanair.com)

Every company has a specific strategy it follows to thrive in the market. The strategy involves positioning the brand in a certain place within the marketplace. Strategic positioning refers to how a company sets itself apart from the competition and delivers a product to the customers. In this case study, we will examine the strategic position of Ryanair, a leading European airline.

To learn more read our explanation about strategic positioning .

Introduction to Ryanair

Ryanair Holdings plc is an Irish airline group and a parent company of Ryanair, Ryanair UK, Buzz, Lauda and Malta Air. It was founded in 1984 by Christopher Ryan, Liam Lonergan, owner of Irish travel agent Club Travel, and Irish businessman Tony Ryan , founder of aircraft leasing company Guinness Peat Aviation.

Ryanair started its operations in 1985 and began flying between Waterford and Gatwick Airport to compete with British Airways and Aer Lingus.

In 1986 the firm added the Dublin - Luton route.

In 1990 what it relaunched as 'Europe's first low fares airline' by implementing frequent flights, moving to a single aircraft fleet type and removing free drinks and expensive meals on board. Currently, Ryanair is Europe's largest airline group. It connects over 240 destinations in over 40 countries. Offering the lowest fares in Europe,

Ryanair brand positioning

Ryanair positions its brand as a low fare airline. The company does not try to place itself among airlines such as British Airways, Lufthansa or Air France which offer a relatively high-quality service at a higher price. Instead, Ryanair aims to satisfy people who are looking for the cheapest service possible, no matter the quality. Because Ryanair promotes its brand as:

The Low Fares Airline" (ryanair.com)

Many customers have built trust in the company and believe that its prices are the lowest. In doing so, they might not bother checking offers from other providers as they know that Ryanair will still be cheaper. This way Ryanair has created many loyal customers. However, such a brand position puts off more demanding customers who do not mind spending more money to get better service. Such customers are less likely to opt for Ryanair and instead, they go for other, full-service airlines.

Ryanair's business strategy

Every company has a specific strategy that places it in a certain position in the market.

According to Porter's generic strategy matrix, all markets operate in the same way. They can be segmented in two ways based on four factors: narrow or broad scope and cost or differentiation source of competitive advantage.

Based on these factors, companies can choose a suitable strategy to follow. As a result, are three main types of strategic positioning strategies: cost leadership , differentiation and focus strategy.

To revise this concept, take a look at our explanation on strategic positioning.

Ryanair. Fly cheaper. "(Ryanair.com)

Ryanair Holdings plc uses the focus strategy , particularly the cost focus strategy.

Companies using a cost focus strategy aim to provide the cheapest product or service within the industry.

As a result, Ryanair offers the cheapest flights in Europe. It addresses the market for people who look for a cheap, basic and efficient service. Ryanair's competitors include EasyJet, Aer Lingus Group, Vueling Airlines and Wizz Air.

Since Ryanair is cost-focused, it does not attempt to compete in all market segments. This means that it does not offer flights for customers with higher requirements, looking for high quality and luxury service. Instead, the airline targets those who have lower requirements and do not mind the lower quality of service for a cheaper price.

There is no business or first class on Ryanair, as the company does not attempt to satisfy customers who look for the best quality, luxury flights.

What is more, contrary to many other airlines, there are no free drinks on board. Food that customers can enjoy during the flight is very simple, such as heated sandwiches and ready meals. Ryanair flies point to point to mid-sized cities using secondary airports. Therefore, demanding customers are very unlikely to use Ryanair's service. Instead, they will go for airlines such as British Airways, Lufthansa or Air France, which are higher cost airlines that Ryanair does not compete with.

How does Ryanair make it so cheap?

Ryanair offers the cheapest fares across Europe. The company sells flights for as little as £ 7, sometimes even cheaper. Flights are not cheap to operate. Each flight is associated with expenses such as airport, aircraft and staff. Additionally, in the United Kingdom, airlines are charged a fee called Air Passenger Duty which is a tax applied to each passenger on each flight. For Ryanair, this comes in at £ 13 per passenger. In such a case, how does Ryanair make any profit?

The company charges additional costs for all additional services at a high price.

The price for an extra legroom seat costs at least £ 15. What is more, priority boarding is at least £6. Both of these services together cost at least £ 21 for the passenger, meanwhile, the airline does not incur additional costs.

This means a pure profit for Ryanair.

If you wanted to order some drinks or water to consume on board, you would face high prices.

The price for preordering Ryanair's small hot breakfast box is £ 10. The breakfast includes bacon, white pudding, sausage, hash browns, tomato, bread, orange juice, and a coffee which altogether do not cost £ 10.

Secondly, there are many additional fees.

If you do not check-in online, the airline will charge you £ 45 at the airport to do that for you. If you want to change your flight, you will have to pay a flight change fee of £ 35 per person. Also, if you want to book a flight which is in a day or two, the price will be several times higher than if you booked it in advance.

Thirdly, Ryanair flies to and from cheap secondary airports.

It flies to London Stansted which is almost 32 miles from the London city center. The airline also does not pay to use the airport's jet bridges that airports charge extra for.

Lastly, there is only one aircraft type at Ryanair which is B737. In doing so, the company needs to keep parts in stock for one type of aircraft only. Furthermore , the crew only need to be trained on one aircraft.

To conclude, Ryanair positions itself as a low-cost and non-full-service brand. This makes the brand stand out from other full-service airlines to customers who are looking for the cheapest, most basic flight options. W hile offering low fares, Ryanair makes a profit on all additional services such as seat allocation, priority boarding, and food and drinks on board. It also charges extra for check-in at the airport and any flight changes. Moreover, Ryanair sees all the possible options to cut costs. It flies from secondary airports, does not pay to use jetbridges and uses one type of aircraft only. This way the airline implements the cost focus strategy.

Ryanair Strategic Position - Key takeaways

• Ryanair Holdings plc is Europe's largest airline group connecting over 240 destinations in over 40 countries.
• It uses the focus strategy, particularly the cost focus strategy, meaning that it aims to provide the cheapest product or service within the industry.
• Ryanair competitors include EasyJet, Aer Lingus Group, Vueling Airlines and Wizz Air.
• The airline makes profits by charging customers for everything at a high price. It also charges many additional fees, flies to cheap secondary airports and operates one type of aircraft only.

https://corporate.ryanair.com/

https://www.managementtoday.co.uk/brief-history-ryanair/food-for-thought/article/1449458

https://www.ryanair.com/gb/en

https://www.comparably.com/companies/ryanair/competitors

http://www.rapid-business-intelligence-success.com/ryanair-business-strategy.html

https://simpleflying.com/why-is-ryanair-so-cheap/

Frequently Asked Questions about Ryanair Strategic Position

--> what competitive strategy does ryanair use.

Ryanair is using a cost focus strategy which aims to provide the cheapest airline service within the industry.

--> What was Ryanair's positioning strategy?

Ryanair's positioning strategy is to promote itself as a low-fares airline. This puts the brand in favour of price-conscious customers. However, those who do not mind spending more for better service will be less likely to opt for Ryanair. 

--> Is Ryanair's strategy sustainable?

The low-cost model of Ryanair reduces the amount of carbon dioxide released during flights, resulting in sustainability. 

--> What is Ryanair's business model?

Ryanair's business model is a low-cost and non-full-service model. The airline offers the cheapest price with minimal services for customers looking for basic flight options. 

--> What are the major contributors to Ryanair's profitability?

Despite the low fares, Ryanair makes a profit by charging additional fares for extra services such as extra legroom or priority boarding. Those who wish to order food or beverages onboard also face relatively high prices. 

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What are the parent companies of Ryanair?

Ryanair, Ryanair UK, Buzz, Lauda and Malta Air

low fare airline

What is strategic positioning?

Strategic positioning refers to how a company sets itself apart from the competition and delivers a product to the customers.

What is the aim of companies using the cost focus strategy?

to provide the cheapest product or service within the industry

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Award winner: Ryanair: Flying too Close to the Sun?

Author perspective

Instructor viewpoint, who – the protagonist.

Michael O’Leary , CEO of Ryanair .

Ryanair is Europe’s largest, cheapest and most profitable airline. It was founded in 1985 in Dublin and initially provided flights between Ireland and the UK.

Between 2013 and 2018 Ryanair successfully planned and delivered a strategic turnaround, cementing its position as Europe’s number one airline. Its “Always Getting Better” programme introduced a host of changes to improve customer experience from online booking, to smoother travel and related services. This helped Ryanair digitally transform towards a travel platform.

Initially, passengers and profits grew as the airline expanded into new routes and services but, by 2017, it faced new challenges. Mishandling of pilot holiday rostering, frequent inabilities to conclude labour agreements, and the UK's withdrawal from the EU was starting to affect customer perception and its profits.

Ryanair’s headquarters are in Dublin, Ireland but it operates bases in over 40 countries across Europe and North Africa.

This case explores Ryanair’s growth and challenges in the period 2013 to 2018 following the launch of its “Always Getting Better” programme.

Early in 2019, Ryanair announced a decrease in profits, putting its reputation as Europe’s most profitable airline in jeopardy. Challenges faced over the last two years had damaged customer satisfaction and their brand image, leaving O’Leary and the management team wondering, will they ever achieve their target of flying 200 million passengers by 2024?

AUTHOR PERSPECTIVE 

This is the first award for authors Ciaran and Dorota, and the fourth for UCD Michael Smurfit Graduate Business School.

The authors said: “We are very pleased that so many of our fellow case instructors found the case study suitable for their needs. This recognition certainly motivates us to develop more cases in the future.”

Developing the case

They continued: “We developed this case to address a specific learning need among our students, and in light of a gap in the market for a case study showcasing the evolution of a business model and the digital transformation of a firm in a mature industry. The fact that there are few other such cases is probably one of the reasons for its popularity. We also designed the case to be modular so that instructors could use it in ways that best suit their needs. This adds to the versatility of the case.”

Rich story to tell

The authors added: “We thoroughly enjoyed writing this case. There was much publicly available information to work with and a rich story to tell.

“Perhaps the biggest challenge was condensing this richness to a workable total length and choosing which insights and data not to include.”

Student engagement

The authors explained: “Students find this case study relatable as many of them have first-hand experience flying with low-cost airlines.

“We benefited tremendously from the feedback of our undergraduate, graduate, and executive students when developing this case and would like to thank them for being such enthusiastic learners.”

They concluded: “Identify a true need in the market, pilot the case on various audiences before writing its final version, and write a teaching note as comprehensive as you would like to get yourself with a case.”

INSTRUCTOR VIEWPOINT 

Discover how this case works in the classroom.

"This case study is contemporary in timing, providing many challenges for students in terms of the company achieving its business goals, whilst recognising the fast-changing nature of the business environment.

"In addition, there is an intriguing challenge for students with the proposed change from the original strategic intent of the low-cost business model to a strategic intent to deepen the relationship with customers to support growth. Students will be challenged to consider the structural, social and reputational implications of this proposed change.

"The case study offers a wide range of challenges for students to consider, and will help them understand such complex issues should they meet them in their own managerial careers."

"When using a case in my Global Corporate Strategy course at Maastricht School of Management, there are a few key elements that are important: is it current; does it illustrate at least one key tool (5-forces); can it be used as the jumping-off point for other strategy discussion; is it about a brand that most students will recognise; and is it interesting for the students. It can be difficult to find a case that hits all these points, as the Ryanair case does. When I find a case like this, I will keep it in my curriculum as long as possible.

"Ryanair: Flying Too Close to the Sun? will continue to be an important element of my course for a few years."

The authors

In conversation with Ciaran and Dorota

Due to the Coronavirus pandemic we were sadly unable to visit Ciaran and Dorota to present their awards in person.

However, they joined our Director, Richard McCracken, from Ireland to discuss their winning case.

Watch the full conversation here:

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Home » Management Case Studies » Case Study: Ryanair Business Strategy Analysis

Case Study: Ryanair Business Strategy Analysis

Ryanair is an Irish low cost airline headquartered in Dublin founded in 1985. It operates 181 aircrafts over 729 routes across Europe and North Africa from 31 bases. Ryanair has seen large success over the recent years due to its low-cost business model and has become the world’s largest airline in terms of international passenger numbers. Taking Porter’s generic business strategies into consideration, Ryanair operates a cost-leadership strategy to drive itself into achieving its mission of being the leading European low-cost carrier (LCC). Throughout this essay the business strategy of Ryanair will be analysed and the sustainability of their model evaluated.

Ryanair’s objective is to firmly establish itself as Europe’s leading low-fares scheduled passenger airline through continued improvements and expanded offerings of its low-fares service. Considering their objectives and mission, Ryanair’s decision on their cost-leadership strategy was based on a few main factors which are discussed below.

A major influence was the deregulation of the airline industry in 1978 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 evaluation of Porters five forces influenced Ryanair’s choice of a cost-leadership strategy, as the threat presented by new entrants and the threat of substitutes could hinder their success. 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.

As Europe’s largest low fare airline, Ryanair’s competitive advantage remains in their ability to continue as cost leaders; providing the cheapest fares to its customers. 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. This leads us to consider some key functional strategies which directly help Ryanair towards their ultimate goal to be Europe’s leading low fares airline.

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. Tickets are almost solely sold on their website ‘www.ryanair.com’ which very importantly keeps sales costs to a minimum since very few phone operators are employed and computers are able to cheaply handle all functions of sales. 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. Ryan Air relies on low cost promotions and in recent times has concentrated on their ‘One million seats at one pound’ which is usually advertised through their internet site, national press and bulletin boards. 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.

Ryanair’s operations strategy determines how the airline will deploy its resources and the policies it will operate by. To keep costs low they operate a ‘no frills’ service onboard aircraft. 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.com all of whom are advertised readily on the Ryanair website. Since the website has high website traffic its partners are able to reach out to Ryanair’s huge client base and are prepared to pay good commissions to the firm for this privilege. Ryanair also generate income from advertising on board the aircraft. Ancillary revenue is generated from many of the services that traditional airlines wouldn’t charge for, such as large baggage into the cargo hold, allocated seating, snacks and drinks.

Ryanair’s strategy when purchasing aircraft is to buy new, uniform 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.

Furthermore Ryanair aggressively hedge and fix as many of their costs as possible, such as oil and aircraft prices so they are not subject to future price fluctuations which could adversely affect profitability.

The human resource policy is again directly related to reducing costs. Employees are expected to pay for their own uniform and equipment. Training given is the required minimum and staff utilization is among the highest in the airline industry. Many staff are employed on performance contracts and those who do not meet their expectations are readily replaced. Staff are also expected to take on a number of roles, cabin staff will also clean the aircraft prior to the next service, check in staff assist in boarding the aircraft etc.

Ryanair has successfully experienced years of growth both in the number of its aircrafts and passengers since its launch.   However, with the global financial system recently suffering its greatest crisis in more than 70 years, existing business models of many aviation firms are coming under great strain. As this economic downturn bankrupts LCCs like XL and Zoom with more expected to follow, the question is whether Ryanair’s cost-leadership strategy is sustainable or not as it continues to offer lower fares in the face of high costs. Although Ryanair has posted losses along with other aviation firms for the latest quarter, it is expected to emerge from this downturn with fewer competitors because its â €š ¬1.8 billon balance sheet is one of the strongest in the industry. Additionally, as the credit crunch takes its toll, traditional airlines are not in a position to cut fares and the threat of new LCCs is virtually eliminated due to the lack of financing. Although Ryanair faces competition from substitutes like Eurostar, it is at an advantage because of Eurostar’s limited destinations.

Ryanair is sticking to its mantra, when the going gets tough, sell more seats for almost nothing. By offering low fares, Ryanair expects passengers to trade down to the low cost airlines rather than stop flying completely. This trend appears accurate so far based on passenger numbers as recession forces millions of passengers to focus on price. Additionally, the latest statistics from The European Low Fares Airline Association members show a 15.7% year-on-year growth in the number of passengers for 2008, indicating that the LCC model is robust, even in times of crisis. Consequently, there is no doubt that Ryanair looks poised for substantial profits and passenger growth in the coming years. However, in order to compete with other LCCs and maintain its continued market share growth in the future, Ryanair needs to improve its poor customer relations.

The sustainability of Ryanair’s cost leadership strategy also depends largely on the price of oil and how effective the firm is in cutting costs in order to continue offering low fares. According to the firm’s latest financial report, Ryanair will enjoy significantly lower oil costs thanks to their recent hedging programme, when most of their competitors are already hedged at much higher prices. These lower prices will drive Ryanair’s traffic growth, maintain high load factors and capture market share from higher cost fuel surcharging competitors. In order to cut costs, Ryanair close all its airport check-in desks and have passengers check-in online instead. Other cost saving methods not yet implemented include charging customers for using toilets on airplanes. These cost cutting ideas are not very popular among consumers and it means that Ryanair needs to improve its already tarnished brand image in the future which it had attained through negative press reporting and misleading advertisements .

The current strategy at Ryanair is expected to work so well that despite the recession Ryanair’s CEO has underlined the firm’s commitment to expansion. The firm is expected to grow at 20 percent a year because of a 180 aircraft’s on order from Boeing. These expansion plans for the future will require the company to increase its landing slots at airports and recruit more employees. Currently Ryanair has limited access to landing slots in major airports and the secondary airports are long distances away from city centers which could make it less attractive in the future.  However, a remarkable cut in flights by other European airline carriers due to recession is creating enormous opportunities for Ryanair, as many major airports compete to reduce charges in order to attract Ryanair’s growth. Availability of skilled personnel shouldn’t be a problem for Ryanair due to recent high unemployment levels. However, Ryanair needs to improve its current low level of empathy for employees if it is to retain them in the future.

Even though Ryanair’s cost leadership strategy is robust and it looks set to serve them well in the future, there are some key areas within the business that can be improved on to enhance the firm’s profitability and brand image.

Ryanair has always been criticized for many aspects of its poor customer relations. According to The Economist, Ryanair’s “cavalier treatment of passengers” had given Ryanair “a deserved reputation for nastiness” and that the airline “has become a byword for appalling customer service  … and jeering rudeness towards anyone or anything that gets in its way”. If Ryanair is to maintain its large customer base, it needs to ensure that it acknowledges its customers’ concerns and maintains a service focused attitude at all costs. Ryanair needs to invest in servicing customers better by providing a non-premium contact number, improving its non user friendly website, and simplifying the terms and conditions of the flight service. Ryanair should also create a frequent flyer program to establish a fixed customer base and encourage customer loyalty.

Ryanair is notorious for its high staff turnover which negatively affects its reputation as an employer. Over utilization of employees, poor remuneration package , and minimal training are a few other critical items to be considered by Ryanair if it is to retain employees in the future. Ryanair needs to understand that although it is currently possible to replace outgoing employees, but with time Ryanair’s overall image will be tarnished. Resultantly, attracting new employees could become impossible and this will hinder their expansion plans. Ryanair should incorporate a flexible benefits package solely designed to improve employee morale such as flexible working hours and extra holidays. To improve its image amongst employees, training at all employee levels must include exposure to similar techniques and methods that help promote the development of a uniform company identity.

Following huge success in Europe, Ryanair should consider introducing low cost transatlantic flights to support its expansion plans and attain a larger customer base. With a high demand for certain routes like London-New York and room for negotiation in airplane prices and airport slots mainly due to the current financial climate, it is an ideal time to further reap the rewards of the cost leadership strategy that has served Ryanair so well over the years.

Ryanair’s model looks set to survive the current industrial downturn through its lower costs and substantial cash balances. No airline is better placed in Europe than Ryanair to trade through this downturn. It will therefore continue to grow, by lowering fares, taking market share from competitors, and expanding in markets where competitors either withdraw capacity or go bust. By taking the recommended improvements into consideration, it looks like Ryanair’s cost leadership strategy seems ideal for the future.

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Six Sigma Case Study: Ryanair

May 18th, 2017

In today’s hypercompetitive traveling industry, operational efficiency and excellence are the two major elements for success. A clear, innovative and efficient strategy can really take off in the current traveling climate. Yet, the ideal operational strategy is not always easy to recognize immediately. Instead, aviation providers such as Ryanair must become adaptive and innovative to form their own efficient operations strategy. This organic operations strategy becomes the cornerstone of decision making and direct action for companies in a highly competitive market.

Introduction to Ryanair

Ryanair is an Irish low-cost airline, first flying in 1985. Over the years, it has become one of Europe’s most popular aviation providers. While Ryanair was originally intended to fly between London and Southeast Ireland, the company’s route network continues to grow rapidly. Net profits, according to the BBC , for the year 2014-15 rose to 66%. Yet, to keep up with its established rivals, it’s integral that it establishes its own service through innovation.

In a hyper-competitive traveling industry, customers can purchase tickets for as little as €1. But how does a company like Ryanair adapt its own values to execute efficiency and operational excellence? In part, it’s by operating an adaptive method of delivery and diagnosing problem areas. Ryanair has been able to increase their profits and reduce losses through the Six Sigma quality management tools. Through strategic management, Ryanair defines and measures operational outcomes and improves a number of their basic practices and systems.

The Six Sigma Methods

Since 1986, a variety of companies and industries have begun using Six Sigma methodologies. These methods help to increase customer satisfaction, stabilize quality assurance, and reduce the occurrence of production defects.

So what exactly is Six Sigma? Former CEO of General Electric, Jack Welch says: “Six Sigma is a quality program that, when all is said and done, improves your customer’s experience, lowers your costs, and builds better leaders.”

This strategic management process is integral to the growth of any company. It follows the DMAIC five-phase project methodology. First by ‘Defining the system’, then ‘Measuring key aspects of current processes’. Next, by ‘Analyzing data to investigate and verify cause and effect’, and ‘Improving current processes based on data analysis’. Finally, by ‘Controlling the future state of processes to ensure that any deviations from the target are corrected before defects are produced’.

To fully implement Six Sigma methodologies, you require  Six Sigma GMA training. This rigorous training provides advocates with the knowledge and expertise to maximize a project’s overall success. Likewise, it observes, recognizes, and improves on current processes.

Six Sigma Black Belts train to exhibit a relentless level of cost consciousness. Through a rigorous and systematic approach led by a cross-functional team, Six Sigma was able to use statistical analysis to measure Ryanair’s operational performance. With the help of Six Sigma, Ryanair was able to eliminate a number of significant cost drivers associated with other airlines and retain low-fares and high-service.

With the aid of Six Sigma yellow belts, Six Sigma green belts, and Six Sigma black belts, Ryanair was able to develop and implement a plan to cut costs and increase customer satisfaction.

Implementing Six Sigma into Ryanair

Having established itself as Europe’s leading low-fare passenger airline, Ryanair aims to utilize these low-fares to generate increased passenger traffic. Fare-conscious leisure and business flyers are targeted and encouraged to fly on one leg of a point-to-point basis. Ryanair maximizes its frequency of short haul flights to stimulate the demand of those travelers who otherwise might have used other means of transportation. Additionally, Ryanair reduces their own costs by flying to smaller, secondary and regional airports that are free from congestion and cost less to use. Through reducing their own costs, Ryanair can provide their customers with a stable, predictable and low-cost service.

Low-fares are the crux of Ryanair’s business model, so how are they able to make a profit and become one of Europe’s leading airlines? By offering passengers rock-bottom prices for their seats, the company is able to charge for ancillary services such as in-flight meals and beverages, baggage costs and early check-ins. The airline is able to increase their revenue by stimulating passenger growth and offering their famous no-frills service.

More Than Just Low Fares

While Ryanair, at the time of writing, flies to over 190 destinations, these are mostly short-haul flights that operate regularly. With this in mind, Ryanair reduces their need to offer an in-flight “all-frills” service. In turn, this increases personnel productivity by allowing staff to focus solely on their duties. By delivering the best possible customer service experience within the low-budget airline industry, Ryanair staff execute their duties and provide a consistent service that customers recognize.

Through deploying Six Sigma advocates and leaders, Ryanair gave themselves a direct advantage in the aviation industry by establishing a set of performance objectives. These are quality, speed, dependability, flexibility, and cost.

Accurate data is integral to the implementation of any Six Sigma methodology, and thus eliminate unnecessary costs. For example, Ryanair scrapped the use of window shades in their aircraft in order to remove unwarranted maintenance costs that came hand-in-hand with damaged or ill-functioning window shades. This also reduced fuel costs by removing the unnecessary weight of the window shades.

Methodology for Success

Ryanair’s adaptive approach to keeping costs down for itself and its dedicated passengers is a testament to its commitment towards innovation. Though the company has a long history of commitment to the fare-conscious budget traveler, the use of the Six Sigma methodology has enabled it to keep up with its competitors and set a precedent for the low-fare travel in the aviation industry.

With their operational strategy streamlined, Ryanair improves their business practices and continues their longstanding commitment to low-budget travel.

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What comes around goes around: Ryanair flight cancellations, corporate governance and (mis)management

• Friday, October 20, 2017
• Expert commentary , Research , Work and Equalities

Tony Dundon, Professor of Human Resource Management & Employment Relations at Alliance Manchester Business School and Work & Equalities Institute .

The fiasco of Ryanair cancelling thousands of flights because of pilot holiday rostering has brought to the fore many bigger issues about corporate governance and sustainability. Only several weeks after the UK government’s reforms to try to improve transparency and regain public trust in the corporate world, Ryanair seem to revel in its own crisis for media spin, displaying what may appear as a disregard for the value of people and service delivery. It is a case study par excellence in strategic (mis)management.

The flight cancellation debacle wiped some €1.4 billion off Ryanair’s shares within days, albeit partially restored since. It is estimated it will cost the company between €25-30 million. It is, however, doubtful it will have any long-term impact or improved institutional learning for an organisation that places bad reputation as part of its core mission.

Ironically, Ryanair’s woes are delivered under a corporate vision entitled ‘Always Getting Better’. While there has been an investment of around $US38 billion in new aircraft fleet since 2013, the gains are clearly skewed to shareholders (and, in particular it’s CEO, Michael O’Leary) and certainly not for its staff or corporate ethics. It can be suggested there are advantages to customers in terms of additional seat capacity and booking processes, but being stranded in another part of the world with no support and little advance notice will remain a painful experience which lives long in the consumers’ memory.

Consumer Relations, Employment Sustainability and Branding Ryanair has, for a long time, had a poor reputation in relation to how it treats staff. The flight cancellation issue has, however, made the degrading treatment of not only pilots, but all staff, much more public. It brings into focus the role of the consumer in shaping the employment governance and human resource management space to a much greater extent.

One classic own goal was when Michael O’Leary accidently (although publically) referred to Ryanair pilots as ‘glorified taxi drivers’. No wonder many left for employment elsewhere at rival Norwegian Air. If there are lessons to be learnt for other corporate leaders, then people are more than an abstract asset. No organisation should ever display such disregard for human feelings and emotions, particularly in service-orientated roles were the skill and engagement of staff becomes important, no matter how bargain basement the price it gets.

Going back to Wealth of Nations, the seminal 1776 tome penned by philosopher Adam Smith, the market is a known ‘social institution’ and not something that is governed by some innate natural law of the universe. Treating people badly is a lack of basic understanding about positional power. The poor treatment of people can inevitably come back to bite. In this case, pilots and cabin crew have the empathy of the public, as well as the affected customers. Their response is an equally importance case study par excellence: this time the capacity of collective labour mobilisation as a countervailing source of power to the unilateral dictate of corporate leaders.

Examples of poor treatment are now wide-spread and have long been known at Ryanair. Cabin crew sign on and work for 10 or 12 hours a day, yet only get paid for the time in the air, pilots have to pay for their own uniforms and other staff have been threatened with discipline if they don’t ‘sell’ enough products in-flight to boost revenue. The precariousness of such working is made all too clear to the customer with the current mismanagement of what is essentially a basic personnel arrangement: that of holiday rostering. Even more evident is that many staff are not direct Ryanair employees, but hired via a complex web of recruitment agencies; all of which is designed to avoid protective worker and citizen rights in favour of corporate greed. Michael O’Leary and Ryanair has been vocally non-union (if not actively anti-union) for some time, not because of a rational business model or logic, but because he epitomises the corporate ideologue who is power dependent. Had Ryanair bargained and consulted with staff through an independent forum such as a trade union, the chances are such a debacle that has led to the loss of millions of euros for the company, not to mention untold customer heartache and upset, would have been easily avoided. The lack of genuine and effective employee voice is itself evidence of poor management. And, as with all ideologues there is a blind spot: failing to see the countervailing collective counter-mobilising force among pilots themselves, cabin crew and now disaffected customers serves to intensify antagonism. Corporate (in)accountability and weak government platitudes The government’s narrative – to make business more transparent with ideas for worker voice on the board, pay gap analysis and other incentives to regulate business greed – seem all the more shallow following Ryanair.

The airline has been criticised by the European Court of Justice (ECJ) for seeking to deal with employee complaints and grievances through the Irish courts, regardless of where employees are based. This directly undermines worker protections further and makes grievance handling all the more complicated for staff. It may transpire yet that current investors will find the whole people management approach simply unpalatable.

Of more pressing policy debate is that the Ryanair issue exposes the limitations in the British government’s white paper to improve corporate conduct. The plans for better employee-customer voice will have had little or no change to Ryanair’s decisions and would have still left customers stranded and employee concerns unheard. The best that could be hoped for is Michael O’Leary makes some comment in the Directors Report and this is made available at some stage on their website. Small if any pressure for change or improvement in that regard then.

A further limitation is that the government’s policy approach and white paper is primarily based on voluntarist principles. With a desire to avoid legislative protections and a future post-Brexit corporate world removed from the remit of the ECJ, there is little prospect that corporate governance will advance the interests of workers or individual customers in the future.

Without more regulatory policy interventions curbing the unfettered power excesses of corporate leaders, Ryanair and many others like them will, in all probability, advance their vested interests over those of others.

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Achieving these goals will require a different lens through which to judge investments.

One which looks beyond headline carbon intensity metrics or targets and analyses companies’ willingness – and ability – to meet the needs of the energy transition. This approach can identify opportunities that would be overlooked by an approach focused solely on a linear reduction in headline portfolio emissions.

One example of how we seek to analyse and then engage with a company on its Net Zero plans is Ryanair. The aviation industry is often discounted by Net Zero investors as too ‘dirty’ to invest in.

However, our analysis of and engagement with Ryanair led us to a different view. We believe that the aviation industry currently has a strong transition incentive but limited green solutions – represented on Figure 3 by high customer demand but low company capabilities. Within the sector, Ryanair is in our view amongst the best placed to address the required transition (Figure 4) – a measure sometimes ignored when focusing solely on a company’s existing emissions or targets.

Our engagement will focus on ensuring Ryanair embraces its leadership role in the aviation industry’s transition and does more to incentivise green innovation in the sector’s ecosystem – that is, shift itself up the y axis of Figure 4 in order to help propel the aviation industry along the x axis of Figure 3.

This could help to transform Ryanair from supposed climate villain to transition hero. It could also help us meet our goals of furthering the energy transition and managing climate risk, whilst profiting should the market reward the company's success.