ryan air full case study

RYANAIR CASE STUDY ML00001-086/Published 03/2012

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MarketLine Case Study

RyanairThe world’s leading low-cost airlineReference Code: ML00001-086

Publication Date: March 2012

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OVERVIEWCatalystRyanair Holdings (Ryanair) operates a low-fares scheduled passenger airline serving short-haul, point-to-point routes between Ireland, the UK, Continental Europe, and Morocco. The company offers more than 1,300 scheduled short-haul flights per day serving 155 locations throughout Europe and Morocco, with an operating fleet of 250 aircraft flying approximately 1,100 routes. The company was established by the Ryan family in 1985 operating daily flights on a 15-seater Bandeirante aircraft from Waterford in the southeast of Ireland to London Gatwick. Since then, Ryanair has pursued an aggressive expansion policy, adding new routes and opening new centers of operation across Europe to become the world’s most popular airline for international flights, having flown 72.1 million passengers in FY2011. This is a highly commendable performance in a very competitive industry. Ryanair must compete with other low-cost airlines such as easyJet and Monarch, as well as with legacy carriers like British Airways and Lufthansa. This case study looks at how Ryanair has risen to become the world’s most popular airline.

Summary Ryanair has redefined the airline industry with its low-cost operating model. In order to keep costs to a minimum

the airline uses small, regional airports and operates as a point-to-point carrier, thus avoiding the costs associated with a hub-and-spoke service.

The company’s adoption of a low-cost operating model allows it to pursue a price-led offering. Ryanair advertises itself as "The low fares airline" and has a price promise under which it will pay double the difference if a customer finds the same flight cheaper elsewhere. The tradeoff for the low fares is a so-called "no-frills" service.

Although the company receives a great deal of negative publicity, this is not entirely warranted and Ryanair in fact tops several rankings that measure customer satisfaction. These include rankings for punctuality, environmental friendliness, lost bags, and the number of complaints received.

The airline’s management team, led by chief executive officer Michael O’Leary, has shown a clear vision for the company’s direction. Furthermore, it has demonstrated an ability to take decisions of strategic significance such as those regarding cost management, the opening of new routes, and the diversification of revenue streams.



TABLE OF CONTENTSOverview ............................................................................................................................................................................... 2

Catalyst.............................................................................................................................................................................. 2

Summary ........................................................................................................................................................................... 2

Analysis ................................................................................................................................................................................. 7

Ryanair has successfully grown revenues, net income, and passenger numbers in recent years ...................................7

Ryanair is now the world’s most popular airline for international flights.........................................................................7

Ryanair has enjoyed very strong revenue growth in recent years .................................................................................7

Net income has also grown, rebounding well after Ryanair’s first ever loss in 2009 .....................................................8

Increased passenger numbers have allowed Ryanair to keep prices low .....................................................................8

Ryanair’s low-cost operating model and price-led offering are the central pillars of the company’s success ...................9

Direct selling is one method that the company uses to save on costs...........................................................................9

The company’s policy of using regional airports is also cost-effective...........................................................................9

Ryanair is a point-to-point carrier, which again reduces the company’s cost base .......................................................9

Ryanair is a so-called "no-frills airline" ...........................................................................................................................9

Ryanair markets itself as a low-cost airline and successfully emphasizes this..............................................................9

Ryanair’s claim of being the cheapest is corroborated by facts ...................................................................................10

The airline has great confidence in its "lowest fares" offer...........................................................................................11

Rising costs represent a threat for the future ...............................................................................................................11

Ryanair uses quality customer service as a differentiator ...............................................................................................12

Ryanair is among the world’s most punctual airlines ...................................................................................................12

The airline loses fewer bags than its competitors ........................................................................................................12

Ryanair promptly handles the low number of complaints it receives ...........................................................................12

The use of small airports and Ryanair’s point-to-point model aid customer service....................................................12

The company is also environmentally conscious.........................................................................................................12

The airline does, however, acknowledge that service can be further improved ..........................................................13

Overall, the company offers a high level of customer service......................................................................................13

Ryanair has a first class management team that continues to drive the business forward through effective cost management and strategic decision-making ...................................................................................................................15

The company’s management team excels in the key area of cost control ..................................................................15

Ryanair has strategically grounded aircraft to save money and protect profitability ....................................................15

The airline has launched new routes for which there is demand .................................................................................15

The company has diversified revenue streams to offset its low fares..........................................................................17

Ryanair has successfully married the lowest fares in the industry with first class customer service to build the world’s most popular airline for international flights .....................................................................................................................18



Sources ........................................................................................................................................................................... 19

Further reading ................................................................................................................................................................ 19

Ask the analyst ................................................................................................................................................................ 19

About MarketLine ............................................................................................................................................................ 19

Disclaimer ........................................................................................................................................................................ 20



LIST OF TABLESTable 1: Global jet fuel prices, 2012............................................................................................................................11

Table 2: Ryanair ancillary revenues, 2007-2011.........................................................................................................17



TABLE OF FIGURESFigure 1: Ryanair revenue progression, 2007-2011..............................................................................................................7

Figure 2: Ryanair net income progression, 2007-2011 .........................................................................................................8

Figure 3: Example of Ryanair newspaper advert ................................................................................................................10

Figure 4: Global jet fuel prices, May 2007-February 2012 ..................................................................................................11

Figure 5: Airline emissions efficiency, 2010 ........................................................................................................................13

Figure 6: Ryanair route map ...............................................................................................................................................16



ANALYSISRyanair has successfully grown revenues, net income, and passenger numbers in recent yearsRyanair enjoyed a highly successful financial year for 2011, seeing strong growth in passenger numbers, revenues, and net income. The growth in Ryanair’s passenger numbers and revenues significantly outstripped the growth of the airline industry as whole.

Ryanair is now the world’s most popular airline for international flightsDuring the year ending March 2011 (Ryanair’s financial year end), the company flew 72.1 million passengers to destinations across Europe and Morocco. According to data published by World Air Transport Statistics, this makes Ryanair the world’s most popular airline for international flights with over 25 million more passengers than second placed Lufthansa. Ryanair has seized on this as an excellent marketing opportunity, branding itself "The world’s favorite airline."

When domestic flights are added in, Ryanair still ranks fifth, which is an impressive performance given the large domestic markets available to carriers in the US and China, where the top four are based.

Ryanair has enjoyed very strong revenue growth in recent yearsThe company has enjoyed excellent revenue growth in recent years, outstripping that of the industry as a whole. For financial year 2011 (FY2011), Ryanair’s revenues grew by 21.5% to €3,629.5 million ($5,049.4 million), while according to MarketLine’s airline industry profile, the global industry grew in value by 2.4% in 2011 and by 8.4% in 2010, which accounts for most of Ryanair’s FY2011. The company’s ability to outperform the industry average demonstrates its pull with travellers and the popularity of its cheap flights.

Figure 1: Ryanair revenue progression, 2007-2011

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SOURCE: Ryanair annual reports M A R K E T L I N E



Net income has also grown, rebounding well after Ryanair’s first ever loss in 2009As well as achieving higher revenues in recent years, Ryanair has grown its net income. As a result of soaring fuel prices and decreased demand during 2009, the company recorded its first ever loss, but it has rebounded well to post strong growth in the last two financial years. For example, Ryanair recorded net income of $521.1 million for FY2011, an increase of 22.7% on FY2010. This shows that despite offering cheap flights to passengers, the airline’s excellence in cost control ensures that it remains profitable.

Figure 2: Ryanair net income progression, 2007-2011

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Increased passenger numbers have allowed Ryanair to keep prices lowPassenger volumes are another area in which Ryanair has grown noticeably and again outperformed the industry as a whole. In 2010, industry volumes grew by 5.7%, while Ryanair’s passenger numbers increased by 13.5%. The airline’s volumes were noticeably higher again in 2011, showing growth of 8.4%, as compared to industry growth of 5.3%.

Growth in all of these key areas presents a picture of a highly popular and financially successful airline, so how has Ryanair achieved its position as the world’s leading low-cost airline?



Ryanair’s low-cost operating model and price-led offering are the central pillars of the company’s successRyanair has pioneered the ultra low-cost business model and has redefined the airline industry in the process. Rival players such as easyJet and Monarch have adopted similar models, but Ryanair has proved second to none in the arena of low-cost operating. The company’s tight control over its cost base means that it is able to offer the cheapest flights in the marketplace while remaining profitable. At a time when cost is a leading driver of customer choice, this provides the company with a competitive advantage.

Direct selling is one method that the company uses to save on costsRyanair sells flights directly to consumers through its own online portal and by telephone. However, Ryanair itself claims that around 99% of all reservations made are made online. Consequently, the company does not have to make use of the services of travel agents. Some industry estimates place the commission paid to such agents as high as 15%, therefore Ryanair is making a significant saving and does not have to pass this cost on to the customer, allowing the airline to offer the best fares possible.

The company’s policy of using regional airports is also cost-effectiveRyanair has a policy of using smaller, regional airports rather than larger, international ones. For example, the airline uses Frankfurt-Hahn instead of Frankfurt International Airport and Rome Ciampino rather than Leonardo da Vinci-Fiumicino Airport. The benefits of using such airports are twofold. Firstly, Ryanair saves significant amounts of money as securing take-off and landing slots at these airports is much cheaper than at large, international airports. Again, this reduces the costs that Ryanair has to pass on to customers so that it is able to offer the lowest fares possible. Secondly, as these airports are typically less busy than the likes of Frankfurt and Heathrow, turnaround times are quicker and slots are easier to secure. This improves punctuality, which creates better customer service, another key selling point in the airline industry.

Ryanair is a point-to-point carrier, which again reduces the company’s cost baseUnlike legacy carriers such as Air France, British Airways, and Lufthansa, Ryanair does not provide a hub-and-spoke service, instead operating purely as a point-to-point carrier. The fact that it flies directly to the end destination means that Ryanair is able to avoid the costs associated with providing through service for connecting passengers, including baggage transfer and transit passenger assistance costs. Furthermore, this eliminates several potential pitfalls of hub-and-spoke services such as having to reimburse passengers for connections missed as a result of delays. The point-to-point model can also be a competitive advantage as passengers often see it as more convenient than a journey that involves connecting flights.

Ryanair is a so-called "no-frills airline"Ryanair offers flights at the cheapest fares available in the marketplace and as a result the "frills" offered by other carriers as standard are optional extras with Ryanair. The airline operates a buy-onboard system whereby passengers have to purchase any food or drink they consume during the flight and there is also no free literature. Sick bags are only distributed upon request, there is no in-flight entertainment, the seats do not have pockets, and staff have to pay for uniforms. In addition, passengers are unable to book designated seats, making the company’s reservation system simpler and cheaper to operate. Passengers also have to check in online at a cost of €6/£6 ($8.34/$13.38) for flights booked online, with this fee doubled for flights booked by telephone, thus saving Ryanair the costs inherent in having a physical check-in desk situated at an airport. The company also does not operate air bridges and passengers instead walk to the plane or are bussed there. This again saves costs as the buses are operated by the airports.

Ryanair markets itself as a low-cost airline and successfully emphasizes thisRyanair sells itself as a low-cost airline and in fact prides itself on being cheapest. The company does an excellent job of pushing one consistent message: cheap flights. Advertising is another area in which Ryanair does not invest significant funds.



It does not employ the services of advertising agencies, instead choosing to carry out all marketing activities in house. Its advertising campaigns typically consist of simple adverts in newspapers and online. These adverts emphasize the fact that Ryanair offers cheap flights to a variety of destinations in Europe. The price is often central to the advert image and is usually presented in large, bold font.

Figure 3: Example of Ryanair newspaper advert

SOURCE: Daily Mail M A R K E T L I N E

The company also uses controversy to promote its business. In recent years, stories that have gained the airline publicity have included plans to charge passengers to use onboard toilets, the introduction of standing places instead of seats, and the idea of screening in-flight pornography. Furthermore, some of the company’s advertising campaigns have also been criticized for demeaning competitors and using images that are deemed to be sexist (see Figure 3). However, all of this ensures that Ryanair remains in the news and at the forefront of consumers’ minds. The consistent "cheap flights" message has won the airline a reputation for being the cheapest around, which means that potential passengers often look at booking with Ryanair as a first port of call.

Ryanair’s claim of being the cheapest is corroborated by factsRyanair prides itself on offering the cheapest flights available and these claims are backed up by facts. According to an article published in UK newspaper The Guardian in November 2011, Ryanair’s average fare was €39 ($54.25) for FY2011. By way of comparison, fellow low-cost airline easyJet’s average fare was €71 ($98.77) and British Airways’ was significantly more expensive at €248 ($345).

It is important to highlight the fact that these are average fares, as Ryanair has a very particular pricing structure. The first 70% of seats are sold at one of the two lowest fares available, the next 25% are sold at a higher price, and the final 5% pay the highest fare.



The airline has great confidence in its "lowest fares" offerSuch is Ryanair’s confidence in its low prices that it runs a price promise. Under the terms of the promise, passengers who are able to find the same flight cheaper with another airline are able to claim back double the difference, subject to certain terms and conditions. In order to qualify for this scheme, the fare quoted must include all mandatory taxes, fees, and charges but exclude administration fees, baggage fees, priority boarding fees, or any other optional fees. This price promise started in September 2010 and runs through to October 31, 2012.

Rising costs represent a threat for the futureMinimizing costs as much as possible is central to Ryanair’s success as this allows it to pursue an aggressive low-price policy. The company has to contend with rising costs, particularly with regards to fuel. This has a particularly significant impact as fuel accounts for 39% of all operating costs. IATA Jet Fuel Monitor data show that the price per barrel of jet fuel stood at $139.50 on March 9, 2012, up by 5.4% on a year earlier. Furthermore, the IATA estimates that the average price per barrel for 2012 will be $132.70, causing the amount spent on fuel in the industry as a whole to increase by $37 billion when compared to 2011. The price of jet fuel is experiencing an upward trend and so represents a threat to Ryanair’s low-cost model on an ongoing basis.

Table 1: Global jet fuel prices, 2012

Fuel price average for 2012 Impact on industry 2012 fuel bill

$132.70 per barrel Increase by $37 billion

SOURCE: IATA M A R K E T L I N E

Figure 4: Global jet fuel prices, May 2007-February 2012

SOURCE: IATA M A R K E T L I N E

Ryanair has been forced to pass on some of these increases to its customers, with The Guardian reporting that the airline’s fares increased by 13% in the six months to November 2011. This took the average fare to €50 ($69.56) for that period. This increase was, however, lower than the rise in fuel costs over those six months, and so Ryanair succeeded in minimizing the impact on the customer. It therefore remains, on most of its routes, the cheapest option, and so has more room for maneuver than its competitors when it comes to price increases. This should allow the company to continue to



pursue the aggressive "cheapest fares" policy that has served it so well.

Ryanair uses quality customer service as a differentiatorRyanair often appears in newspaper stories quoting isolated incidents of poor customer service. Examples include "Disabled woman sues Ryanair after husband is forced to give her fireman’s lift to get her on plane" and "Man seeks payout in wheelchair case" (both Mail Online). As a result, the company has garnered something of a reputation for low levels of customer service. This is, however, not entirely deserved and there are in fact areas of customer service in which Ryanair excels.

Ryanair is among the world’s most punctual airlinesAccording to the airline’s own statistics, Ryanair was the most punctual airline in the world in 2010, with 85% of all flights landing on time. This reputation for punctuality is reinforced by data published by the independent body FlightStats, which collects data on departure and arrival times. For 2011, Ryanair was a finalist in the arrival performance among major European airlines category of the FlightStats awards, ultimately losing out to Swedish carrier SAS. The company has continued this strong punctuality performance in 2012. According to FlightStats data, 85% of Ryanair flights landed on time between January 1 and February 29, 2012, while only 4% were categorized as very late or excessively late. Arriving at a destination on time is a key driver of customer satisfaction and so strong levels of on-time arrivals are likely to win customer goodwill.

The airline loses fewer bags than its competitorsIndependent statistics published by SITA show that Ryanair lost fewer bags than its competitors in 2010, with just 0.3 lost bags per 1,000 passengers. By way of comparison, the same statistics show British Airways losing around 20 bags per 1,000 passengers.

Ryanair promptly handles the low number of complaints it receivesRyanair claims that it receives fewer complaints than any of its competitors. While this is not verified by an independent body, statistics published by the company show that Ryanair has continued to build on an already high level of customer service. According to these data, there were only 0.87 complaints per 1,000 passengers in 2011, down from 1.07 the previous year. Furthermore, 99% of these complaints were answered within seven days.

The use of small airports and Ryanair’s point-to-point model aid customer serviceRyanair predominantly uses regional airports, which are typically less busy than the likes of Frankfurt and Heathrow. Consequently, turnaround times are quicker and landing and takeoff slots are easier to secure. This improves punctuality, something which contributes to better customer service. Moreover, the fact that Ryanair operates a point-to-point service is not only cost-effective but also eliminates several potential pitfalls of hub-and-spoke services such as having to reimburse passengers for connections missed as a result of delays. The point-to-point model can also be a competitive advantage in terms of customer service as passengers often see a direct flight as more convenient than a journey that involves connecting flights.

The company is also environmentally consciousIn an era of increased environmental conscience, airlines are coming under growing pressure to demonstrate their green credentials. Corporate and social responsibility has become a huge concern to airlines as it can significantly impact reputation, both negatively and positively. Consequently, Ryanair has invested significant funds in its fleet and now operates one of the most modern fleets in the industry. This has paid dividends with the company garnering a reputation for efficiency. Moreover, this is reinforced by research carried out by Brighter Planet, which shows that of the 20 largest airlines by passenger volume, Ryanair is the most efficient in terms of CO2 emissions per passenger mile.



Figure 5: Airline emissions efficiency, 2010

SOURCE: Brighter Planet M A R K E T L I N E

The airline does, however, acknowledge that service can be further improvedRyanair receives a great deal of negative publicity and while not all of it is warranted, it cannot be claimed that the airline gets everything right.

The company has come under fire for its treatment of disabled customers in the past, although it should be noted that these are isolated incidents. Passenger Bob Ross won a court case after the airline charged him £18 ($28.87) for the use of a wheelchair at Stansted Airport, and in April 2011 wheelchair user Jo Heath won compensation after she was left on the runway and had to be carried onto the plane by her husband.

The company has also been criticized for what some deem to be stealth charges. The most notable example is the charge levied for booking by credit and debit card. In the UK, for example, this fee stands at £6 ($9.62) per passenger per one-way flight. This would obviously double for a return flight. Ryanair disputes that these fees are "card charges," instead labeling them as administration fees. They have, however, brought the company much unwanted attention and attracted the ire of customers. The same can also be said about the company’s premium rate customer service phone line.

Overall, the company offers a high level of customer serviceRyanair’s outperformance of airlines such as British Airways in key areas affecting levels of customer satisfaction contradicts the view that higher prices lead to a higher standard of customer service and that low-cost airlines "cut



corners."

Ryanair has managed to marry the lowest fares in the marketplace with a high level of customer service and this has played a vital role in the company’s success story.



Ryanair has a first class management team that continues to drive the business forward through effective cost management and strategic decision-makingRyanair operates in a highly competitive industry and in order to stave off the threats posed by rival airlines, the company needs a first class management team capable of taking strategic decisions that can sometimes prove to be difficult. In chief executive officer Michael O’Leary and his team, Ryanair has a management team with a proven track record of excellence.

The company’s management team excels in the key area of cost controlAs a low-cost airline, Ryanair must maintain a firm control over costs so that it is able to undercut the competition and offer the lowest fares in the marketplace. The airline’s management team has shown an unrivalled ability to do this and has pioneered the low-cost operating model in the aviation industry.

The company’s use of smaller, regional airports saves on airport fees and the fact that Ryanair only operates point-to-point flights means that it saves on costs associated with a hub-and-spoke service, such as baggage transfer. Furthermore, it operates as a so-called "no-frills" airline and does not purport to be anything else. This means that the service it provides is exactly what customers expect, and at the same time the airline saves money by not providing complimentary extras such as meals, literature, and sick bags.

Certain costs are, however, unavoidable and this is certainly the case with fuel. According to the company’s 2011 annual report, fuel costs accounted for 39% of all operating costs in FY2011, and as such they need to be kept under control as much as possible. The Ryanair management team has acted shrewdly in this regard by employing the necessary financial instruments to keep costs as low and consistent as possible. For example, the company’s 2011 annual report states that it is hedged to 90% on fuel costs.

Ryanair has strategically grounded aircraft to save money and protect profitabilityAs well as operating a highly successful low-cost operating model, Ryanair’s management team has demonstrated that it is willing to make strategic decisions that benefit the company financially. The most evident example of this is the deliberate grounding of aircraft during times of low demand and yields. In recent years, in response to an operating environment characterized by high fuel prices, lower winter yields, and higher airport charges, the airline has adopted a policy of grounding a certain portion of its fleet between November and March.

In the winter of 2010/11, the airline grounded approximately 40 aircraft, and it announced plans to double this number to 80 for the winter of 2011/12. This is done to protect profitability as the low yields offered at this time mean that many flights are not cost-effective. The decision to ground flights is a bold one but one that has paid dividends, as shown by the company’s ongoing strong financial performance.

The airline has launched new routes for which there is demandRyanair’s development has been characterized by rapid expansion, with the airline continually adding new routes and opening new bases across Europe.

When the company started operations in 1985, it operated one route: Waterford to London Gatwick. By 2011, Ryanair was operating flights that served 155 locations throughout Europe and Morocco, with 250 aircraft flying 1,100 routes. The company’s main UK bases are at Stansted Airport and Glasgow’s Prestwick Airport, while it also has a large base in Dublin, Ireland. The company’s first continental base was opened at Brussels' Charleroi Airport in 1999 and further bases were soon added at Frankfurt Hahn, Rome Ciampino, and Barcelona Girona.

In 2005, five new bases were launched at Liverpool John Lennon Airport, Shannon in the west of Ireland, Pisa, Nottingham East Midlands, and Cork, and new routes to destinations in Lithuania, Poland, Portugal, and Slovakia were added. In 2006, the company opened new bases in Madrid and Marseille. In the same year, Ryanair extended its operations to more destinations in Poland, Slovakia, and Hungary. In 2007, the company opened its Bristol base by operating flights for the first time from Bristol to Budapest, Derry, Knock, Milan, Porto, Riga, and Wroclaw.



In the same year, Ryanair launched eight new routes from its Shannon base to Birmingham, Fuerteventura, Kaunas (Lithuania), Leeds, London Luton, Riga, Tenerife, and its first domestic service from Shannon to Dublin. Moreover, it also announced five new routes from Brussels Charleroi to Bergerac, Limoges, Perpignan, Porto, and Zaragoza, as well as new routes from seven UK airports, namely Birmingham, Durham Tees Valley, Edinburgh, Liverpool, London Stansted, Manchester, and Newquay, as part of its biggest ever European expansion.

Further, in 2008 Ryanair launched 12 new UK routes as part of a package of 40 new European routes and a new base was revealed at Reus Airport in Spain. In 2009, Ryanair launched three new Italian bases at Alghero, Bologna, and Cagliari airports, offering a total of 67 domestic and international routes. The company launched six new routes to the Greek holiday destinations of Kos, Rhodes, and Volos in February 2010. In the following month, Ryanair opened its 37th base at Oslo Rygge with three aircraft and 27 routes. In September 2010, Ryanair opened its newest base at Barcelona El Prat airport, and it also opened its third route from Rhodes to Rome in December 2010. During the same month Ryanair commenced its first Estonian flights from Tallinn, with seven routes to Dublin, Dusseldorf, Edinburgh, London, Milan, Oslo, and Stockholm.

This continued expansion via the opening of new bases and routes has made Ryanair one of Europe’s largest airlines and the world’s most popular airline for international flights by passenger numbers, thus vindicating the management’s strategy of rapid expansion.

Figure 6: Ryanair route map

SOURCE: Airline Route Maps M A R K E T L I N E



The company has diversified revenue streams to offset its low faresWhile it is true that Ryanair’s low-cost model allows it win custom by offering the lowest fares in the marketplace, it also means that other revenue streams are necessary. The company’s management team has therefore focused on, and succeeded in, growing ancillary revenues.

The ancillary revenues generated by Ryanair include income derived from onboard sales, excess baggage charges, administration fees, and the sale of travel insurance. In addition to the income it produces itself, Ryanair also benefits financially from strategic partnerships it has signed with other companies.

Ryanair has a contract with Booking.com, under which passengers are able to make hotel reservations with this partner firm via the Ryanair.com portal. Booking.com handles all aspects of such services and pays a commission fee to the airline for this. A similar contract is in place with Hertz car rental.

The company has succeeded in growing this vital revenue stream in recent years, and in FY2011 ancillary revenues accounted for 22.1% of all Ryanair revenues.

Table 2: Ryanair ancillary revenues, 2007-2011

2007 2008 2009 2010 2011

Ancillary revenues ($million) 503.8 679.0 831.9 923.2 1,115.2


The company grew ancillary revenues by 21% in FY2011, helping to partially offset a 37% increase in fuel costs. This was much higher than the growth in passenger numbers for the same period, which the company put down to an improved product mix and higher Internet-related revenues. Total ancillary revenue per passenger was up 12% to €11.12 (€15.47).



CONCLUSIONSRyanair has successfully married the lowest fares in the industry with first class customer service to build the world’s most popular airline for international flightsRyanair has redefined the airline industry with its low-cost operating model, and the adoption of this model allows it to pursue a price-led offering. Ryanair advertises itself as "The low fares airline" and has a price promise under which it will pay double the difference if a customer finds the same flight cheaper elsewhere. This has won the airline a great deal of custom from travellers making short journeys and for whom price is the key consideration. This price-led strategy is not, however, the sole reason for the airline’s success.

Ryanair has also demonstrated an ability to provide first class customer service and in fact tops several rankings that measure customer satisfaction. These include rankings for punctuality, environmental friendliness, lost bags, and the number of complaints received. By achieving such high standards of service, the company is disproving the commonly held opinion that higher prices automatically mean higher levels of service.

As tough external macroeconomic conditions prevail, price will remain the main driver of airline choice for many. Ryanair’s situation as the airline with the lowest fares places it in an excellent position to grow its business. This opportunity is augmented by an increasing awareness of the company’s high level of service as passengers begin to realize that Ryanair can compete with legacy carriers such as British Airways and Lufthansa.



APPENDIXSourcesRyanair Annual Report 2007

Ryanair Annual Report 2009

Ryanair Annual Report 2011

http://www.iata.org/ps/publications/Pages/wats-passenger-carried.aspx

http://www.ryanair.com/en/investor/investor-relations-news

http://www.guardian.co.uk/global/blog/2011/nov/07/ryanair-theairlineindustry

http://www.ryanair.com/doc/investor/Strategy.pdf

http://marketingteacher.com/case-study/ryanair-case-study.html#

http://www.flightstats.com/go/FlightRating/flightRatingByCarrier.do?airlineCode=FR

http://www.ryanair.com/en/news/ryanair-no1-with-fewest-lost-bags

http://www.ryanair.com/en/news/customer-service

http://www.dailymail.co.uk/news/article-1376905/Abandoned-tarmac-Disabled-woman-left-sitting-plane-Ryanair-wouldnt-fetch-lift.html

http://www.guardian.co.uk/money/2011/dec/23/ryanair-credit-card-surcharges-crackdown

http://brighterplanet.com/

Further readingRyanair Holdings plc – MarketLine Company Profile

Global Airlines – MarketLine Industry Profile

Airlines in Europe – MarketLine Industry Profile

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http://www.iata.org/ps/publications/Pages/wats-passenger-carried.aspx

http://www.ryanair.com/en/investor/investor-relations-news

http://www.guardian.co.uk/global/blog/2011/nov/07/ryanair-theairlineindustry

http://www.ryanair.com/doc/investor/Strategy.pdf

http://marketingteacher.com/case-study/ryanair-case-study.html

http://www.flightstats.com/go/FlightRating/flightRatingByCarrier.do?airlineCode=FR

http://www.ryanair.com/en/news/ryanair-no1-with-fewest-lost-bags

http://www.ryanair.com/en/news/customer-service



http://www.guardian.co.uk/money/2011/dec/23/ryanair-credit-card-surcharges-crackdown

http://brighterplanet.com/

mailto:[email protected]



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