ryanair holdings plc

7/21/2019 Ryanair Holdings Plc

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EXECUTIVE SUMMARY

Ryanair is the Europes leading low-cost air carrier. It is widely known and is a

prefered choice for cost conscious air travellers. Over the past few years, it has

embarked on aggressive expansion plan.

Ryanair is not spared from global economic condition, and also the changing

customer expectation. To ensure sustainability, it has to react towards the changing

business environment and to be more receptive towards internal and external

customer needs. Besides that, Ryanair needs to continue investment in technological

advancement to be cost competitive.


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1. BRIEF OVERVIEW OF RYANAIR HOLDINGS PLC.

Ryanair Holdings Plc., Europes largest operating low-cost airline based at

Dublin, Ireland. The company was established by three brothers from the

Ryan family - Cathal, Declan and Shane Ryan in the year 1985, with an initial

investment of 1 million and 25 staff. With a single airplane, a 15-seat

Embraer Bandeirante turboprop aircraft, the airline began its operations in

July 1985 on its scheduled routes between Ireland and United Kingdom and

utilized secondary airports to save cost. By late 1985, the airline entered the

Dublin-London market and competed with British Airway (BA), Dan Air and

Aer Lingus.

Michael OLeary, was appointed as the CEO of Ryanair in 1993. Being a

charismatic leader emulated the business strategies of Southwest Airlines

and developed the low-cost model further. Ryanair Holdings Plc was

incorporated in November 1996, and listed its shares on the Dublin and

NASDAQ stock markets in May 1997. On January 2000, Ryanair launched

the ryanair.com.

With a fleet of modern technological aircrafts to in-flight mobile services,

Ryanair has revolutionized the European air travel industry, serving 800

routes (Exhibit 1) from 32 bases (Exhibit 2), a record of close to 42.5 million

passengers in a year (Exhibit 3),making it the biggest low cost carrier and

the number one in Europe.


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2. OVERVIEW OF SWOT ANALYSIS

The SWOT analysis is a simple framework for generating the Strengths,

Weaknesses, Opportunities and Threats of an organization. SWOT is a two

prong strategy; analyze the internal force through the strengths and

weaknesses, and the external force through opportunities and threats.

Figure 1 : Illustrative diagram of SWOT analysis

The strengths are the resources the organization that are usually capitalized

for planning a strategy or developing a competitive advantage. These

strengths usually comprise of a reputable brand image, a good leadership,

strong customer database or any other features that may add value to the

organization. The absences of these strengths are viewed as weaknesses.

Weaknesses are the negative aspects such as lack of marketing expertise,

poor quality of goods and services and damaged reputation. These factors

are usually within the organizations control and can be improvised with

proper organization and business strategies.

The opportunities reveal the possible chances of an organization gaining

profit and growth, some of which are a developing a new international market,

business expansion to international market or a merger with a new entity.


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Threats are the negative conditions that are beyond the control of an

organization, making it vulnerable to operate. Some of the examples of

threats are political unrest, terrorist attacks, recession, and change in

government policies. But these can be overcome with the presence of

substitute recovery plans for the organization.

3. SWOT ANALYSIS ON RYANAIR

The SWOT analysis on Ryanair can be classified into various segments, as

illustrated in Figure 1.0below. Ryanairs opportunities were capitalized using

its strengths, while eliminating the weaknesses and threats.

Figure 2 : The various segments of Ryanair SWOT

Strength

The major strength of Ryanair was its financial strength gained through its

profits over the past 14 years being in the Low Cost Carrier (LCC) industry.

This enabled the company to gain first mover advantage, especially in the

case of airplane procurements, whereby Ryanair makes deals based on their

own bargaining conditions, likewise in the case of Boeing.

The airline has relatively set high barriers to the new entrants of the similar

industry in UK. In other words, there will be an immediate price war if a

competitor is penetrates into the existing Low Cost Carrier (LCC) route.


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Preempting potential competitors has to either offer better value or lower fare

than Ryanair, which relatively lead to pain of losses to the competitor.

Throughout Ryanairs experience in the LCC industry, the company has

nurtured phenomenal brand awareness in UK through its no frills and low

fare policy that leads to higher seat capacity, thus enabling it to maintain its

position as a market leader in its industry.

Another strength of Ryanair is the remarkable track record for its high service

performance. Ryanair was voted the best airline in Europe by the Association

of European Airlines (AEA) in terms of best punctuality, low baggage loss and

least cancellations (breakingtravelnews.com)(Exhibit 4).

Ryanairs has implemented a hub-to-spoke system that simplified its network

of routes, making the flight operation more efficient. This system eliminated

terminal delays and gave way for more frequent flight with faster turn-around

and a reasonable punctuality.

The airline operates the largest travel website in Europe. Ryanair.com,

encourages online bookings and check-in since the time it was introduced in

March 2006. It enables its customers to enjoy benefits on the majority of

Ryanair routes.

Privilege was given to passengers traveling with hand luggage and a

European passport, whereby they will be able to bypass queues at airport

check-in at boarding gates, on to of a 9% reduction in its average fares.

Weaknesses

Although, Ryanair is one of Europes the most successful airlines, yet some of

its major weaknesses has impaired its viability. The weaknesses of Ryanair

can be segmented into five aspects, i.e. organization culture, decision making

process, customer services, corporate social responsibility (CSR) and

regulatory compliance.


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ISSUE

1. Organization Culture

2. Decision Making

3. Customer Service

4. Corporate Social Responsibility (CSR)

WEIGHT GE

10

8

6

6

5. Ryanair.com 4

6. Regulatory Compliance 4

Source : OHigginns

Figure 3 : The weightage on some of Ryanairs weaknesses

One of the major weaknesses of Ryanair is its poor organization culture.

There are various factors influencing these criteria. Trade unions were not

allowed in the organization to deter bargaining terms and conditions, and

other legal aspects pertaining to the employees rights.

The overly emphasis on achievement outcomes has lead to negligence to itsemployee welfares, resulting to employees poor quality in work performance.

In a press statement by the International Transport Workers Federation (ITF),

the employees were overworked to a point of exhaustion (work 12 hour days

without breaks), and had to pay for their uniforms, training and the water they

need to drink on flights (itfglobal.org).

These factors have lead to employees exasperation and hindered them to

deal with their customers in an unpleasant manner.

Ryanair has also projected a bad corporate image due to its CEO, Michael

OLeary. Being classified as an arrogant personality, the decision making has

been biased to status quo; i.e. no changes done to the business decision

based on the unpredicted and volatile economic situation. To accomplish his

ambitions and goals, OLeary favors his personal hostile ambitions towards

his customers and competitors.


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This has lead to various critics by the regulatory authorities, competitors and

general public resulting to court rulings and bad press; but yet he was

inconsiderate about it and went on with his agenda.

In the aspect of customer relations, Ryanairs cost cutting efforts has resulted

to annoyance and inconvenience to its customers. There were high

complaints especially in the case of charging customers even for the basic

needs such as oxygen mask (Exhibit 5), its reluctance to take responsibility

of lost baggage, discriminating the disabled and refusal to provide services to

the disabled or older passengers (O Higgins). One example was in the case

of a disabled passenger, Bob Ross, where he was charged 18 to use a

wheelchair at Stansted Airport, in Essex (news.bbc.co.uk). Exhibit 6

highlights the other cases pertaining to Ryanairs customer service.

Some of the other shortcomings were due to its advertisements, which is

either misleading or offensive. In most cases the adverts provided false

information, especially in the case of its ticket fares with hidden charges; and

its destinations which mentioning main city location, while actually operating

from remote locations (http://en.wikipedia.org/wiki/Ryan_Air). There were

also advertisements which had offensive elements to degrade its competitors,

one of which is in the case of Sabena Airlines whereby the ad projected a

picture of the Manneken Pis, a famous Belgian statue of a urinating urchin,

with a punchline stating, "Pissed off with Sabena's high fares? Low fares have

arrived in Belgium." (Exhibit 7)(Irishtimes.com 5 May, 2001).

Opportunities

The opportunities for Ryanair came in various forms, varying from the air

industry deregulation, new routes, entry to the US domestic market and

Ryanair Direct.

De-regulation of the air industry by the European Union (EU) in the year 1992

opened new dimensions for the airline. Taking advantage of this Ryanair

launched its services at Paris, Charleroi and Stockholm. The company earned

huge profits enabling it to place an order for 45 units of the new Boeing 737-

800 series fleets.


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This was a big order worth $2 million. The company introduced a new

business model in Europe, new services to new markets and low fares to 300

million people that were being explored by the high fares of flag carriers.

These were not possible with the previous regulation that restrained capacity,

fares and routes. (Case studies: SAS Airline & Ryanair)

The enlargement of the European Union has also increased in new

destinations and therefore this lead to better company performance of

Ryanair. Countries in Eastern Europe were becoming an attractive destination

and airports were pursuing Ryanair to bring its low fare service to their

communities. This has ensured a sufficient number of new market growths

are made available for Ryanair for the next five years.

Another potential prospect for Ryanair was when United States (US) opened

up its restricted routes (trans-Atlantic routes) to Ryanair and the other new

rivals. A new long haul flight will be launched to cater the trans-Atlantic route,

offering a fare as low as $12 for one-way. The "Open Skies" deal, took effect

towards end of March 2008, allowing Ryanair to serve close to five to six

destinations in US from its 23 bases in Europe. (USA TODAY - 12/4/2007)

Canada being present for potential businesses in international trade has

opened up an opportunity for Ryanair to establish themselves as a low cost

carrier and also to partner with companies within Canada to offer the same

low-cost air fare they offer in their home base Europe.

Therefore, this could be a great place for Ryanair to capitalize on the airfare

market, and expand into the U.S as well. (terpconnect.umd.edu)The low cost based policy continued to find new opportunities, one of which is

Ryanair Direct (a call centre) to encourage customers to book their seats

directly with the airline. This is in regards to improvise on the Customer

Reservation System (CRS) and to do away with the travel agents have cost

associated to the sales of ticket for Ryanair. In other words, Ryanair was

charged by the travel agents for booking done through CRS and a fee

imposed for every ticket sold. Besides enabling a save in the costs by

eliminating travel agents commissions of 7.5%, the website was also used to

sell travel insurance, accommodation and car hire.


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Threats

Ryanair has been continuously facing fierce operating challenges. This is

because the company operates in a highly competitive marketplace. Thecompetitors has commenced their own no frills charter services and have

reacted by introducing fare cuts on short routes, flying larger aircraft with one

passenger class, reducing in-flight service, internet bookings and weekend

offers. Mainstream airlines also intend to follow the budget airline model to be

executed on international routes. (O Higgins 2004).

Technological advancement had a reversed implication to Ryanair. Internet

and credit card usage was still at an infancy stage especially in Eastern

Europe. (Economist 2004c:69).The rapid development in telecommunication

may result in lesser need a business travel. Meetings can be held via video or

teleconferencing, thus eliminating the need for physical presence in a

location.

Terrorist attacks were an unpredicted threat to Ryanair. This was evidenced

in the case of the terrorist attacks on United States and London. This caused

a drop in the air travel as the consumers were apprehensive about security

and a raise in the insurance coverage due to a third party liability from acts of

war or terrorism. This resulted in Ryanair seeking other options such as

government or self insurance, which relatively resulted to cost increase and

revenue drop. (Ryanair.com)

Threat also came in the form of a drop in the fuel price. Ryanairs strategy of

fuel hedging provides extensive protection against unpredicted fluctuations of

fuel prices. However, the current drop in the fuel price, resulted in them

dipping onto its cash balance to finance the differences, thus affecting its

margin (Oxfordbridgewriters.com).

The change in government policies such as an increase in the air passenger

taxes results to a higher air travel cost. This may lead passengers to seek for

alternative mode of transport such as high-speed trains and buses for their

travel needs, therefore causing a drop in air travel demand.


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4. RECOMMENDATIONS TO OVERCOME THE WEAKNESSES AND

THREATS OF RYANAIR

People relation is an important aspect to determine Ryanairs success.

Internally, it leads to improve the morale of their staff especially taking care of

their basic needs and welfare, listening to their positive and negative

feedbacks as well as getting them involved in making recommendations and

decisions. This leads to greater sense of belonging and whole hearted

participation in Ryanair business.

Externally, Ryanair need to be more customers focused. This is through

meeting the basic expectations of an air traveler. Being too cost focus will

lead to negative perceptions over Ryanairs commitment towards its travelers.

Creative pricing to bundle in some of the individual items charged separately

such as oxygen mask and wheelchair will help eliminate undue critics. Being

attentive too problems faced by the customers will also help to bolster its

image.

Most of the threats faced by Ryanair are external and beyond their control

such as terror attacks, fluctuating bunker cost as well as weather. Maintaining

a good cost management system such as having a young and healthy fleet of

aircrafts will ensure good asset utilization, in terms of constantly ensuring

good load factor and profitable routes.

This will enable them to react fast and better against external threats by

realigning their network according to market demand.


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5. OVERVIEW OF PEST ANALYSIS

PEST analysis is a tool used to identify the external macro-environment thatsaffects an organizations operation. The PEST is an acronym for Political,

Economic,Sociocultural and Technological.

Figure 4 : An illustration of a PEST Model

The PEST analysis helps to determine market growth or decline, business

position, potential and guidance for the business operations (Kotler : 1998),

thus being effective for business and strategic planning, marketing planning,

business and product development and research reports. PEST also ensures

that companys performance is aligned positively with the powerful forces of

change that are affecting business environment.


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6. TECHNOLOGICAL ANALYSIS ON RYANAIR

The technological environment on the whole does not have an adverse

impact on the company, but has been an added advantage to it in the aspect

of cost efficiency. The biggest success for Ryanair was the conversion British

Airways Booking System (BABS) host reservation system to Skylight Systems

by Accenture in January 2000.

The Skylights system enabled the Ryanair customers to reserve and book

their air tickets through ryanair.com. These strategic marketing application

has helped Ryanair in terms of reduction in its operating cost, improve its

sales performance and total consumer patronage, eliminate travel agents

commission, and streamline labor functions in the aspect of eliminating front

desk personnel.

The airline has also moved into offering in-flight mobile phones services on

their regular routes across UK airspace. The usage of mobile in flights was

generally being banned due to its signal being interference to the onboard

communication and navigation system. But the new technology that was

specially designed for Ryanair by a Swiss communication company, OnAir,

was able to weaken the signal from the phones and transfers calls, texts and

e-mails through a satellite (Exhibit 8) (BBC, UK 19 February, 2009).

Another innovation of Ryanair was the implementation of an electronic device

to assist the cabin crew in selling merchandise on-board. The technology was

rolled in the Ryanairs fleet on April 2008 onwards and this has enhanced the

onboard sales service, enabling them to introduce more products. (REUTERS 4 January, 2008)

The aircraft technology has also been an added advantage to Ryanair

through its investment in the next generation aircrafts and engine

technologies. The new Boeing fleets have minimized noise, fuel and CO2

emissions, thus enabling the company to achieve the combination of:

numerous fuel saving commercial measures. (Ryanair.com)

(2,824 words)


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APPENDIX


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EXHIBIT 1 : SOME OF RYANAIRS ROUTES


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EXHIBIT 2 : RYANAIRS DESTINATIONS


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EXHIBIT 3 : PASSENGER GROWTH FROM YEAR 1995 TO 2007

The numbers from the latest financial year (ended 31-Mar-2009):

Operating revenue from continuing operations rose 8.5% to EUR2.94 billion; Passenger numbers rose 15% to 58.5 million; 18 net new aircraft (year-end fleet of 181 B737-800 aircraft); Six new bases at Alghero, Birmingham, Bologna, Bournemouth, Cagliari, and

Edinburgh; 223 new routes, for a total of "800+" routes with "1,200+ daily departures" (the

airline has apparently lost count).

Source : RyanAir.com


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EXHIBIT 4 : THE CUSTOMER CARE STATISTICS FOR THE SECONDQUARTER OF 2009

Source : RyanAir.com


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EXHIBIT 5 : FEE IMPOSED FOR EMERGENCY INSTRUCTION CARD ANDOXYGEN MASK


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EXHIBIT 6 : SOME OF THE OTHER CASES INVOLVING RYANAIRSDISABALED PASSENGERS

Source : Wikipedia

YEAR DETAILS

2005 Airline was criticized for ejecting nine blind and partially sighted passengers from a

flight at Stansted, because the group meant the plane would be carrying more than

the four disabled passengers permitted by the airline's safety regulations.

(http://www.mnddc.org/news/inclusion-daily/2005/10/101405ukairacc.htm)

2005 Ryanair was forced to pay Bob Ross 1,336 in damages after charging him 18 to

use a wheelchair

(http://news.bbc.co.uk/2/hi/business/4114399.stm)

2006 Refusal in providing a sick cancer sufferer with a wheelchair.

(http://archives.tcm.ie/irishpost/2006/08/30/story4561.asp)

2007 A 14-year old with a broken leg being forced to stand for two hours on a flight,

despite the boy being in pain.

http://www.shortnews.com/start.cfm?id=61961

2007 Ryanair ordered a group of visually impaired passengers to disembark from a flightbefore take-off on the excuse that the flight had exceeded the permitted number of

"mobility-impaired" passengers and refused to pay compensation required by law,

claiming that they had disembarked voluntarily. Ryanair paid compensation before

court proceedings took place.

(http://www.timesonline.co.uk/tol/travel/news/article2293457.ece)

2008 Paul Heath left to lift disabled wife, Jo Heath Refusal onto plane after RyanAir

cabin crew and handling agent refused to offer assistance.

(http://www.dailymail.co.uk/travel/article-610634/Ryanair-left-lift-disabled-wife-plane.html)


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EXHIBIT 7 : THE MISLEADING AND OFFENSIVE ADVERTISEMENTS OFRYANAIR


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EXHIBIT 8 : THE IN-FLIGHT MOBILE SIGNAL TRANSMISSION

Source : http://news.bbc.co.uk/2/hi/technology/7899446.stm


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REFERENCE

a) Internet References

1. BBC News, Ryanair allows mobile phone use,- Viewed on 12 August, 2009

http://news.bbc.co.uk/2/hi/technology/7899446.stm

2. Birds Eye View, Strength, Weaknesses, Opportunities, Threat

Viewed on 20 July, 2009

www.air-scoop.com

3. Case studies: SAS Airline & Ryanair, New Boeing 737-800 series fleets

- Viewed on 4 August, 2009http://umu.diva-portal.org/smash/record.jsf?pid=diva2:140520

4. Conduct A Strategic Analysis Of A Multinational Company (MNC) Or An InternationalCompany Ryanair, PESTLE Analysis, Technological

- Viewed on 4 August, 2009http://www.oxbridgewriters.com/essays/business/ryanair-airports-strategy.php

5. Funding Universe, Ryanair Holdings Plc, Michael OLeary

- Viewed on 13 August, 2008http://www.fundinguniverse.com/company-histories/Ryanair-Holdings-plc-Company-History.html

6. How Ryanair Has Exploited The Economic Theory Behind Airline Contestability AndDeregulation,Ryanairs Cost AdvantagesViewed on 28 July, 2009http://www.airneth.com/index2.php?option=com_docman&task=doc_view&gid=533&Itemid=15 .

7. Low Cost or Low Ethics,Innovation

Viewed on 1 August, 2009http://stajano.deis.unibo.it/ResP2005-pdf/Ryanair.pdf

8. Reuters, Ryanair picks GuestLogix in-flight sales devices, Electronic Device,

- Viewed on 30 July, 2009http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSL0456358520080104

9. Ryanair Holdings Plc, European Airline Market

Viewed on 28 July, 2009

http://www.ryanair.com/site/about/invest/docs/2003/20F_front_2003.pdf


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10. Ryanair Plc, Government Regulations, SWOT Analysis, Objectives and Long TimeVisionViewed on 28 July, 2009

http://solvay.ulb.ac.be/cours/alle/BuspPresRyanair04.pdf

11. Ryanair SWOT Analysis: Addicted to growth, a great model for bad times,STRENGTH : Low fare super brand

- Viewed on 31 July, 2009http://www.centreforaviation.com/news/2009/06/03/ryanair-swot-analysis-addicted-to-growth-a-great-model-for-bad-times/page1

12. Ryanair, Critisicm and Complaints Misleading Advertising

Viewed on 5 August, 2009http://www.hamblecollege.co.uk/hamblewiki/wp/r/Ryanair.htm

13. Ryanair, Ryanair, Europes Greenest Airline, Fuel burn and CO2 emissions

- Viewed on 30 July, 2009http://www.ryanair.com/site/EN/about.php?page=About&sec=environment

14. Strategic Case Analysis : Ryanair, External Analysis - PEST

Viewed on 12 August, 2009http://www.essaycapital.com/samples/Degree_Case_Analysis_Harvard.pdf

15. The Case of Ryanair EU State Aid Policy on the Wrong Runway,The New Principles of the Commission for Assessing Subsidies to Airlines: A CriticalEvaluation

- Viewed on 4 August, 2009https://www.uni-marburg.de/fb02/makro/forschung/gelbereihe/artikel/2004-13-Groeteke-Kerber.pdf

b) Book References

16 Strategic Management Concepts and Cases by Peter Wright, Mark J. Kroll, John ParnelSWOT Analysis : Page 50 - 54

17. Management, James A.F. Stoner, R. Edward Freeman, Daniel R.Gilbert,JR

Macroenvironment Analysis

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