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Ryanair – The Low Fares Airline

Team members: Ivan MartinovSabbir S. M.

Strategic Management

10.04.2023 Strategic Management 2

Agenda

Company Overview1

2

3

4

5 Conclusion

Strategic Analysis

Organizing for Strategy

Strategy Formulation


» 1985, first route with daily flights on a 15-seater Bandeirante aircraft,

» In 1986 launch fare of £99 return, less than half the price of the BA/Aer Lingus lowest return fare of £209. First European fare war

» In 1990, losses of £20m. Adopt Southwest Airlines low fares model.

» In 1997, Ryanair launches its first four European routes

» By 2009, traffic grew to 14% compare to 2008, resulting 66.5m passengers in response of reduced of just €35.

» Covering 44 bases, 27 countries, 160 airports with 254 Boeing 737-800’s

Company Overview


Agenda

Company Overview1

2

3

4

5 Conclusion

Strategic Analysis

Organizing for Stratgy


Threat of Entry

BuyersSuppliers

RivalrySubstitutes

Porter’s Five Forces - Supplier

Boeing is main suppliers

Only 2 possible suppliers of planes – Boeing and Airbus

High switching cost Price of aviation

directly related to the price of oil Regional Airports depends on one airline

Bigger airports have competitors of Ryan Air

Threat of Entry

BuyersSuppliers

RivalrySubstitutes

Porter’s Five Forces – Threat of entry

High capital investment

Restricted slot availability makes it more difficult to find suitable airports

Immediate price war if encroaching on existing LCC route

Need for low cost base

Flight Authorization

Threat of Entry

BuyersSuppliers

RivalrySubstitutes

Porter’s Five Forces - Buyers

Customers are price sensitive

High Switching tendency

Customers know about the cost of supplying the service

No loyalty

Threat of Entry

BuyersSuppliers

RivalrySubstitutes

Porter’s Five Forces - Substitutes

No brand loyalty of customers

No ‘close customer relationship’

No switching costs for the customer

Other modes of transport: Eurolines, ferries etc.

Threat of Entry

BuyersSuppliers

RivalrySubstitutes

Porter’s Five Forces - Rivalry

The LCC market is highly competitive

Most cost advantages can be copied immediately

the two major low-cost airlines have avoided direct head to head competition by choosing different routes to serve

Following Ryanair strategy will create heavy pressure on prices, margins,

Price is the main differentiating factor


SWOT Matrix

Strengths- Brand name- Low airport charge- First mover advantage on regional airports- E-ticketing (94% on booking) reduce operating cost- High seat density- All Boeing aircraft make it low maintenance cost- Fuel and other risk hedging- High service performance: punctual, low baggage

loss

Weaknesses- Prone to bad press- Niche market: restricted expansion possibility- Distance from some regional airports make

inconvenience to the traveler- Poor service- Extremly sensitive in changing fare

Opportunities- European Union expansion- Scope of potential market to capture- Benefits from less exposure geographical risk- Economic slowdown helps Ryanair to promote their

strategy of low fare

Threat- Oil market fluctuation- Increase of low fare competition- Limited growth in Southern Europe- Customers are price sensitive- Increase in air traffic charge


PESTLE AnalysisSocial

» Changes in demographics and consumer preferences

» Frequent short-term trips

» Threat of terrorist attacks

» Increased environmental awareness

Technological

» New aircrafts; with much more efficient engines → reduced CO2 emissions and fuel consumption

» Internet

» High speed trains

Political

» Strong Political Environment

» EU Expansion

» Trade Union Pressure

» Global Carbon Tax

» Emission constraints

» Corporate Lawsuits

Legal

Economic

» Rising fuel prices

» Weak US dollar

» Global crisis

» High rates of unemployment

» Global warming and CO2 emissions

» Noise pollution

Environmental


Conclusion of PESTLE Analysis

Conclusion: » Positive sociodemographic factors

supported by strong technological innovations

» Bad legal and environmental aspects » Mixed political and economic

environment

» Result of analysis: The Macroenvironement is contradictory


Stakeholder Mapping

Power

Low

High

Low HighLevel of Interest

Keep satisfied Key players

Minimal effort Keep informed

» NGOs » Shareholders and Investors

» Creditors

» Government

» Customers

» Employees

» Competitors

» Local communities


Stakeholder Expectations

» EUR 17 billion for fleet replacement› Higher fuel efficiency › 45% reduction in CO2 emissions› Average age of aircraft fleet 2.5 years (average industry 11 years)

» Noise reduction - fulfilled noise requirements, winglets, operational measures

» Waste reduction – no free meals, drinks or newspapers

» Regular financial reports

» CSR Campaigns – Girls of Ryanair Charity Calendar 2011


Agenda

Company Overview1

2

3

4

5 Conclusion

Strategic Analysis




Vision» Become Europe’s Leading Passenger Carrier

Mission» No. 1 for offering cheapest air fare» No. 1 for punctuality» No. 1 for service commitment

Vision and Mission


» Offer the lowest fares at all time on all routes» No fuel surcharge guaranteed» Honor the agreed fare after payment» Minimize the numbers of passengers facing delays» Allow reservation changes» Respond quickly to passenger complaints and provide prompt refunds» Take measures to speed up check-in» Minimize the number of passengers who are involuntarily denied boarding» Minimize the number of passengers who are involuntarily denied boarding» Ryanair will provide the following information to passengers at the time of

booking

Ryan Air Passenger Charter


Ansoff Martix

Products

Existing

New

Existing NewMarkets

Product Development Diversification

Market Penetration Market Development

» Increased number of passengers

» Frequent flights

» Increased number of routes offered

» Eastern Europe expansion: new EU countries

» Turkey?

» North Africa – Morocco, … ?


Boston Consulting Group Matrix

Market Growth

Low

High

High LowMarket Share

Stars Question Marks

Cash Cows Poor Dogs

» Popular destinations:

London, Paris, Milan

Madrid, Rome, Barcelona

» Hot new destinations:

Croatia

» Unknown popularity:

Morocco

» Small unnecessary

destinations


Global integration/local responsiveness grid

Globalization forces towardsstandardization

Weak

Strong

Weak StrongLocalization forces towards customization

Global Strategy

Transnational Strategy

Multidomestic Strategy

International Strategy


Agenda

Company Overview1

2

3

4

5 Conclusion

Strategic Analysis




» Offering Low Fares» Frequent point-to-point flights on short-haul routes» Choice of routes» Low operating cost:

› Aircraft equipment cost› Personnel expenses› Customer service cost› Airport access fee

» Maximize the use of internet» Commitement to safety and quality maintainence» Focused criteria for growth

Strategic Goals


Overall cost leadership by:› Low Aircraft maintainence cost› Lowering Personnel expenses› Lowering Customer service cost› loweringAirport access fee

Business Level strategy


Positioning


Balanced Scorecard I• Increase revenue

and profitability• Reduce costs

• Increase market share and customer satisfaction

• Reduce prices

• Employee training

• Increase fleet and crew utilization

Financial Customer

LearningInternal


Balanced Scorecard IIStrategy Performance measures Targets Initiatives

Financial

• profit margins• revenue growth• cash flow and costs

• 20 % market value increase per year• 20 % seat revenue increase per year

• Additional routes • More frequent flights• Further cost reduction

Customer• market share • customer satisfaction• on-time arrivals (%)• passengers

• > 0.5% missed bags• 10% passenger growth per year • < 95% on-time arrivals

• Customer loyalty programs• Quality management

Internal • on-ground time• on-time departure

• < 95% on-time departures• > 30mins on-ground time

• Cycle time optimization program

Learning • number of additional courses attended

• < 70% of employees take at least one course per year

• Various training programs offered


Thank you for your attention!