Ryanair's Competitive Advantages Last Update:15.Sep.2009

Ryanair's

Competitive Advantages

Last Update:15.Sep.2009

About Ryanair Founded in 1985: 2 Aircrafts Carried 82,000 Passengers 1991: Michael O’Leary Appointed Transformed to Low Cost Airline 1997: Floated on Dublin SE and Nasdaq Rapid Expansion (2008 Figures) : 169 Aircrafts 794 Routes 148 Destinations, Across 26 European Countries 58 Million Passenger Annually Source: European Low Fares Airline Association,2009

Founded in 1985:

2 Aircrafts

Carried 82,000 Passengers

1991: Michael O’Leary Appointed

Transformed to Low Cost Airline

1997: Floated on Dublin SE and Nasdaq

Rapid Expansion (2008 Figures) :

169 Aircrafts

794 Routes

148 Destinations, Across 26 European Countries

58 Million Passenger Annually

Source: European Low Fares Airline Association,2009

Key points from the article Ryanair’s Integrated Business Strategy Resource-Based View (Inside out) Marketing View (Outside in) Variety of Destinations &Routes Competitive Advantage Competitive position Low Cost Airline Business Model (Passes the costs directly to Ryanair’s customers)

External Analysis: Porter’s Five Forces Threat of New Entrants HIGH Threat of Substitute Products MEDIUM Buyers’ Bargaining Power LOW Suppliers’ Bargaining Power LOW Industry Competitors Rivalry Among Existing Firms HIGH

External Analysis, PEST Analysis POLITICAL(Low impact) Inside Europe Political stability Outside Europe Middle East OPEC ,a political force ECONOMICAL(Low impact) Inside Europe Stable economy Stable consumers Outside Europe (undeveloped market) non- stable economy non -stable

POLITICAL(Low impact)

Inside Europe

Political stability

Outside Europe

Middle East

OPEC ,a political force

ECONOMICAL(Low impact)

Inside Europe

Stable economy

Stable consumers

Outside Europe (undeveloped market)

non- stable economy

non -stable

External Analysis, PEST Analysis(Cont’d) SOCIAL(Highly Impact) Changing consumer demographics Fluctuating consumer preferences Technological(Low impact) Aircrafts Supply chain software's programs

SOCIAL(Highly Impact)

Changing consumer demographics

Fluctuating consumer preferences

Technological(Low impact)

Aircrafts

Supply chain software's programs

Ryanair: Value Chain Infrastr. HRM Tech. Dev. Proc. Margin Margin Minimum Corporate HQ Low Cost Training Internet Boeing Discount Quality Training Low Cost Suppliers Airport Agreements No Frills Low Cost* Quick Turnaround Reliable Service Low Cost Promotions Free Publicity Controversial Internet Sales Yield Management Limited Resources Basic/Low Cost High Productivity Inbound Logistics Operations Outbound Logistics Marketing & Sales Service Limited Crew Internet Information Alliances Management Control Integrated Systems Outsourced In-house Low Tech Marketing Internet Sales Private Performance Contracts n/a Low Cost

Infrastr.

HRM

Tech. Dev.

Proc.

Business Model Full Service( Traditional) Using Hub& Spoke network Congestion during peak hours Delay of only a few inbound flights Will spill over across large portions of the network Low average daily utilization of aircraft, higher costs per seat mile Enormous transaction costs Complex fare structure Low cost(LCC) Non-stop point-to-point services High seating density and load factors Uniform aircraft types (usually the 737-300) Direct booking (internet/call centre - no sales commissions) No frills such as “free” food/drinks, lounges or ‘air miles’ Simple systems of yield management (pricing) Use of secondary airports to cut charges and turnaround times

Full Service( Traditional)

Using Hub& Spoke network

Congestion during peak hours

Delay of only a few inbound flights Will spill over across large portions of the network

Low average daily utilization of aircraft, higher costs per seat mile

Enormous transaction costs

Complex fare structure

Low cost(LCC)

Non-stop point-to-point services

High seating density and load factors

Uniform aircraft types (usually the 737-300)

Direct booking (internet/call centre - no sales commissions)

No frills such as “free” food/drinks, lounges or ‘air miles’

Simple systems of yield management (pricing)

Use of secondary airports to cut charges and turnaround times

Average cost per seat Mile Low Cost (LCC) vs. Full service (Traditional )

Breakout :, Cost per seat Mile Gap Low Cost (LCC) vs. Full service (Traditional )

Break Down of Cost Saving Low Cost (LCC) vs. Full service (Traditional )

RYANAIR Competitive Advantages Online Bookings One Class Travel Ticketless Boarding Unallocated Seats Flying to Secondary Airports Point-to-Point Flying In-house Marketing No Frills Reduced Turnaround Times No Refund Policy Corporate Partnerships No Cargo Service Bargaining Power New Aircrafts Owns Own Fleet Operations Denominated in Euro Hedge Fuel Risk Highly Successful Ancillary Service Offering Outsourcing of Services at International Airports

Online Bookings

One Class Travel

Ticketless Boarding

Unallocated Seats

Flying to Secondary Airports

Point-to-Point Flying

In-house Marketing

No Frills

Reduced Turnaround Times

No Refund Policy

Corporate Partnerships

No Cargo Service

Bargaining Power

New Aircrafts

Owns Own Fleet

Operations Denominated in Euro

Hedge Fuel Risk

Highly Successful Ancillary Service Offering

Outsourcing of Services at International Airports

Limited Airport Transportation Advertising on Airplanes Yield Management Uniform Fleet High Productivity High Service Levels General Cost Reductions Eliminating seatback pockets No blankets or pillows Airsickness bags distributed on request Charges larger penalties for overweight luggage RYANAIR Competitive Advantages(cont’d.)

Limited Airport Transportation

Advertising on Airplanes

Yield Management

Uniform Fleet

High Productivity

High Service Levels

General Cost Reductions

Eliminating seatback pockets

No blankets or pillows

Airsickness bags distributed on request

Charges larger penalties for overweight luggage

Cutting costs:“Race to bottom” Ryanair, the World’s favourite airline, today (9 th July) launched an online poll to ask if passengers would ‘stand’ on short flights if it meant they could travel for FREE, or pay 50% less than seated passengers. Ryanair is gauging passenger demand for its ‘vertical seating’ which will allow passengers to travel – for free – in a secure upright position on short flights of approximately one hour. Source: http://www.ryanair.com/site/EN/news.php?yr=09&month=jul&story=gen-en-090709

Europe short haul market(TOP.6) Lufthansea Passengers – 5.53m Market share – 7.8% Ryanair Passengers – 5.12m Market share – 7.2% Air France Passengers – 4.64m Market share – 6.6% easyJet Passengers – 3.53m Market share – 5% Iberia Passengers – 3.3m Market share – 4.7% SAS Passengers – 3.23m Market share – 4.6%

Lufthansea Passengers – 5.53m Market share – 7.8%

Ryanair Passengers – 5.12m Market share – 7.2%

Air France Passengers – 4.64m Market share – 6.6%

easyJet Passengers – 3.53m Market share – 5%

Iberia Passengers – 3.3m Market share – 4.7%

SAS Passengers – 3.23m Market share – 4.6%

Ryanair, World’s N0.1 Carrier Ranked By IATA(2008)

Ryanair’s Future Plans Cutting Costs No Window Blinds No Reclining Seats , Leather Seats Velcro Headrests Carry-on Luggage Revenue Enhancement Satellite Television Internet On-board Rented In-flight entertainment

Cutting Costs

No Window Blinds

No Reclining Seats , Leather Seats

Velcro Headrests

Carry-on Luggage

Revenue Enhancement

Satellite Television

Internet On-board

Rented In-flight entertainment

Ryanair’s Future Plans(cont.) “ Free tickets. In a decade or so, airlines will pay travellers to distribute people around Europe. The airline industry is Tesco, is Ikea, is network TV in the way viewers watch for free and advertisers Pay for access to them, is the internet in the same way that websites earn money for delivering click-through traffic or other sites.” Michael O'Leary ,Chief Executive Officer of the Irish airline Ryanair

“ Free tickets. In a decade or so, airlines will pay travellers to distribute people around Europe.

The airline industry is Tesco, is Ikea, is network TV in the way viewers watch for free and advertisers

Pay for access to them, is the internet in the same way that websites earn money for delivering click-through traffic or other sites.”

Michael O'Leary ,Chief Executive Officer of the Irish airline Ryanair

Conclusion Ryanair rapid growth is due to: Low cost Airline Business Model that restructured European Aviation Industry Pioneer innovative cost reduction methods Creative alternative revenue generation &free flights goal in next phase evolution

Ryanair rapid growth is due to:

Low cost Airline Business Model that restructured European Aviation Industry

Pioneer innovative cost reduction methods

Creative alternative revenue generation &free flights goal in next phase evolution

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References www.ryanair.com Analysis of Ryanair’s competitive advantage ,November ,2008 by Jess Mun www.associatedcontent.com/1159874

www.ryanair.com

Analysis of Ryanair’s competitive advantage ,November ,2008 by Jess Mun

www.associatedcontent.com/1159874