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Ryanair Low-Cost Strategy Business Model

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Description of the strategy (business model) of Low Cost Carrier Ryanair. Focussing on the value proposition, value architecture, revenue model and corporate culture and values.

Published in: Business
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  • @fontmar Feel free to use this presentation!
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  • Dear Kevin, I am wondering if I can show your presentation in a public course, naming the author and giving him honors...
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  • Hi can you explain how you found the numbers for the document on page 10. What does 5€ mean for the ryanair staff? Thank you very much
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Ryanair Low-Cost Strategy Business Model

  1. 1. Strategy module | Kevin Constant | Lesley WiemeRyanair – Business Model
  2. 2. Key Figures
  3. 3. Key FiguresEUR million 2013 Change vs FY2012 % of 2013 totalFuel 1,886 18,3% 45%Airport & Handling Charges 612 10,4% 15%Route Charges 487 5,7% 12%Employee 436 5,0% 10%Depreciation 330 6,6% 8%Materials, repairs 121 16,1% 3%Aircraft Rentals 98 8,3% 2%Other 198 9,9% 5%Total Expenses 4,166 12,4% 100%
  4. 4. Hyper-competitive environmentTrends:• Consolidation among Legacy Carriers• Low-Cost subsidiaries of FSCs (e.g. Germanwings, Iberia Express)• LCCs evolving to more hybrid formsCompetitive environment
  5. 5. Ryanair‟s business modelValue Proposition What value do we create for whom?Value Architecture How do we do it?Revenue Model How do we earn money?Culture & Values What values do we pursue and communicate?
  6. 6. Value propositionLowest fares = CORE of business modelTarget customers?• Those who compromise on comfort• all fare-conscious customersHow?• Maintain focus on cost-containment• Maximise ancillary revenue
  7. 7. Value architectureAirport-related• Short-haul• Point-to-point• Monopoly on most of its routes• Secondary airports: Less congestion Lower charges Bargaining power
  8. 8. Value architectureAircraft-related costsAircraft acquisition costs• Aircraft of a single type (Boeing 737-800)• Buy in bulk• Young fleet: lower per seat costAircraft usagePersonnel-related costsCost savings are more important than relationship between management andemployees.
  9. 9. Value architectureCustomer service costs• Agreements with third party contractors• Internet booking facility
  10. 10. Value architectureFigure: Lowest ex fuel costs at Ryanair (figures from Ryanair, FY2013)
  11. 11. Value architectureFigure: Ryanair’s average fare vs other airlines (Figures from Ryanair, FY2013)
  12. 12. Revenue model58%22%20%"Core" revenuesAncillary revenuesSubsidies
  13. 13. Revenue modelCompulsory fees and chargesVariable amount fare based on barebone ticket structureTicket-related fees and additional chargesAncillary revenues“We think [passengers who forget their boarding pass] should pay 60 euros for being so stupid.”
  14. 14. Airport AirlineDeliver servicePay charges and feesAirport RyanairProvide subsidies and supportGrants its presenceRevenue model
  15. 15. Corporate culture and values
  16. 16. SWOT analysis• Brand name (20 years in LCC business)• Lowest fares• Small headquarters: low on overheads• Benefits from low airport charges• Low distribution cost• O‟Leary charisma providing strong leadershipand cheap marketing• Financial situation• Dependency on subsidies• Poor service, prone to bad press• Low frequencies and mid-day departure times(problem for business travellers)• Market growth• Continuing European economic crisis• Growing demand for LCCs• Growing market with EU enlargement• Untapped potential in Europe• Absence of LCC on long-haul flights• Market consolidation (LHG, AF-KLM, IAG)• Increase of airport and navigation charges• Fuel price volatility• EU regulations (e.g. on denied boardingcompensation and „hidden fees‟)• EC investigations into airport subsidiesThreats
  17. 17. Strategy module | Kevin Constant | Lesley Wieme?

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