Dogfight over Europe: Ryanair
Dogfight over Europe: Ryanair
A. What is Ryanair’s strategy and why has it been successful so far? In 1911, Ryanair faced cash flow problem, and was going to be bankrupted. However, it found the way to overcome this crisis by transform themselves from ordinary high-price airlines into the lowest price airline in the EU. They focused on 5 things to rebirth their company.
1. Focused on cut down the costs: Ryanair aggressively cut most of its costs in many ways. Found the routes and airports that charged low landing fees, and low turnaround costs Chose routes to Secondary airports, low airport fee
Eliminated all in-flight amenities
Used metal stairs instead of “air bridge”
Paid lower commissions to travel agents
Saved cost in its internal operations
Implemented economies of scale by using one model aircraft and treating all customers equally
2. Focused on operating efficiency: Ryanair carefully allocate all of its resources and assets to get the highest performance outcome. Optimized airplanes usages by relocating the planes used in loss-making routes to gain-making routes. Attempted to increased aircraft turnaround rate in many ways Operated only one type of aircraft
Provided the newsletter to employees, which contained its and its competitors’ movements
3. Focused on customer satisfactions: Ryanair sustained customer care. Even though they are mostly middle-to-low classes who expected less services due to the lowest airfares, they would receive more than their expectation. There were 160 full-time reservation agents at its call enter at Dublin answered calls Maintained its record for on-time flight due to good-performed aircraft turnaround Received airfares in other currency
Had fewer restrictions to change the tickets
4. Focused on ancillary income: Ryanair gained extra revenue from other sales and services. In-flight sales: beverages, snacks, and traditional items
Advertised spaces renting
Other referred fees
5. Focused on its employees: Ryanair never forgot to sustain and motivate employees. Imprinted its values to employees. “the firms as brutally cost conscious” Gave its stock options to employees
Rewards system varied with performance, commission, and corporate profits Had lots of job opportunities, e.g. promotion or rotation
Had no bureaucracy and hierarchy
Compared to its competitors, Ryanair became succeed because it was the first low-cost airlines which provided low airfares that generate increased volume of customers. At the same time, it had maintained a continuous focus on customer satisfactions, cost management and operating efficiencies, leading to the great reputation that transfer “from mouth to mouth” by its loyalty customers. That created more customer and more income, being its sources of fund for reinvest. Also, the extra revenue from sales, advertised spaces renting, and referral fees could support its financial health and accommodate it to sell the ticket more lower price. Moreover, started with people, Ryanair’s employees shared the same values and goals with their company, “cost-conscious” with “good-services”.
Sharing the company’s benefit with them also motivated them to work better and better. This was the other important foundation for its success. That’s why, Ryanair was success and became very high competitiveness in this market. B. Looking to the future, what should be the strategic concerns of Ryanair? What recommendations would you make to the top management? In my opinions, the most strategic concerns of Ryanair is its competitors. Assuming we were in 1999, at that time, no carrier that were Ryanair’s primary competitor. However, in this year, no-frills carriers accounted for 3% of the European air travel market. This implied that the competition would be more intense. I would like to go through each competitors one-by-one.
Virgin Express: It was most harmful competitor. It had many features as same as Ryanair, and some of them were better than Ryanair’s, e.g. nine languages services in ticket reservations, no physical tickets (lower its costs), etc. Virgin Express’s financial lost in 1998 might be resulted from only a shortage of pilots. If Virgin Express could fix that problems, continuously improve its features, and fully implement cost control, it would become very competitiveness to the market. Suggestion for Ryanair: Sustain doing the ways Ryanair was, improve quality of service, innovate the ways to reduce costs, and focus more in marketing and creating brand awareness easyJet: It was also harmful competitor. It had the same business model concerned about cost control, it gradually grew and was going to change from subcontracting to their own operation by reinvesting.
However, its philosophy was “won’t complete with other low-fare guys”. Suggestion for Ryanair: Quickly expand the flying routes and grasp that benefits before easyJet does. British Airway’s Go: British Airway’s Go had powerful backups and great brand values. It provided better service in-flight but also sold ticket at the cheap price. Leading to the price competition in the future. Suggestion for Ryanair: The company have to innovate its new unique point to eliminate the problem that it would have faced the loss of its customers to the competitors. It also need to in-depth its group of customers to find the ways out. Also, Ryanair have to be alert all the time. As the market become more intense, only dynamic organization can survive.