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Ryanair has ordered 225 brand new Boeing 737-800 aircrafts. The average aircraft age was about 10 years vs. easy Jet’s was 5.1 years (2003). However with the deliver of the new aircrafts, Ryanair’s figure will enhance. The average age of the fleet is important, as maintenance costs depends on this.
, 2001). Ryanair has also shown good profitability.
Ryanair’s most important assets are aircrafts and access to secondary airports. But this alone doesn’t make this airline successful: the real assets are the employees and particularly the CEO Michael O’Leary. Ryanair has a solid financial statement and a good profit track which is currently negatively influenced by the ongoing price war.
Threshold capabilities of Ryanair are: the ability to keep flying from A to B on a low cost basis and sustaining competitive ticket prices.
Ryanair always searches for possibilities to cut costs. Low operating costs within the complete value chain, subcontracting and economics of scale (performance related pay, efficient aircrafts, use of secondary airports, internet as marketing and sales device…) make it possible to provide the cheapest ticket prices available.
Very sound financial statement (e.g. liquidity ratio, shareholder funds…).
CEO Michael O’Leary (Effective, charismatic leadership) and Ryanair’s management. The management of Ryanair received several awards and Michael O’Leary was named one of “25 European business starts by the Financial Times”.
Ryanair has a high market share, and the possibility to act as a price leader (sound financial figures making it possible to initiate and sustain a price war)
Effective employment handling: Every 7th employee (191 in total) was promoted internally (Annual Report 2004, p. 5), keeping people who already know the company which in turn reduces costs (introduction…) and enhances motivation. Employees have also the interest to bring the company forward because over 30% already are shareholders.
Sustainable competitive advantage according to Lynch (2003) of Ryanair is: the low cost basis (key success factor), offering of the cheapest ticket prices (in order to target price sensitive customers) and the abilities of the management and the CEO (leadership) of Ryanair. In addition to that first mover experience (experience from competing against BA and Aer Lingus at the beginning) may also have benefited the company.
Dynamic capabilities provide a constant flow of opportunities (Lynch, 2003), from which Ryanair could take advantage in order to sustain the competitive advantage:
As it can be seen, Ryanair’s dynamic capabilities are flexibility and the ability of rapid adoption to changing conditions. Hence the competitive advantage is not static (e.g. low cost basis). This is what Brown and Eisenhardt (1998) define as “continual revolution” (Lynch, 2003 [p. 130]).
By referring to the above said, it’s possible to identify the following strength and weaknesses.
As it can be seen, Ryanair fulfils all key success factors. The cost leadership approach is certainly Ryanair’s major strength and provides competitive advantage. However there were some weaknesses identified: for now, the company should at least rethink its hedging policy.
The classification of factors into strength and weaknesses can be misleading. For example, the enlargement of the fleet can lead to economics of scope. But at the same time, there is the risk of creating overcapacity (and thereby deteriorating performance indicators, e.g. load factor). Hence some issues may be both, a possible strength and weakness. The same is true for opportunities and threats. This is a limitation of the SWOT analyses.
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