Ryanair - Strategy and Value Creation 2014
FionaODriscoll
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May 06, 2014
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About This Presentation
Strategic analysis of Ryanair's new customer focused strategy
Slide Content
Strategy Report
Strategy and Value Creation
Prof. Adriano Freire
Group 3: Bruno Dias, Fábio Ferreira, Fiona O'Driscoll, Gonçalo Guerra, Paulo Correia
Strategy and Value Creation
Prof. Adriano Freire
Group 3: Bruno Dias, Fábio Ferreira, Fiona O'Driscoll, Gonçalo Guerra, Paulo Correia
Introduction
•Ryanair was founded in 1985 by Christopher
Ryan, Liam Lonergan and Tony Ryan
•It has grown from a single-aircraft family
operation into one of the world’s leading airlines
•It is currently the largest European low-fare
airline or, as they like to call themselves,
“Europe’s only ultra low-cost carrier.”
2
•Ryanair was founded in 1985 by Christopher
Ryan, Liam Lonergan and Tony Ryan
•It has grown from a single-aircraft family
operation into one of the world’s leading airlines
•It is currently the largest European low-fare
airline or, as they like to call themselves,
“Europe’s only ultra low-cost carrier.”
2
History
3
•Fleet expansion, now with 305
Boeing 737-800 Aircraft
•1,600 flights daily across 1,600+
routes from 57 bases
•180 destinations in 29 different
countries
•9,000+ skilled professionals
•81.5 million passengers
•Fleet of 2 Embraer Bandeirante
turbo-prop aircraft
•Initial routes:
•Waterford-London Gatwick
•Dublin-London Luton
•Ran at a loss until 1991, when
Michael O’Leary was charged with
making it profitable.
See Appendix for full company history
3
•Fleet expansion, now with 305
Boeing 737-800 Aircraft
•1,600 flights daily across 1,600+
routes from 57 bases
•180 destinations in 29 different
countries
•9,000+ skilled professionals
•81.5 million passengers
•Fleet of 2 Embraer Bandeirante
turbo-prop aircraft
•Initial routes:
•Waterford-London Gatwick
•Dublin-London Luton
•Ran at a loss until 1991, when
Michael O’Leary was charged with
making it profitable.
See Appendix for full company history
Vision
4
CURRENT/MATURING
“Retailers Aldi, H&M and Ikea as
examples Ryanair aims to follow.
All started focused on low-cost
then added choice and improved
their service. That is the journey
Ryanair is on.”
ORIGINAL/CORE
“Ryanair’s objective is to firmly establish itself as
Europe’s leading low-fares scheduled passenger
airline through continuous improvements and
expanded offerings of its low-fares service.
Ryanair aims to offer low-fares that generate
increased passenger traffic while maintaining a
continuous focus on cost-containment and
operating efficiencies.”
4
CURRENT/MATURING
“Retailers Aldi, H&M and Ikea as
examples Ryanair aims to follow.
All started focused on low-cost
then added choice and improved
their service. That is the journey
Ryanair is on.”
ORIGINAL/CORE
“Ryanair’s objective is to firmly establish itself as
Europe’s leading low-fares scheduled passenger
airline through continuous improvements and
expanded offerings of its low-fares service.
Ryanair aims to offer low-fares that generate
increased passenger traffic while maintaining a
continuous focus on cost-containment and
operating efficiencies.”
Mission
ORIGINAL/CORE
“To become Europe’s most profitable airline by rolling out proven low-
fare, no frills service in all markets in which we operate to the benefit of
passengers, people and stakeholders.”
Ryanair website
5
Narrow definition
Air
transportation
Broad definition
Work in diverse
markets to the
benefit of
passengers, people
and stakeholders
CURRENT/MATURING
“We’ll fix the things customers don’t like and improve the traveller
experience, improve the digital experience and improve the brand.”
Michael O’Leary
ORIGINAL/CORE
“To become Europe’s most profitable airline by rolling out proven low-
fare, no frills service in all markets in which we operate to the benefit of
passengers, people and stakeholders.”
Ryanair website
5
Narrow definition
Air
transportation
Broad definition
Work in diverse
markets to the
benefit of
passengers, people
and stakeholders
CURRENT/MATURING
“We’ll fix the things customers don’t like and improve the traveller
experience, improve the digital experience and improve the brand.”
Michael O’Leary
Vision & Mission
•Ryanair’s core vision is evolving as the company matures, but remains objective and
straight to the point
•Its core mission is aligned with this vision and places the values that Ryanair strongly
believes in at the center of its mission – delivering profitability, low cost and industry
leading customer standards to its passengers.
Ryanair strongly believes that its mission is to provide to people a way to travel at low-cost in
various markets.
This is the main added value that Ryanair provides to its customers, and strongly indicates its
positioning.
•Over time, its vision has evolved and more recently it has changed its focus to
improving customer relations in addition to being Europe’s “only ultra low cost airline”
Its latest mission reflects a new focus on enhancing the customer experience, as it widens its
definition of customer service, which it admits was previously “tightly defined”, adding:
“We’re on time, offer a low fare and won’t lose your bag. Now we think that’s not enough.”
It uses brands such as Aldi, Ikea, H&M and Skoda who also started as low cost providers but
over time improved customer service “They started off absolutely focused on cost, then they
focused on choice and then they improved the service. That’s the line our brand will go on.”. “
Profitability remains at the core of this new mission, best summed up as follows: “We won’t
lose our focus on the lowest fares, but we will improve customer service.” “We’ve been
careless with passengers and staff and yet 81.5 million fly with us. Imagine how much better
it will work if we stop being nasty to people and have a decent website. The opportunities are
limitless.”
6
•Ryanair’s core vision is evolving as the company matures, but remains objective and
straight to the point
•Its core mission is aligned with this vision and places the values that Ryanair strongly
believes in at the center of its mission – delivering profitability, low cost and industry
leading customer standards to its passengers.
Ryanair strongly believes that its mission is to provide to people a way to travel at low-cost in
various markets.
This is the main added value that Ryanair provides to its customers, and strongly indicates its
positioning.
•Over time, its vision has evolved and more recently it has changed its focus to
improving customer relations in addition to being Europe’s “only ultra low cost airline”
Its latest mission reflects a new focus on enhancing the customer experience, as it widens its
definition of customer service, which it admits was previously “tightly defined”, adding:
“We’re on time, offer a low fare and won’t lose your bag. Now we think that’s not enough.”
It uses brands such as Aldi, Ikea, H&M and Skoda who also started as low cost providers but
over time improved customer service “They started off absolutely focused on cost, then they
focused on choice and then they improved the service. That’s the line our brand will go on.”. “
Profitability remains at the core of this new mission, best summed up as follows: “We won’t
lose our focus on the lowest fares, but we will improve customer service.” “We’ve been
careless with passengers and staff and yet 81.5 million fly with us. Imagine how much better
it will work if we stop being nasty to people and have a decent website. The opportunities are
limitless.”
6
General Objectives SpecificMeasurableAchievableRelevantTimely
To become Europe’s
most profitable airline
Low operating costs
Non-financial
objectives
Deliver the best
customer service
performance in its
peer group
Financial
Obejctives
The main flaw in the financial and non-financial objectives is that they fail to meet all the SMART requirements since
Ryanair does not clearly compromise itself with any deadline. However, in all other respect Ryanair’s objectives
cleary set out the steps the company will focus on to deliver its mission.
To become Europe’s most profitable airline is a specific objective, certainly a relevant one, achievable since
Ryanair is one of the biggest players in the market, and measurable by Annual Report information.
To compete with low operating costs is also measurable by Annual Report information, quite specific, quite
relevant since it is one of the Key Success Factors in the market in which Ryanair operates, and already has
achieved this.
To deliver the best customer service performance in its peer group is measurable, namely by market
surveys/studies by performed by independent public or private companies, it is specific although the customer
service performance concept is not totally clear, it is relevant since it can produce a significant competitive
advantage (as demonstrated by its main LCC competitor EasyJet).
In recent year’s Ryanair’s claims to deliver the best service based on flight times, lost baggage numbers, etc. has
failed to be backed up by consumer surveys (eg. came bottom of 100 brands in a 2013 Which Survey in the UK).
However, with the launch of its “Always Getting Better” strategy in 2014 it firstly aims to fix things customers
don’t like eg. cabin baggage allowance, relaunch the website and will aim to “become as liked as they are useful”
by generally providing better customer service.
7
Ryanair’s aim and objectives are very clear: to
be profitable; to be Europe’s leading low-fares
scheduled passenger airline; to prevent further
airlines’ domination in the market ; and to
generate traffic numbers through low fares by
continuously maintaining a focus on cost
containment and operational efficiencies
(Annual Report 2013)
To become Europe’s
most profitable airline
Low operating costs
Non-financial
objectives
Deliver the best
customer service
performance in its
peer group
Financial
Obejctives
The main flaw in the financial and non-financial objectives is that they fail to meet all the SMART requirements since
Ryanair does not clearly compromise itself with any deadline. However, in all other respect Ryanair’s objectives
cleary set out the steps the company will focus on to deliver its mission.
To become Europe’s most profitable airline is a specific objective, certainly a relevant one, achievable since
Ryanair is one of the biggest players in the market, and measurable by Annual Report information.
To compete with low operating costs is also measurable by Annual Report information, quite specific, quite
relevant since it is one of the Key Success Factors in the market in which Ryanair operates, and already has
achieved this.
To deliver the best customer service performance in its peer group is measurable, namely by market
surveys/studies by performed by independent public or private companies, it is specific although the customer
service performance concept is not totally clear, it is relevant since it can produce a significant competitive
advantage (as demonstrated by its main LCC competitor EasyJet).
In recent year’s Ryanair’s claims to deliver the best service based on flight times, lost baggage numbers, etc. has
failed to be backed up by consumer surveys (eg. came bottom of 100 brands in a 2013 Which Survey in the UK).
However, with the launch of its “Always Getting Better” strategy in 2014 it firstly aims to fix things customers
don’t like eg. cabin baggage allowance, relaunch the website and will aim to “become as liked as they are useful”
by generally providing better customer service.
7
Ryanair’s aim and objectives are very clear: to
be profitable; to be Europe’s leading low-fares
scheduled passenger airline; to prevent further
airlines’ domination in the market ; and to
generate traffic numbers through low fares by
continuously maintaining a focus on cost
containment and operational efficiencies
(Annual Report 2013)
Specific Objectives
8
•Grow from 81m passengers in 2013 to 90m in 2014
2014 Passenger Numbers
•Starting flight from primary airports in Lisbon, Rome, Athens and Belgium in 2014
Primary Airports
•Penetrating Eastern European markets, with Slovakia regarded as a priority
•Create a base in Slovakia by 2015 and grow from 800,000 customers to 2m
Eastern Europe
•Target the business customer to grow from 19m (c.20% of passengers) currently to double
that figure in the next 2 years
Business Segment
•Cheap long-haul flights to the US on the agenda, within 4 to 5 years
Transatlantic
8
•Grow from 81m passengers in 2013 to 90m in 2014
2014 Passenger Numbers
•Starting flight from primary airports in Lisbon, Rome, Athens and Belgium in 2014
Primary Airports
•Penetrating Eastern European markets, with Slovakia regarded as a priority
•Create a base in Slovakia by 2015 and grow from 800,000 customers to 2m
Eastern Europe
•Target the business customer to grow from 19m (c.20% of passengers) currently to double
that figure in the next 2 years
Business Segment
•Cheap long-haul flights to the US on the agenda, within 4 to 5 years
Transatlantic
Organizational Overview
•Presence in 180 airports in
29 countries in Europe and
North Africa.
•57 bases, where they base
their aircrafts and crew
•1611 routes spread across
Europe, Eastern Europe and
North Africa.
9
•Presence in 180 airports in
29 countries in Europe and
North Africa.
•57 bases, where they base
their aircrafts and crew
•1611 routes spread across
Europe, Eastern Europe and
North Africa.
9
Organizational Overview
•Young fleet of 305 single type
aircrafts (average 4 years old,
vs. 9-11 years of typical
European carriers)
•Advantages in terms of:
–fuel efficiency,
–maintenance costs,
–flight training costs
–customer perception.
10
•Young fleet of 305 single type
aircrafts (average 4 years old,
vs. 9-11 years of typical
European carriers)
•Advantages in terms of:
–fuel efficiency,
–maintenance costs,
–flight training costs
–customer perception.
10
Organizational Overview
•More than 9000 employees.
•Yet ratio of booked pax to staff of
8,674 in 2013 is one of lowest
amongst European airlines (eg.
EasyJet has 6,914 booked pax/staff
member)
•50% of the flight crew are
contractors - employed only when
required. All are non-unionized.
•Carried around 81,5 million
passengers in 2013.
11
•More than 9000 employees.
•Yet ratio of booked pax to staff of
8,674 in 2013 is one of lowest
amongst European airlines (eg.
EasyJet has 6,914 booked pax/staff
member)
•50% of the flight crew are
contractors - employed only when
required. All are non-unionized.
•Carried around 81,5 million
passengers in 2013.
11
CEO – Michael O’Leary
12
EGOS map: E-S
•Extrovert
•Spontaneous
•Egocentric
•Risk-Taker
Strongly associated
with the Ryanair
brand…
But will this CEO’s brashness damage the brand as Ryanair seeks to win new converts
through a customer charm offensive?
12
EGOS map: E-S
•Extrovert
•Spontaneous
•Egocentric
•Risk-Taker
Strongly associated
with the Ryanair
brand…
But will this CEO’s brashness damage the brand as Ryanair seeks to win new converts
through a customer charm offensive?
Financial Overview
•Ryanair has been growing over the past two years, driven by increased
frequency of flights and new destinations.
•If we look closely to the profit from 2012 to 2013, we’ll see that the company
had a 13% increase in profit after tax to €569 million – it’s a decrease from the
25% profit from 2011 to 2012, but still a very good example of Ryanair’s
financial health.
•The airline’s aggressive strategy of cost reduction and higher ancillary
revenue has been paying off, with an operating revenue increase of around
13% to €4884 million and a record high of €1064 million in ancillary revenues
(a 20% increase from 2012).
•And by Michael O’Leary’s words, they’re not slowing down: “Ryanair continues
to look for opportunities to invest our cash wisely.”
13
•Ryanair has been growing over the past two years, driven by increased
frequency of flights and new destinations.
•If we look closely to the profit from 2012 to 2013, we’ll see that the company
had a 13% increase in profit after tax to €569 million – it’s a decrease from the
25% profit from 2011 to 2012, but still a very good example of Ryanair’s
financial health.
•The airline’s aggressive strategy of cost reduction and higher ancillary
revenue has been paying off, with an operating revenue increase of around
13% to €4884 million and a record high of €1064 million in ancillary revenues
(a 20% increase from 2012).
•And by Michael O’Leary’s words, they’re not slowing down: “Ryanair continues
to look for opportunities to invest our cash wisely.”
13
Financial Overview
14
•Since 2009, when the company made its first annual loss during the ‘00s, earnings have
been strongly seasonal, with annual profits increasingly relying on a strong summer to
offset a loss making winter (cross subsidising).
In past grounded planes during the winter but in future will focus on business
traveller segment to mitigate this seasonality.
•Strong profitability and balance sheet with large cash balance.
Returning €1.5Bn to shareholders through buy backs and special dividends over
the past 5 years. Secured a BBB+ rating to raise debt to fund new Boeing order.
"We'll be
grounding fewer
aircraft next winter
and flying more
business-type
flights from those
major cities during
the winter period"
Michael O’Leary
14
•Since 2009, when the company made its first annual loss during the ‘00s, earnings have
been strongly seasonal, with annual profits increasingly relying on a strong summer to
offset a loss making winter (cross subsidising).
In past grounded planes during the winter but in future will focus on business
traveller segment to mitigate this seasonality.
•Strong profitability and balance sheet with large cash balance.
Returning €1.5Bn to shareholders through buy backs and special dividends over
the past 5 years. Secured a BBB+ rating to raise debt to fund new Boeing order.
"We'll be
grounding fewer
aircraft next winter
and flying more
business-type
flights from those
major cities during
the winter period"
Michael O’Leary
Industry ≡ PEST
15 Description Impact Description Impact
Deregulation Decrease in margins due to increasing competition
related to deregulation
Air transportation deregulation in Europe (1978-1997)
allowed sharp rise in routes and competition and
substantial drop in prices
War
Political instability in the Middle East increases oil
costs
People got afraid to fly after Gulf War, 9-11 and Iraq
war
Terrorism
New security requirements increase operational costs
and waiting times, making air transportation less
attractive
Increase in security requirements leads to increased
waiting times, making air transportation less attractive
EU Expansion
Increasing mobility of workers and capital between
countries will lead to a decrease in the cost of these
two factors
EU future expansion will allow new routes, and a
increasing number of passengers.
EU Emissions Trading
Scheme
Increasing taxes associated with new environmental
laws
On January 1, 2014 the EU ETS for airlines serving
European airports was introduced. These have largely
been passed onto customers through fare increases.
Fuel Prices
Increase in fuel prices affects significantly companies'
profits. Efficient financial management of fuel reserves
including trading with options and futures is getting
more and more important to keep costs down
Increase in fuel prices makes air travelling less
attractive due to price increases
Sovereign debt crisis Decrease in market opportunities
Descreasing income and investment reduce ability to
travel
Trend to decrease
government subsidies
Increase in market efficiency will benefit companies
that are less dependant
Consumers will benefit from increasing competition
associated to market efficency
Business is turning
global
Increase in opportunities for growth in different
markets
Increased demand by business flyers
Falling flight prices
Introduction of LCCs and increased competition has
put pressure on all airlines to compete on price,
eroding margins
Increased demand for general people
Trends
Impact on Supply Impact on Demand
Political Factors
Economic Factors
15 Description Impact Description Impact
Deregulation Decrease in margins due to increasing competition
related to deregulation
Air transportation deregulation in Europe (1978-1997)
allowed sharp rise in routes and competition and
substantial drop in prices
War
Political instability in the Middle East increases oil
costs
People got afraid to fly after Gulf War, 9-11 and Iraq
war
Terrorism
New security requirements increase operational costs
and waiting times, making air transportation less
attractive
Increase in security requirements leads to increased
waiting times, making air transportation less attractive
EU Expansion
Increasing mobility of workers and capital between
countries will lead to a decrease in the cost of these
two factors
EU future expansion will allow new routes, and a
increasing number of passengers.
EU Emissions Trading
Scheme
Increasing taxes associated with new environmental
laws
On January 1, 2014 the EU ETS for airlines serving
European airports was introduced. These have largely
been passed onto customers through fare increases.
Fuel Prices
Increase in fuel prices affects significantly companies'
profits. Efficient financial management of fuel reserves
including trading with options and futures is getting
more and more important to keep costs down
Increase in fuel prices makes air travelling less
attractive due to price increases
Sovereign debt crisis Decrease in market opportunities
Descreasing income and investment reduce ability to
travel
Trend to decrease
government subsidies
Increase in market efficiency will benefit companies
that are less dependant
Consumers will benefit from increasing competition
associated to market efficency
Business is turning
global
Increase in opportunities for growth in different
markets
Increased demand by business flyers
Falling flight prices
Introduction of LCCs and increased competition has
put pressure on all airlines to compete on price,
eroding margins
Increased demand for general people
Trends
Impact on Supply Impact on Demand
Political Factors
Economic Factors
Industry ≡ PEST
16 Description Impact Description Impact
Holiday popularity Opportunities in new markets and in a new segment
Increased popularity of holidays in eastern European
countries abroad led to a boom in demand
Vistit relative type travel
Increase in relative type travelling creates new market
opportunities
Increased popularity of relative type holidays in
eastern increased demand
Technology Technology is fast moving but is very costly Better on-board conditions increase demand
Lower operating costs
Modern aircrafts are more economic to run, making
possible cheap air travel
Lowest production costs reduce price and therefore
increase demand
Lower turn around times
Time required for a plane from arrival to the next
departure at an airport has been reduced, mainly due
to advanced methods like aircraft fueling
simultaneously with passengers boarding. Lower turn-
around times means higher margins
Decrease in turn around times makes the product
more attractive to costumers
Online booking
Online booking lowers significantly or eliminates the
intermediation costs to companies
Online booking lowers significantly or eliminates the
intermediation costs to customers
Social Factors
Technological Factors
Trends
Impact on Supply Impact on Demand
16 Description Impact Description Impact
Holiday popularity Opportunities in new markets and in a new segment
Increased popularity of holidays in eastern European
countries abroad led to a boom in demand
Vistit relative type travel
Increase in relative type travelling creates new market
opportunities
Increased popularity of relative type holidays in
eastern increased demand
Technology Technology is fast moving but is very costly Better on-board conditions increase demand
Lower operating costs
Modern aircrafts are more economic to run, making
possible cheap air travel
Lowest production costs reduce price and therefore
increase demand
Lower turn around times
Time required for a plane from arrival to the next
departure at an airport has been reduced, mainly due
to advanced methods like aircraft fueling
simultaneously with passengers boarding. Lower turn-
around times means higher margins
Decrease in turn around times makes the product
more attractive to costumers
Online booking
Online booking lowers significantly or eliminates the
intermediation costs to companies
Online booking lowers significantly or eliminates the
intermediation costs to customers
Social Factors
Technological Factors
Trends
Impact on Supply Impact on Demand
Industry ≡ Competitors
17
•In the European space, Ryanair competes with most traditional and low-cost
airlines, shown in the diagram below (dimension by number of routes
operated). These competitors include Lufthansa, who are the largest airline in
the world by market share of air transport market.
•The main low cost carriers are Easyjet, Norwegian Air Shuttle, Air Berlin, Wizz
Air, Vueling
•Easyjet is by far the most direct competitor but Norwegian Air Shuttle (no.3)
has been competing aggressively in the LCC segment and has recently
introduced trans-Atlantic flights to NY and long haul to Asia.
17
•In the European space, Ryanair competes with most traditional and low-cost
airlines, shown in the diagram below (dimension by number of routes
operated). These competitors include Lufthansa, who are the largest airline in
the world by market share of air transport market.
•The main low cost carriers are Easyjet, Norwegian Air Shuttle, Air Berlin, Wizz
Air, Vueling
•Easyjet is by far the most direct competitor but Norwegian Air Shuttle (no.3)
has been competing aggressively in the LCC segment and has recently
introduced trans-Atlantic flights to NY and long haul to Asia.
Industry ≡ Competitors
18
Analysing the European Air Passenger
market by number of carriers (previous
slide), the Top 5 Concentration Ratio and
the HHI Index suggest a fragmented market.
Region
Top 5 HHI
concentration ratio Index
Europe 45% 524
43%
30%
26%
Ryanair
Easyjet
Others
However, if we consider
uniquely the LLC segment,
the market is quite
concentrated, as Ryanair
and Easyjet control 73% of
the market by themselves.
Source: Euromonitor, data of 2012 Top 20 airline groups in Europe by seats: 6 to 13-May-2013
18
Analysing the European Air Passenger
market by number of carriers (previous
slide), the Top 5 Concentration Ratio and
the HHI Index suggest a fragmented market.
Region
Top 5 HHI
concentration ratio Index
Europe 45% 524
43%
30%
26%
Ryanair
Easyjet
Others
However, if we consider
uniquely the LLC segment,
the market is quite
concentrated, as Ryanair
and Easyjet control 73% of
the market by themselves.
Source: Euromonitor, data of 2012 Top 20 airline groups in Europe by seats: 6 to 13-May-2013
Industry ≡ Competitor (Easyjet)
19
Strategy
•Seize the efforts and talent of
people (employees) to add values
to customers at low-prices
•Partnerships with primary
airports to get more
opportunities
Objectives
•Delivery record profits
•Growth on profit margin
•Improved returns for
shareholders
Competencies
•Low cost and high margins
•Own customer proposition
based on a brand with-
brand has pan-European
reach
•Compromise with safety
Assumptions
•Be the best low-cost airline
in the world
19
Strategy
•Seize the efforts and talent of
people (employees) to add values
to customers at low-prices
•Partnerships with primary
airports to get more
opportunities
Objectives
•Delivery record profits
•Growth on profit margin
•Improved returns for
shareholders
Competencies
•Low cost and high margins
•Own customer proposition
based on a brand with-
brand has pan-European
reach
•Compromise with safety
Assumptions
•Be the best low-cost airline
in the world
Industry ≡ Competitor (Easyjet)
We analyze the main Ryanair’s main competitor, EasyJet, in order to infer what are the main threats
that Ryanair faces regarding it’s competitors
•EasyJet, as Ryanair, differentiates itself on its ability to deliver products with high margins and
based on low costs. However, EasyJet has competencies that are not the main concern of Ryanair:
its own customer proposition based on its pan–european brand and the importance given to
safety.
•Its strategy of leveraging employees' hard work and talent to achieve its goals is, at least on its
message to the exterior, different from Ryanair’s, which is less prone to stress the importance of
its employees, although its objectives are similar: deliver record profits, growth on profit margin
and improve returns for shareholders
•EasyJet flies to primary airports but manages to recover these costs in yields targeting business
travelers, for example, aiming to be a long-term partner for airports and exploring further
opportunities that may arrive with these partnerships.
• Ryanair, on the other side, relies on secondary airports and tactics that may seem as aggressively
confident and self-assertive. However, Ryanair seems to be shifting towards a more costumer-
oriented and sophisticated strategy, improving its CRM and doubling its advertising budget.
•Generally, Easyjet has roughly the same goals as Ryanair, but seems to be more worried to
differentiate its services and its brand. On a market segment (low-fares airlines) with
increasingly fierce competition, this is a serious threat to Ryanair, which has a more rigid
approach and seems to have difficulty in adapting its strategy to the new market conditions .
However, Ryanair has made recently efforts to broaden its strategy and adapt itself to a more
customer-oriented market, but is, regarding this issue, behind Easyjet
20
We analyze the main Ryanair’s main competitor, EasyJet, in order to infer what are the main threats
that Ryanair faces regarding it’s competitors
•EasyJet, as Ryanair, differentiates itself on its ability to deliver products with high margins and
based on low costs. However, EasyJet has competencies that are not the main concern of Ryanair:
its own customer proposition based on its pan–european brand and the importance given to
safety.
•Its strategy of leveraging employees' hard work and talent to achieve its goals is, at least on its
message to the exterior, different from Ryanair’s, which is less prone to stress the importance of
its employees, although its objectives are similar: deliver record profits, growth on profit margin
and improve returns for shareholders
•EasyJet flies to primary airports but manages to recover these costs in yields targeting business
travelers, for example, aiming to be a long-term partner for airports and exploring further
opportunities that may arrive with these partnerships.
• Ryanair, on the other side, relies on secondary airports and tactics that may seem as aggressively
confident and self-assertive. However, Ryanair seems to be shifting towards a more costumer-
oriented and sophisticated strategy, improving its CRM and doubling its advertising budget.
•Generally, Easyjet has roughly the same goals as Ryanair, but seems to be more worried to
differentiate its services and its brand. On a market segment (low-fares airlines) with
increasingly fierce competition, this is a serious threat to Ryanair, which has a more rigid
approach and seems to have difficulty in adapting its strategy to the new market conditions .
However, Ryanair has made recently efforts to broaden its strategy and adapt itself to a more
customer-oriented market, but is, regarding this issue, behind Easyjet
20
Industry ≡ Segments
21
•The European airline industry has 2
main segments:
–Cargo
–Passengers
•Our analysis will focus on the
passenger airline segment, given
that Ryanair doesn’t operate on
cargo
•The main factors used to segment
the this market are:
–Distance: Short or Long-haul (usually
LCC’s only operate short-haul flights)
–Fare Pricing
–Customer Intention (which is a
segmentation that can be applied to
each Fare Pricing category)
Customer
Intention
Fare
Pricing
Distance Industry
Passenger
Airlines
Short-haul
Low Cost
Leisure
Business
Traditional
Carriers
Leisure
Business
Charter
Leisure
Business
Long-haul
Traditional
Carriers
Leisure
Business
Charter
Leisure
Business
Cargo
21
•The European airline industry has 2
main segments:
–Cargo
–Passengers
•Our analysis will focus on the
passenger airline segment, given
that Ryanair doesn’t operate on
cargo
•The main factors used to segment
the this market are:
–Distance: Short or Long-haul (usually
LCC’s only operate short-haul flights)
–Fare Pricing
–Customer Intention (which is a
segmentation that can be applied to
each Fare Pricing category)
Customer
Intention
Fare
Pricing
Distance Industry
Passenger
Airlines
Short-haul
Low Cost
Leisure
Business
Traditional
Carriers
Leisure
Business
Charter
Leisure
Business
Long-haul
Traditional
Carriers
Leisure
Business
Charter
Leisure
Business
Cargo
Industry ≡ Segments
•Low cost carriers customers are usually more price-sensitive than the traditional
carriers customers
•Punctuality and reliability are also key factors, especially for business customers
•They’re usually more interested in short-haul, usually direct flights (no stopovers)
both for leisure or for business
22
Fare Pricing
Low Cost Traditional Charter
Customer
Intention
Leisure
Price sensitive; seat only
product; point-to-point;
secondary airports
Differentiation of product
by service (eg. first class,
loyalty schemes, lounge);
point-to-point and
network; primary airports
Customer insensitive to
brand; reliance on tour
operators; largely
unscheduled service; point
to point; different airport
destinations
Business
Price sensitive; seat only
but some options eg. seat
allocation; point-to-point;
primary as well as
secondary airports
Differentiation of product
by service (eg. business
class, lounges, ticket
flexibility); point-to-point
and network; primary
airports
Customer insensitive to
brand; reliance on
tour/agency bookings;
largely unscheduled
service; point to point;
limited routes (eg. Egypt,
Caribbean)
•Low cost carriers customers are usually more price-sensitive than the traditional
carriers customers
•Punctuality and reliability are also key factors, especially for business customers
•They’re usually more interested in short-haul, usually direct flights (no stopovers)
both for leisure or for business
22
Fare Pricing
Low Cost Traditional Charter
Customer
Intention
Leisure
Price sensitive; seat only
product; point-to-point;
secondary airports
Differentiation of product
by service (eg. first class,
loyalty schemes, lounge);
point-to-point and
network; primary airports
Customer insensitive to
brand; reliance on tour
operators; largely
unscheduled service; point
to point; different airport
destinations
Business
Price sensitive; seat only
but some options eg. seat
allocation; point-to-point;
primary as well as
secondary airports
Differentiation of product
by service (eg. business
class, lounges, ticket
flexibility); point-to-point
and network; primary
airports
Customer insensitive to
brand; reliance on
tour/agency bookings;
largely unscheduled
service; point to point;
limited routes (eg. Egypt,
Caribbean)
Industry ≡ Passengers by Segment
23
•Leisure travellers make up the biggest
class of passengers on the majority of
flights
•The vast majority of passengers are
leisure customers, on both internal and
external routes
•Within leisure on flights to Europe, approx.
50% are holiday makers while a further
~20% are Visiting Friends & Relatives
•Business travellers are c.20% of passengers
in this market and growing as economic
growth recovers
"At the major airports, there is a higher proportion of business travellers, politicians, bureaucrats
(and) consultants... We have a major growth opportunity in the next 12 to 24 months.“ Michael O’Leary
(Based on UK Data, 2002 - 12)
23
•Leisure travellers make up the biggest
class of passengers on the majority of
flights
•The vast majority of passengers are
leisure customers, on both internal and
external routes
•Within leisure on flights to Europe, approx.
50% are holiday makers while a further
~20% are Visiting Friends & Relatives
•Business travellers are c.20% of passengers
in this market and growing as economic
growth recovers
"At the major airports, there is a higher proportion of business travellers, politicians, bureaucrats
(and) consultants... We have a major growth opportunity in the next 12 to 24 months.“ Michael O’Leary
(Based on UK Data, 2002 - 12)
Industry ≡ Business Segment Requirements
24
(Based on PWC Global Survey “Lessons Learned From the Airline Industry” 2013)
24
(Based on PWC Global Survey “Lessons Learned From the Airline Industry” 2013)
(Based on PWC Global Survey “Lessons Learned From the Airline Industry” 2013)
Industry ≡ Business Segment Requirements
25
Industry ≡ Business Segment Requirements
25
Industry ≡ Business Booking Channels
PhoCusWright-Travelport White Paper (2013):
In 2014, European companies will book 41 billion of travel
through the online tools of large agencies…representing a
29% spike in online gross bookings over 4 years.
2/3 will go through the largest, pan-European travel
management companies (TMCs)—Carlson Wagonlit
Travel, American Express, Hogg Robinson Group (HRG), BCD,
and Expedia’s Egencia.
Local TMCs are also predicted to see a solid growth rate of
18% between 2010 and 2014
In 2014, TMCs, including corporate booking tools, hotel
booking aggregators, and online travel management
companies, will book 13.1 billion euro in online managed
travel bookings
But 7.7 billion euro in online managed travel bookings will be
done through supplier websites, such as those run by railway
company agencies and low-cost carriers like Easyjet.
Online channels for managed travel seem to be blossoming in popularity because automation has been found to be
cheaper, more time efficient, and provides easier accounting
Companies are switching to agencies because they can help keep business travel expenditures under budget by
restricting the type of travel that employees can purchase
TMCs may have access to discounted airline, hotel and car rental rates, unlike small businesses that cannot
individually negotiate such discounts because their volume is comparatively small. Three recent studies found
that airfares booked through TMCs cost between 9 and 24% less than fares found on the open market.
Studies also show that nearly half of bookings done through TMCs have to be edited or changed at some point
prior to departure. So companies may like having TMCs for their ability to quickly cope with changes to
itineraries.
HRG Airtrends Survey (2013):
Still a focus on cost by our clients and an increase in the use
of economy fares, particularly on short-haul destinations
Business class transactions have declined dramatically across
domestic and short-haul destinations in mainland Europe with
drops of 22% and 45% respectively.
Economy and low-cost carrier transactions on short-haul
destinations in Europe rose by 1% and 4% respectively,
suggesting a widespread shift in travel policy on these routes.
26
PhoCusWright-Travelport White Paper (2013):
In 2014, European companies will book 41 billion of travel
through the online tools of large agencies…representing a
29% spike in online gross bookings over 4 years.
2/3 will go through the largest, pan-European travel
management companies (TMCs)—Carlson Wagonlit
Travel, American Express, Hogg Robinson Group (HRG), BCD,
and Expedia’s Egencia.
Local TMCs are also predicted to see a solid growth rate of
18% between 2010 and 2014
In 2014, TMCs, including corporate booking tools, hotel
booking aggregators, and online travel management
companies, will book 13.1 billion euro in online managed
travel bookings
But 7.7 billion euro in online managed travel bookings will be
done through supplier websites, such as those run by railway
company agencies and low-cost carriers like Easyjet.
Online channels for managed travel seem to be blossoming in popularity because automation has been found to be
cheaper, more time efficient, and provides easier accounting
Companies are switching to agencies because they can help keep business travel expenditures under budget by
restricting the type of travel that employees can purchase
TMCs may have access to discounted airline, hotel and car rental rates, unlike small businesses that cannot
individually negotiate such discounts because their volume is comparatively small. Three recent studies found
that airfares booked through TMCs cost between 9 and 24% less than fares found on the open market.
Studies also show that nearly half of bookings done through TMCs have to be edited or changed at some point
prior to departure. So companies may like having TMCs for their ability to quickly cope with changes to
itineraries.
HRG Airtrends Survey (2013):
Still a focus on cost by our clients and an increase in the use
of economy fares, particularly on short-haul destinations
Business class transactions have declined dramatically across
domestic and short-haul destinations in mainland Europe with
drops of 22% and 45% respectively.
Economy and low-cost carrier transactions on short-haul
destinations in Europe rose by 1% and 4% respectively,
suggesting a widespread shift in travel policy on these routes.
26
Industry ≡ Porter’s 5 Forces
27
Medium
Strong
Weak
Strong Weak
Weak
Intensity of rivalry
Threat of Substitute
Products
Power of Buyers
Power of Suppliers
Power of New Entrants
According to the Porter’s 5 Forces Model, there is a Medium overall
expected impact on Margins.
27
Medium
Strong
Weak
Strong Weak
Weak
Intensity of rivalry
Threat of Substitute
Products
Power of Buyers
Power of Suppliers
Power of New Entrants
According to the Porter’s 5 Forces Model, there is a Medium overall
expected impact on Margins.
Industry ≡ Attractiveness
28
SOURCE:
Value, Growth (to 2017) and Risk - Euromonitor (Passport statistics and “Low Cost Carriers Exploring New Territories”)
* Margin - CAPA data for 2012 industry values of Low Cost Airline companies were used based on EasyJet, Norwegian,
Ryanair and Vueling Airlines; for traditional an average of the CAPA value (-1%) and Lufthansa (3%) was used. For charter
Hoover.com data for Monarch, Tui Travel, Thomson Airways and Tomas Cook was used
** Risk - Measured from 2007 to 2012 based on the standard deviation of annual growth in market values
•The Low Cost Carrier segment of the European passenger airline industry is
the most attractive of the 3 segments analysed. This is due to higher
forecast CAGR (2x other segments), higher margins (by a factor of 8x times)
and relatively low volatility, despite economic weakness in recent years.
Value (in $US)
Carriers
Value
(Mkt Share)
Growth Margin
*
Risk
**
Attractiveness
Traditional 65.316.985 0,71 0,04 0,01
0,05 0,15
Low Cost 16.154.474 0,18 0,08 0,08 0,02 0,67
Charter 10.831.102 0,12 0,04 0,01 0,01 0,15 Value Growth Margin Risk
Attractiveness
Index
Traditional
LCC
Charter
28
SOURCE:
Value, Growth (to 2017) and Risk - Euromonitor (Passport statistics and “Low Cost Carriers Exploring New Territories”)
* Margin - CAPA data for 2012 industry values of Low Cost Airline companies were used based on EasyJet, Norwegian,
Ryanair and Vueling Airlines; for traditional an average of the CAPA value (-1%) and Lufthansa (3%) was used. For charter
Hoover.com data for Monarch, Tui Travel, Thomson Airways and Tomas Cook was used
** Risk - Measured from 2007 to 2012 based on the standard deviation of annual growth in market values
•The Low Cost Carrier segment of the European passenger airline industry is
the most attractive of the 3 segments analysed. This is due to higher
forecast CAGR (2x other segments), higher margins (by a factor of 8x times)
and relatively low volatility, despite economic weakness in recent years.
Value (in $US)
Carriers
Value
(Mkt Share)
Growth Margin
*
Risk
**
Attractiveness
Traditional 65.316.985 0,71 0,04 0,01
0,05 0,15
Low Cost 16.154.474 0,18 0,08 0,08 0,02 0,67
Charter 10.831.102 0,12 0,04 0,01 0,01 0,15 Value Growth Margin Risk
Attractiveness
Index
Traditional
LCC
Charter
Industry ≡ Lifecycle
29
Decline Maturity Growth Introduction
•Until 2017, LCC segment is
expected to grow on average
by 7-9%, compared to 4% of
traditional carriers
•In Europe, CAGR difference is
even higher, being on average
7,5% , compared to 2% of
traditional carriers
•(see PEST analysis for factors
affecting the segment)
Charter
Low Cost
Traditional
29
Decline Maturity Growth Introduction
•Until 2017, LCC segment is
expected to grow on average
by 7-9%, compared to 4% of
traditional carriers
•In Europe, CAGR difference is
even higher, being on average
7,5% , compared to 2% of
traditional carriers
•(see PEST analysis for factors
affecting the segment)
Charter
Low Cost
Traditional
Industry ≡ Key Success Factors
•Ryanair only operates in short-haul, mainly within the EU.
•In this segment, price is key for both business and leisure travelers, while
features such as comfort are not as important.
•Currently approximately 20 - 25% of customers (c.19m) are business.
30 Segment Description Key buying factors
Competition
factors
Key success
factors
Passenger,
Short-haul, Low
fare Leisure
travelers
Travelers that
consider low
prices the most
important factor
Low price Low-cost
Cost effective
services
Routes
Advertising
Availability
through
internet
Smart routing
Low fares
Brand
awareness
Safety
Online booking
Basic service
quality
Passenger, Short-
haul, Low fare
Business travelers
Price is not the
most important
factor but is
valued
Interested in
optimize time,
comfort and
money
Low price
Punctuality
Flight reliability
Low-cost
Cost effective
services
Routes
Advertising
Availability
through
internet
Customer
service
Smart routing
Low fares
Brand
awareness
Safety
Online booking
Basic service
quality
Added
Customer
Service
•Ryanair only operates in short-haul, mainly within the EU.
•In this segment, price is key for both business and leisure travelers, while
features such as comfort are not as important.
•Currently approximately 20 - 25% of customers (c.19m) are business.
30 Segment Description Key buying factors
Competition
factors
Key success
factors
Passenger,
Short-haul, Low
fare Leisure
travelers
Travelers that
consider low
prices the most
important factor
Low price Low-cost
Cost effective
services
Routes
Advertising
Availability
through
internet
Smart routing
Low fares
Brand
awareness
Safety
Online booking
Basic service
quality
Passenger, Short-
haul, Low fare
Business travelers
Price is not the
most important
factor but is
valued
Interested in
optimize time,
comfort and
money
Low price
Punctuality
Flight reliability
Low-cost
Cost effective
services
Routes
Advertising
Availability
through
internet
Customer
service
Smart routing
Low fares
Brand
awareness
Safety
Online booking
Basic service
quality
Added
Customer
Service
Resources
31
Human Resources
•More than 9,000 employees
•Expanding workforce – 500 new pilots, engineers and cabin crew in 2014
•Number of employees per plane lower than the industry’s average (around 8,700 passengers per staff
member)
•Highly trained (graduated) pilots and cabin crew with low training costs
•Staff multi-task and paid by performance (eg. concessions on sales, etc.)
•Non-unionized staff
Organizational Resources
•Fleet of 305 aircrafts (Boeings 737-800’s) - standardised fleet with low maintenance & training costs
•Young, efficient fleet – on average with less than 5 years
•Maximum aircraft utilization
•Headquarters in Dublin Airport – benefits from lower tax and labour conditions
•Largest penetration across Europe - 57 bases and 1,611 routes across 29 countries and a presence in 180 airports
•Internet booking only - reduces costs. Relaunch of website in 2014.
•Partnerships with hotels, car rental companies and other ancillary service providers
•Airline reputation - punctual and reliable flights (93% flights on time), clean safety record and fewer baggage losses
Financial Resources
•Strong operating margins, cash generation and balance sheet
•Stock market listing allows access to equity capital for investment – currently utilizing cash balances to buy back stock
and pay dividends
•Recent S&P rating will allow access to capital markets to fund Boeing purchase
•No/low agent commissions and innovative monetization of ancillary revenues (eg. advertising on internet, boarding
cards and planes)
•Access to attractive airport subsidies, particularly from secondary airports
•No legacy pension plan issues (which many traditional carriers have to manage)
31
Human Resources
•More than 9,000 employees
•Expanding workforce – 500 new pilots, engineers and cabin crew in 2014
•Number of employees per plane lower than the industry’s average (around 8,700 passengers per staff
member)
•Highly trained (graduated) pilots and cabin crew with low training costs
•Staff multi-task and paid by performance (eg. concessions on sales, etc.)
•Non-unionized staff
Organizational Resources
•Fleet of 305 aircrafts (Boeings 737-800’s) - standardised fleet with low maintenance & training costs
•Young, efficient fleet – on average with less than 5 years
•Maximum aircraft utilization
•Headquarters in Dublin Airport – benefits from lower tax and labour conditions
•Largest penetration across Europe - 57 bases and 1,611 routes across 29 countries and a presence in 180 airports
•Internet booking only - reduces costs. Relaunch of website in 2014.
•Partnerships with hotels, car rental companies and other ancillary service providers
•Airline reputation - punctual and reliable flights (93% flights on time), clean safety record and fewer baggage losses
Financial Resources
•Strong operating margins, cash generation and balance sheet
•Stock market listing allows access to equity capital for investment – currently utilizing cash balances to buy back stock
and pay dividends
•Recent S&P rating will allow access to capital markets to fund Boeing purchase
•No/low agent commissions and innovative monetization of ancillary revenues (eg. advertising on internet, boarding
cards and planes)
•Access to attractive airport subsidies, particularly from secondary airports
•No legacy pension plan issues (which many traditional carriers have to manage)
Economy Type Potential
Scale
High fleet turnarounds
Increase of cabin crew per flight
Staff payment structure linked with performance
Experience
Bargaining power with airports acquired along the years
Decrease in maintenance costs
Optimization of spare parts
Optimization of seat occupation
Scope
Partnerships created with hotels and car rental services
Ryanair-branded credit card
Airport parking and bus and train transfers
32
•Strong market position, with significant scale advantages in Ryanair's key airports, as
well as a limited amount of competition on the company's route networks.
•Ryanair is one of the best companies in the world when it comes to resource
utilization. The usage rate is very high (high load factors and high numbers of
passengers served / member of staff) due of the optimization of resource utilization.
•Connected to that, is also the company’s payment structure. There’s a link between
staff performance and remuneration, usually, that comes with a higher productivity
and lower waste of resources.
Scale, experience and scope economies
Scale
High fleet turnarounds
Increase of cabin crew per flight
Staff payment structure linked with performance
Experience
Bargaining power with airports acquired along the years
Decrease in maintenance costs
Optimization of spare parts
Optimization of seat occupation
Scope
Partnerships created with hotels and car rental services
Ryanair-branded credit card
Airport parking and bus and train transfers
32
•Strong market position, with significant scale advantages in Ryanair's key airports, as
well as a limited amount of competition on the company's route networks.
•Ryanair is one of the best companies in the world when it comes to resource
utilization. The usage rate is very high (high load factors and high numbers of
passengers served / member of staff) due of the optimization of resource utilization.
•Connected to that, is also the company’s payment structure. There’s a link between
staff performance and remuneration, usually, that comes with a higher productivity
and lower waste of resources.
Scale, experience and scope economies
Economy Type Potential
Scale
High fleet turnarounds
Increase of cabin crew per flight
Staff payment structure linked with performance
Experience
Bargaining power with airports acquired along the years
Decrease in maintenance costs
Optimization of spare parts
Optimization of seat occupation
Scope
Partnerships created with hotels and car rental services
Ryanair-branded credit card
Airport parking and bus and train transfers
33
•Due to the amount of business that Ryanair can attract to the airports where it operates (usually
secondary ones), it has gaining great bargaining power with them. That is very useful for their time
optimization strategy, hangar placement and even in terms of subsidies received. This bargaining
power has also been used very effective in its deals with Boeing over the years.
•Maintenance has been very stable through time, largely due to the use of a standarised fleet.
Spare parts are optimized due to the purchase of aircrafts from a single manufacturer, leading to a
very standardized process.
•Generally Ryanair has achieved high operating efficiency due to its focus on costs , allowing it to
operate at a significantly lower cost per passenger than its peers. Seat occupation has gone up due
to the company’s high punctuality, low fares policy and also due to the special discounts given to
passengers to occupy otherwise unsold seats.
Scale, experience and scope economies
Scale
High fleet turnarounds
Increase of cabin crew per flight
Staff payment structure linked with performance
Experience
Bargaining power with airports acquired along the years
Decrease in maintenance costs
Optimization of spare parts
Optimization of seat occupation
Scope
Partnerships created with hotels and car rental services
Ryanair-branded credit card
Airport parking and bus and train transfers
33
•Due to the amount of business that Ryanair can attract to the airports where it operates (usually
secondary ones), it has gaining great bargaining power with them. That is very useful for their time
optimization strategy, hangar placement and even in terms of subsidies received. This bargaining
power has also been used very effective in its deals with Boeing over the years.
•Maintenance has been very stable through time, largely due to the use of a standarised fleet.
Spare parts are optimized due to the purchase of aircrafts from a single manufacturer, leading to a
very standardized process.
•Generally Ryanair has achieved high operating efficiency due to its focus on costs , allowing it to
operate at a significantly lower cost per passenger than its peers. Seat occupation has gone up due
to the company’s high punctuality, low fares policy and also due to the special discounts given to
passengers to occupy otherwise unsold seats.
Scale, experience and scope economies
34
•Over the years Ryanair has proven to be very attentive to other possibilities of revenue
and attracting new clients. With that in mind, the airline has developed strategic
partnerships with other companies that could improve even further the travel
experience of their customers, making it a whole package, key-in-hand kind of deal.
This is often achieved through strategic alliances with car rental companies, hotels, bus
and trains transfers, airport parking lots and credit card companies.
•Ryanair also takes advantage of its well defined processes to extract additional revenue
from different services, such as in-flight sales. Currently, ancillary revenues account for
20% of Ryanair’s total revenues.
Scale, experience and scope economies Economy Type Potential
Scale
High fleet turnarounds
Increase of cabin crew per flight
Staff payment structure linked with performance
Experience
Bargaining power with airports acquired along the years
Decrease in maintenance costs
Optimization of spare parts
Optimization of seat occupation
Scope
Partnerships created with hotels and car rental services
Ryanair-branded credit card
Airport parking and bus and train transfers
•Over the years Ryanair has proven to be very attentive to other possibilities of revenue
and attracting new clients. With that in mind, the airline has developed strategic
partnerships with other companies that could improve even further the travel
experience of their customers, making it a whole package, key-in-hand kind of deal.
This is often achieved through strategic alliances with car rental companies, hotels, bus
and trains transfers, airport parking lots and credit card companies.
•Ryanair also takes advantage of its well defined processes to extract additional revenue
from different services, such as in-flight sales. Currently, ancillary revenues account for
20% of Ryanair’s total revenues.
Scale, experience and scope economies Economy Type Potential
Scale
High fleet turnarounds
Increase of cabin crew per flight
Staff payment structure linked with performance
Experience
Bargaining power with airports acquired along the years
Decrease in maintenance costs
Optimization of spare parts
Optimization of seat occupation
Scope
Partnerships created with hotels and car rental services
Ryanair-branded credit card
Airport parking and bus and train transfers
Competencies & Strategic Fit
35 Strengths
Value
Creation
Difficult to
Imitate
Rare to find
in the
market
Organizational
Support
Core
Competency
Low fares
Cost effectiveness
Innovation in Ancillary
services
Largest European
network
Active route
management
Fleet management –
standardized, modern
and utilization rate
Staff management – use
of contracts and non-
unionized
Reliability – punctuality
and baggage handling
Rapid turnaround
Internet booking
Bargaining power –
airlines, airports, etc.
35 Strengths
Value
Creation
Difficult to
Imitate
Rare to find
in the
market
Organizational
Support
Core
Competency
Low fares
Cost effectiveness
Innovation in Ancillary
services
Largest European
network
Active route
management
Fleet management –
standardized, modern
and utilization rate
Staff management – use
of contracts and non-
unionized
Reliability – punctuality
and baggage handling
Rapid turnaround
Internet booking
Bargaining power –
airlines, airports, etc.
Competencies ≡ Cost Effectiveness
•Ryanair’s superior cost
effectiveness is attributed
to the following
Airport Access & Handling
Costs
Aircraft Equipment Costs
Personnel Costs
Customer Service Costs
Fuel Costs reduced through
“flying slow” policy
36
•Ryanair’s superior cost
effectiveness is attributed
to the following
Airport Access & Handling
Costs
Aircraft Equipment Costs
Personnel Costs
Customer Service Costs
Fuel Costs reduced through
“flying slow” policy
36
Competencies ≡ Other
•Ryanair’s high number of routes provided in Europe and North of Africa (1611)
gives the company some bargaining power over the airports in which it
operates. Because they’re usually secondary airports, having an airline with a
high turnaround rate like Ryanair is a huge boost in revenue.
•The effective management of these routes is paramount. Ryanair is looking for
profitable routes. If they don’t have a high occupancy rate in the flights of
those routes, they are closed shortly (a good example was the short life of the
Lisbon-Faro route than was only up for a couple of weeks).
•Ancillary Revenues are some of the most important sources of revenue for
LCC. In Ryanair’s case, that basically unbundles its service, is a way to find new
services for which customers can be charged besides ticketing. On-flight sales
and baggage fees account for most part of them.
•A high standardized and young fleet also helps Ryanair minimize its
maintenance and spare parts costs. This has a huge weight in the airline’s
operating margins. Once again, having a fleet comprised of the same airplane
is a way to maximize one of Ryanair’s focus points, cost effectiveness.
37
•Ryanair’s high number of routes provided in Europe and North of Africa (1611)
gives the company some bargaining power over the airports in which it
operates. Because they’re usually secondary airports, having an airline with a
high turnaround rate like Ryanair is a huge boost in revenue.
•The effective management of these routes is paramount. Ryanair is looking for
profitable routes. If they don’t have a high occupancy rate in the flights of
those routes, they are closed shortly (a good example was the short life of the
Lisbon-Faro route than was only up for a couple of weeks).
•Ancillary Revenues are some of the most important sources of revenue for
LCC. In Ryanair’s case, that basically unbundles its service, is a way to find new
services for which customers can be charged besides ticketing. On-flight sales
and baggage fees account for most part of them.
•A high standardized and young fleet also helps Ryanair minimize its
maintenance and spare parts costs. This has a huge weight in the airline’s
operating margins. Once again, having a fleet comprised of the same airplane
is a way to maximize one of Ryanair’s focus points, cost effectiveness.
37
Brand ≡ Strength or Weakness?
38
Despite being one of the few airlines in Europe to successfully delink itself from its country of origin and therefore build a
truly international brand, Ryanair’s brand image is poor as it has always been considered as a not so customer friendly
brand. It has had to defend itself in the UK due to customer related charges and that, obviously, took its toll in the
already not so friendly image Ryanair had.
The CEO, Michael O’Leary, has often labeled customers as “idiots”, called those who forget to print their boarding pass
“stupid” and told anyone looking for a refund to “**** off”. Which might not be the best way to treat your customers.
Kenny Jacobs, the recently appointed chief marketing officer looks to move the airline into a friendlier direction, towards
the customers and their needs and not treat them like an inconvenience that must be dealt with.
But know it’s taking a turn towards the other direction, assuming that profit and low costs are not the only important
things in the world when you’re providing services. By the ending of 2013, Ryanair felt the impact of not regarding their
customers as they should in their profits. Shareholders also wanted the company to turn in another direction in response
to its poor customer image (in addition to its poor legal image eg. received an 8m euro fine for labour contracts in France
in 2013 and has been the subject of several court and EU investigations, over airport subsidies, Aer Lingus takeover, etc.)
Simon Carter, marketing director at Fujitsu, recently stated
that it’s “interesting that Ryanair has finally concluded that
the textbooks were right, that customers do have a choice
and that customer respect is necessary”.
According to YouGov’s BrandIndex, Ryanair’s ratings have
been going up since they adopted this new strategy.
Reputation, Brand Impression, Quality and Buzz have all
gone up ate least half a point. To top it all, Ryanair’s Index
score (the average of all perception measures including
impression, quality, value, reputation, satisfaction and
recommendation) rose more than five points.
Despite all these rises, Ryanair’s values are still negative.
Than is one of the main reasons why they’re trying a
different approach, to try and capture a slice of the market
that doesn’t care just about the price, but is also conscious
of the service quality they should receive and demand it.
38
Despite being one of the few airlines in Europe to successfully delink itself from its country of origin and therefore build a
truly international brand, Ryanair’s brand image is poor as it has always been considered as a not so customer friendly
brand. It has had to defend itself in the UK due to customer related charges and that, obviously, took its toll in the
already not so friendly image Ryanair had.
The CEO, Michael O’Leary, has often labeled customers as “idiots”, called those who forget to print their boarding pass
“stupid” and told anyone looking for a refund to “**** off”. Which might not be the best way to treat your customers.
Kenny Jacobs, the recently appointed chief marketing officer looks to move the airline into a friendlier direction, towards
the customers and their needs and not treat them like an inconvenience that must be dealt with.
But know it’s taking a turn towards the other direction, assuming that profit and low costs are not the only important
things in the world when you’re providing services. By the ending of 2013, Ryanair felt the impact of not regarding their
customers as they should in their profits. Shareholders also wanted the company to turn in another direction in response
to its poor customer image (in addition to its poor legal image eg. received an 8m euro fine for labour contracts in France
in 2013 and has been the subject of several court and EU investigations, over airport subsidies, Aer Lingus takeover, etc.)
Simon Carter, marketing director at Fujitsu, recently stated
that it’s “interesting that Ryanair has finally concluded that
the textbooks were right, that customers do have a choice
and that customer respect is necessary”.
According to YouGov’s BrandIndex, Ryanair’s ratings have
been going up since they adopted this new strategy.
Reputation, Brand Impression, Quality and Buzz have all
gone up ate least half a point. To top it all, Ryanair’s Index
score (the average of all perception measures including
impression, quality, value, reputation, satisfaction and
recommendation) rose more than five points.
Despite all these rises, Ryanair’s values are still negative.
Than is one of the main reasons why they’re trying a
different approach, to try and capture a slice of the market
that doesn’t care just about the price, but is also conscious
of the service quality they should receive and demand it.
Competencies & Strategic Fit
39 Passenger
> Short-haul
> Low fare
> Leisure travelers
Low
fares
Smart
routing
Brand
awareness
Safety
Online
booking
Basic
service
quality
Punctuality 4 2 5 3 5
Lowest fares 5 2 5
3 4
Staff specialization 5 1 2 3 2 5
Bargaining power with airports 5 5 3
2
Continuous Innovative measures
to increase Ancillary services
5 1 3
Largest short-haul European
network
3 3 4 1 4
Innovation 5 3 5 1 3 4
Average 4,57 2,67 3,57 2,00 2,40 3,86
Overall Score 3,18
Passenger
> Short-haul
> Low fare
> Business travelers
Low
fares
Smart
routing
Brand
awareness
Safety
Online
booking
Basic
service
quality
Added
Customer
Service
Punctuality 4 2 5 4 5 5
Lowest fares 5 2 5 3 4 3
Staff specialization 5 1 2 3 2 5 5
Bargaining power with
airports
5 5 3 2 3
Continuous Innovative
measures to increase
Ancillary services
5
1
3 4
Largest short-haul European
network
3 3 4 1 4 5
Innovation 5 3 5 1 3 4 4
Average 4,57 2,67 3,57 2,00 2,60 3,86 4,14
Overall Score 3,34
The Core Competencies of Ryanair are
highly connected to operational
services, in a way they are the means
to maximize time, staff work, aircraft
utilization and eventually profit.
When we bear in mind the Lowest
Fares, Staff specialization, Punctuality,
Bargaining power with airports,
Continuous Innovative Measures to
increase ancillary services, their
short-haul European network and
innovative skills, we cannot avoid
connecting them to a company that
has a high turnover and a high ratio of
service delivery.
The Core Competences of
Ryanair are very well
connected to the Key Success
Factors of the industry in
which it operates. This can be
one of the best reasons why
Ryanair has enjoyed such
success over the last 29 years.
39 Passenger
> Short-haul
> Low fare
> Leisure travelers
Low
fares
Smart
routing
Brand
awareness
Safety
Online
booking
Basic
service
quality
Punctuality 4 2 5 3 5
Lowest fares 5 2 5
3 4
Staff specialization 5 1 2 3 2 5
Bargaining power with airports 5 5 3
2
Continuous Innovative measures
to increase Ancillary services
5 1 3
Largest short-haul European
network
3 3 4 1 4
Innovation 5 3 5 1 3 4
Average 4,57 2,67 3,57 2,00 2,40 3,86
Overall Score 3,18
Passenger
> Short-haul
> Low fare
> Business travelers
Low
fares
Smart
routing
Brand
awareness
Safety
Online
booking
Basic
service
quality
Added
Customer
Service
Punctuality 4 2 5 4 5 5
Lowest fares 5 2 5 3 4 3
Staff specialization 5 1 2 3 2 5 5
Bargaining power with
airports
5 5 3 2 3
Continuous Innovative
measures to increase
Ancillary services
5
1
3 4
Largest short-haul European
network
3 3 4 1 4 5
Innovation 5 3 5 1 3 4 4
Average 4,57 2,67 3,57 2,00 2,60 3,86 4,14
Overall Score 3,34
The Core Competencies of Ryanair are
highly connected to operational
services, in a way they are the means
to maximize time, staff work, aircraft
utilization and eventually profit.
When we bear in mind the Lowest
Fares, Staff specialization, Punctuality,
Bargaining power with airports,
Continuous Innovative Measures to
increase ancillary services, their
short-haul European network and
innovative skills, we cannot avoid
connecting them to a company that
has a high turnover and a high ratio of
service delivery.
The Core Competences of
Ryanair are very well
connected to the Key Success
Factors of the industry in
which it operates. This can be
one of the best reasons why
Ryanair has enjoyed such
success over the last 29 years.
New SWOT Analysis
40 Opportunities and Time
Short-medium term Medium-long term
Strengths
First mover advantage in low-
cost market
Up-to-date fleet
Excellent cost management and
logistics
Brand recognition
High operating margins
Specialized staff
Lowest fares
Network
Ancillary revenues
Increase frequency on existing
routes
Increase Brand Image
Maintain lowest fares
Continue investment in staff
specialization
Increase presence in social
networks
New routes in EU countries
where opportunity arises
Current economic outlook
favorable to low fare airlines
Create new routes inside and
outside the EU
Initiate routes that are still
untapped by the low-cost
carriers
Lease unused fleet
Long-haul
Market growth and market
share gains
Weaknesses
Seasonality
Controversial advertising
Poor CRM
Limited landing slots in major
airports
High level of innovation needed
Poor website and social media
presence
Gain experience in markets
outside Europe
Increase CRM
Create new website and
increase presence in social
media
Add cargo efficient airplanes to
its fleet
More investment in R&D
Increase presence in major
airports
Invest in the BRICs
Create routes outside of Europe
Maximize aircraft utilization
40 Opportunities and Time
Short-medium term Medium-long term
Strengths
First mover advantage in low-
cost market
Up-to-date fleet
Excellent cost management and
logistics
Brand recognition
High operating margins
Specialized staff
Lowest fares
Network
Ancillary revenues
Increase frequency on existing
routes
Increase Brand Image
Maintain lowest fares
Continue investment in staff
specialization
Increase presence in social
networks
New routes in EU countries
where opportunity arises
Current economic outlook
favorable to low fare airlines
Create new routes inside and
outside the EU
Initiate routes that are still
untapped by the low-cost
carriers
Lease unused fleet
Long-haul
Market growth and market
share gains
Weaknesses
Seasonality
Controversial advertising
Poor CRM
Limited landing slots in major
airports
High level of innovation needed
Poor website and social media
presence
Gain experience in markets
outside Europe
Increase CRM
Create new website and
increase presence in social
media
Add cargo efficient airplanes to
its fleet
More investment in R&D
Increase presence in major
airports
Invest in the BRICs
Create routes outside of Europe
Maximize aircraft utilization
New SWOT Analysis
41
•EU Current Countries: Focus on Scandinavia and Poland (where low levels of Low Cost Carrier
penetration & incumbents are being restructured); moving to more central bases (Brussels,
Lisbon, Rome and Athens already); Russia as a rising opportunity.
•The business segment is also seen as an area with large growth and profit potential.
•Middle East is a market with significant attractiveness, explored by just a few carriers. Very
interesting bet, in case their airspace opens in the coming years with Israel expected to be the first
to open up first.
•In the long term, in case Ryan Air develops competencies in the long-haul segment, US and Asia
are markets with high levels of attractiveness.
EU Current
Countries
Russia
Middle East
US
Asia
Strengths
Weaknesses
Business
segment
41
•EU Current Countries: Focus on Scandinavia and Poland (where low levels of Low Cost Carrier
penetration & incumbents are being restructured); moving to more central bases (Brussels,
Lisbon, Rome and Athens already); Russia as a rising opportunity.
•The business segment is also seen as an area with large growth and profit potential.
•Middle East is a market with significant attractiveness, explored by just a few carriers. Very
interesting bet, in case their airspace opens in the coming years with Israel expected to be the first
to open up first.
•In the long term, in case Ryan Air develops competencies in the long-haul segment, US and Asia
are markets with high levels of attractiveness.
EU Current
Countries
Russia
Middle East
US
Asia
Strengths
Weaknesses
Business
segment
Strategic Dimensions
42 Products-markets
Vertical
Integration
Internationalization
ID:
Internal
Development
Increase routes
to Europe and
Northern Africa;
Operating in
major airports
Internet
booking; Mobile
website and app;
mobile boarding
passes
Increase routes
to Europe and
Northern Africa
External:
Mergers &
Acquisitions
Failed to
takeover Aer
Lingus
External:
Strategic
Alliances
Lease unused
fleet
Airport parking
and bus and train
transfers;
Partnerships with
car rental
companies and
hotel chains;
Ryanair-branded
credit and prepaid
cards (Deutsch
Bank, GE Money,
Access Prepaid
and Santander)
Handling;
Ticketing;
Catering;
Aircraft
maintenance
External:
Market
Transactions
Sell outdated
fleet
Google Adsense &
Global
Distribution
Systems (GDS)
42 Products-markets
Vertical
Integration
Internationalization
ID:
Internal
Development
Increase routes
to Europe and
Northern Africa;
Operating in
major airports
Internet
booking; Mobile
website and app;
mobile boarding
passes
Increase routes
to Europe and
Northern Africa
External:
Mergers &
Acquisitions
Failed to
takeover Aer
Lingus
External:
Strategic
Alliances
Lease unused
fleet
Airport parking
and bus and train
transfers;
Partnerships with
car rental
companies and
hotel chains;
Ryanair-branded
credit and prepaid
cards (Deutsch
Bank, GE Money,
Access Prepaid
and Santander)
Handling;
Ticketing;
Catering;
Aircraft
maintenance
External:
Market
Transactions
Sell outdated
fleet
Google Adsense &
Global
Distribution
Systems (GDS)
Products-Markets
43
Product/Service
Existing New
Markets
Existing
Market penetration
-This is a key strategy of Ryanair, that is
consolidating existing routes
(eg. Scandinavia, Germany, Eastern Europe)
- Seeking to increase market share by
moving from secondary to primary airports
Product extension
-Ryanair's expansion into ancillary products is
an opportunity currently exploited very
profitably by Ryanair, although this is not its
core business
New
Market development
-Ryanair is continuously developing new
routes (eg. Norway to Canary Islands).
-Increasing customer focus should increase
market share by converting non-clients,
particularly business travelers
Products-markets diversification
- Flying to new markets outside Europe
(eg Russia, Israel)
-Diversification into transatlantic (USA)
and other long haul flights
-Flying more than point-to-point flights and
joining a European/global alliance
43
Product/Service
Existing New
Markets
Existing
Market penetration
-This is a key strategy of Ryanair, that is
consolidating existing routes
(eg. Scandinavia, Germany, Eastern Europe)
- Seeking to increase market share by
moving from secondary to primary airports
Product extension
-Ryanair's expansion into ancillary products is
an opportunity currently exploited very
profitably by Ryanair, although this is not its
core business
New
Market development
-Ryanair is continuously developing new
routes (eg. Norway to Canary Islands).
-Increasing customer focus should increase
market share by converting non-clients,
particularly business travelers
Products-markets diversification
- Flying to new markets outside Europe
(eg Russia, Israel)
-Diversification into transatlantic (USA)
and other long haul flights
-Flying more than point-to-point flights and
joining a European/global alliance
Products-Markets
44
•In some industries companies have adopted
the bundling strategy as a way cross sell their
products and make their business more
attractive to consumers.
•Ryanair however, chose to do the opposed
strategy, as they unbundled all their services,
stripping them from the basic service, and
making the basic service cheaper and more
attractive to their customers.
•Furthermore, it has partnered with providers
of complementary (add on) services and
managed to generate additional revenues
through monetising those activities also.
Full Service Fare
Basic
Flight Fare
Baggage Fees
Seat Allocation
Checkin /
Boarding Pass Fees
Unbundling
Ancilliary
Car Rentals
Hotels
Airport Parking
...
Complementary
Services
44
•In some industries companies have adopted
the bundling strategy as a way cross sell their
products and make their business more
attractive to consumers.
•Ryanair however, chose to do the opposed
strategy, as they unbundled all their services,
stripping them from the basic service, and
making the basic service cheaper and more
attractive to their customers.
•Furthermore, it has partnered with providers
of complementary (add on) services and
managed to generate additional revenues
through monetising those activities also.
Full Service Fare
Basic
Flight Fare
Baggage Fees
Seat Allocation
Checkin /
Boarding Pass Fees
Unbundling
Ancilliary
Car Rentals
Hotels
Airport Parking
...
Complementary
Services
Products-Markets
•Regarding Products-Markets diversification, as we have seen before, Ryanair’s goal is
to be the top Europe low-fare airline. That is Ryanair’s market, and the company is
structured to respond to those markets needs. Nothing indicates that a strategic shift is
going to take place for now. Therefore, products-markets diversification (for example,
going further than point-to-point flights) does not seem to be an objective for Ryanair,
at least in the short-term.
•Regarding market penetration and market development, as we can see in the 2013
Annual report, Ryanair has opened 7 new bases and 217 new routes, opening new
markets. Regarding the increase in market share, the Annual Report states that
“Although Ryanair intends to compete vigorously and to assert its rights against any
predatory pricing or other similar conduct, price competition among airlines could
reduce the level of fares and/or passenger traffic on Ryanair‘s routes to the point
where profitability may not be achievable”, which indicates that the strategy of
differentiation through price may lead to an additional difficulty in increase market
share through this particular strategy (due to the increasing market competition).
•As to Product extension, Ryanair has been demonstrating over the years it is the most
innovative and creative airline company, specially when we are talking about creating
additional sources of revenues (and cutting costs). Selling space in the aircraft exterior
for publicity is one example. Ryanair will surely extend its range of products (ancillary
services already represent 20% of their revenues).
45
•Regarding Products-Markets diversification, as we have seen before, Ryanair’s goal is
to be the top Europe low-fare airline. That is Ryanair’s market, and the company is
structured to respond to those markets needs. Nothing indicates that a strategic shift is
going to take place for now. Therefore, products-markets diversification (for example,
going further than point-to-point flights) does not seem to be an objective for Ryanair,
at least in the short-term.
•Regarding market penetration and market development, as we can see in the 2013
Annual report, Ryanair has opened 7 new bases and 217 new routes, opening new
markets. Regarding the increase in market share, the Annual Report states that
“Although Ryanair intends to compete vigorously and to assert its rights against any
predatory pricing or other similar conduct, price competition among airlines could
reduce the level of fares and/or passenger traffic on Ryanair‘s routes to the point
where profitability may not be achievable”, which indicates that the strategy of
differentiation through price may lead to an additional difficulty in increase market
share through this particular strategy (due to the increasing market competition).
•As to Product extension, Ryanair has been demonstrating over the years it is the most
innovative and creative airline company, specially when we are talking about creating
additional sources of revenues (and cutting costs). Selling space in the aircraft exterior
for publicity is one example. Ryanair will surely extend its range of products (ancillary
services already represent 20% of their revenues).
45
Products-Markets ≡ Targeting the Business Costumer
46
Ryanair targeting Business Customer…
•Opening at primary airports (Brussels,
Rome, Lisbon and Athens already
announced)
•Improved customer service – more cabin
baggage, seat allocation, ticketing flexibility,
group services online, website profiles,etc.
•Agreement with American Express in 2013
– facilitates business travellers, travel
agents and corporate travel departments
•Transition to travel agents and GDS to
ensure corporate visibility as well as wider
distribution – announced deal with
Travelport GDS for this purpose
•Change in pricing model – lower longer
dated prices and higher short (1-2 months
ahead) pricing
Changes by
Traditional
Changes by
LCC
“20 to 25% of our passengers are travelling on business, with online check-in ensuring they avoid
airport queues, while the option of priority boarding and reserved seating has proven extremely
popular…with business passengers, who can board and exit the aircraft first, or choose one of 45
pre-reserved seats.“ Michael O’Leary
46
Ryanair targeting Business Customer…
•Opening at primary airports (Brussels,
Rome, Lisbon and Athens already
announced)
•Improved customer service – more cabin
baggage, seat allocation, ticketing flexibility,
group services online, website profiles,etc.
•Agreement with American Express in 2013
– facilitates business travellers, travel
agents and corporate travel departments
•Transition to travel agents and GDS to
ensure corporate visibility as well as wider
distribution – announced deal with
Travelport GDS for this purpose
•Change in pricing model – lower longer
dated prices and higher short (1-2 months
ahead) pricing
Changes by
Traditional
Changes by
LCC
“20 to 25% of our passengers are travelling on business, with online check-in ensuring they avoid
airport queues, while the option of priority boarding and reserved seating has proven extremely
popular…with business passengers, who can board and exit the aircraft first, or choose one of 45
pre-reserved seats.“ Michael O’Leary
Vertical Integration
47
As a way to keep its structure as costless an flexible as possible, Ryanair outsources most
of the functions related to their business. For instance, because demand for their
products is highly seasonal, 50% of their flight crew is outsourced and hired when needed.
There are other services in which they collect money from the companies that actually
provide the service, but in which Ryanair does not operate (ex: book a car or book a hotel)
ENGINEERING SERVICES:
•Ryanair Engineering Services
•Hangar Support; Cabin Maintenance; Line Maintenance
CARGO SERVICES:
•Storage and Transportation services
SUPLLIERS:
Fleet
Fuel
Airport
services
Partially Integrated services Fully integrated services
INBOUND
LOGISTICS:
•Route
Selection
•Passenger
Service System
•Pricing
System
•Flight
Scheduling
•Crew
Scheduling
•Facilities
Planning
OPERATIONS:
•Ticket Counter
Operations
•Gate
Operations
•Aircraft
Operations
•On-board
Service
•Baggage
Handling
OUTBOUND
LOGISTICS:
•Transfer
(luggage,
passengers)
•Baggage
System
SERVICE:
• Lost and
found offices
• Complaints
management
• Lounges
• Information
services
TRAVEL
SERVICES:
• Book a car
service
• Book a hotel
service
• Train and
Bus Transfer
• Rent a Car
ON-LINE
SALES
•Mobile
website
•Mobile
App
•Mobile
Boarding
pass
No Integrated services External suppliers
SUPPLIERS
Facilites,
vehicles,
outsourcing
SUPPLIERS
IT & IS
47
As a way to keep its structure as costless an flexible as possible, Ryanair outsources most
of the functions related to their business. For instance, because demand for their
products is highly seasonal, 50% of their flight crew is outsourced and hired when needed.
There are other services in which they collect money from the companies that actually
provide the service, but in which Ryanair does not operate (ex: book a car or book a hotel)
ENGINEERING SERVICES:
•Ryanair Engineering Services
•Hangar Support; Cabin Maintenance; Line Maintenance
CARGO SERVICES:
•Storage and Transportation services
SUPLLIERS:
Fleet
Fuel
Airport
services
Partially Integrated services Fully integrated services
INBOUND
LOGISTICS:
•Route
Selection
•Passenger
Service System
•Pricing
System
•Flight
Scheduling
•Crew
Scheduling
•Facilities
Planning
OPERATIONS:
•Ticket Counter
Operations
•Gate
Operations
•Aircraft
Operations
•On-board
Service
•Baggage
Handling
OUTBOUND
LOGISTICS:
•Transfer
(luggage,
passengers)
•Baggage
System
SERVICE:
• Lost and
found offices
• Complaints
management
• Lounges
• Information
services
TRAVEL
SERVICES:
• Book a car
service
• Book a hotel
service
• Train and
Bus Transfer
• Rent a Car
ON-LINE
SALES
•Mobile
website
•Mobile
App
•Mobile
Boarding
pass
No Integrated services External suppliers
SUPPLIERS
Facilites,
vehicles,
outsourcing
SUPPLIERS
IT & IS
Vertical Integration (F-B)
48
Flight
Operations
Aircraft
manufacturers
Maintenance
& Engineering
Catering
Advertising &
Promotion
After sales
support
Online sales
Handling
Jet Fuel
supplier
Airports
Backward
Integration
Forward
Integration
Internal
External
48
Flight
Operations
Aircraft
manufacturers
Maintenance
& Engineering
Catering
Advertising &
Promotion
After sales
support
Online sales
Handling
Jet Fuel
supplier
Airports
Backward
Integration
Forward
Integration
Internal
External
Internationalization
49
Ryanair has been
negotiating a
deal in order to
fly to cities in
Russia.
The scandinavian market is also an
appealing target for new Ryanair
operations.
Middle East markets, Israel in
particular is an attractive market
for Ryanair if “open-skies”
agreements are reached
Although not certain in
the near/medium-
term, Ryanair has
expressed interest in
US long-haul
operations, given the
market potential
Current
Markets
49
Ryanair has been
negotiating a
deal in order to
fly to cities in
Russia.
The scandinavian market is also an
appealing target for new Ryanair
operations.
Middle East markets, Israel in
particular is an attractive market
for Ryanair if “open-skies”
agreements are reached
Although not certain in
the near/medium-
term, Ryanair has
expressed interest in
US long-haul
operations, given the
market potential
Current
Markets
Internationalization
50
Attractiveness factors Weight Middle-East Asia-Pacific Europe North America South America
Market factors
Market value 15% 7 7 4 6 6
Market growth rate 10% 7 5 4 7 5
Average gross margin 7% 6 5 6 6 5
Other market factors 2% 5 5 5 5 5
Market evaluation 2,27 2 1,52 2,12 1,85
Operational factors
Local wages level 12% 5 7 4 4 6
Operating costs 17% 5 7 4 4 6
Legal requirements 7% 5 6 6 6 5
Other operating factors 3% 5 5 5 5 5
Operational evaluation 1,95 2,6 1,73 1,73 2,24
Risk factors
Exchange risk 9% 5 5 7 8 4
Political Risk 9% 4 5 8 9 4
Competitive risk 7% 6 6 5 5 6
Other risk factors 2% 5 5 5 5 5
Risk evaluation 1,33 1,42 1,8 1,98 1,24
Overall attractiveness 5,55 6,02 5,05 5,83 5,33
3 1 5 2 4
•Even though Middle East has a higher score, Ryanair is likely to see the North America
market as a more appealing target due to proximity and ease of access to the market
(existing “open-skies” agreements)
50
Attractiveness factors Weight Middle-East Asia-Pacific Europe North America South America
Market factors
Market value 15% 7 7 4 6 6
Market growth rate 10% 7 5 4 7 5
Average gross margin 7% 6 5 6 6 5
Other market factors 2% 5 5 5 5 5
Market evaluation 2,27 2 1,52 2,12 1,85
Operational factors
Local wages level 12% 5 7 4 4 6
Operating costs 17% 5 7 4 4 6
Legal requirements 7% 5 6 6 6 5
Other operating factors 3% 5 5 5 5 5
Operational evaluation 1,95 2,6 1,73 1,73 2,24
Risk factors
Exchange risk 9% 5 5 7 8 4
Political Risk 9% 4 5 8 9 4
Competitive risk 7% 6 6 5 5 6
Other risk factors 2% 5 5 5 5 5
Risk evaluation 1,33 1,42 1,8 1,98 1,24
Overall attractiveness 5,55 6,02 5,05 5,83 5,33
3 1 5 2 4
•Even though Middle East has a higher score, Ryanair is likely to see the North America
market as a more appealing target due to proximity and ease of access to the market
(existing “open-skies” agreements)
Internationalization – Integration
51
Local Adaptation
Low High
Global Integration
High
Global
Company
Transnational
Company
Low
Local
Company
Multinational
Company
•Ryanair strives for the lowest cost possible, and their business-level strategy tends to be
cost leadership. During initial stages, Ryanair used to do no local adaptation, being price
their main competitive weapon.
•We believe Ryanair is starting to evolve towards a Transnational Strategy, by starting to
differentiate their services in other components rather than just price, while doing
more local adaptation to successfully get into new markets. A good example is the huge
bet in customer care they are doing in 2014 (its “Always Getting Better” strategy)
51
Local Adaptation
Low High
Global Integration
High
Global
Company
Transnational
Company
Low
Local
Company
Multinational
Company
•Ryanair strives for the lowest cost possible, and their business-level strategy tends to be
cost leadership. During initial stages, Ryanair used to do no local adaptation, being price
their main competitive weapon.
•We believe Ryanair is starting to evolve towards a Transnational Strategy, by starting to
differentiate their services in other components rather than just price, while doing
more local adaptation to successfully get into new markets. A good example is the huge
bet in customer care they are doing in 2014 (its “Always Getting Better” strategy)
Diversification
52
•Diversification involves entering new industries as
determined by the corporate strategy.
•While there are a number of complementary services
which generate ancillary revenues for Ryanair through
contracts with other companies (eg. hotels, car rental,
branded credit cards, etc.) Ryanair has not pursued a
diversification strategy to date.
•Rather than diversifying to reduce risk, the company is
committed in sustaining their low cost competitive
advantage over competitors.
52
•Diversification involves entering new industries as
determined by the corporate strategy.
•While there are a number of complementary services
which generate ancillary revenues for Ryanair through
contracts with other companies (eg. hotels, car rental,
branded credit cards, etc.) Ryanair has not pursued a
diversification strategy to date.
•Rather than diversifying to reduce risk, the company is
committed in sustaining their low cost competitive
advantage over competitors.
Competitive Advantages
53
Lowest Cost Base - Sustainable Competitive Advantage
Ryanair consistently presents a lower cost per passenger inferior to their competitors
(Easyjet’s cost per passenger is 67% above that of Ryanair – excluding fuel costs)
[3]
This is only possible because Cost Reduction is deeply embedded into Ryanair’s DNA,
driving all decisions. Below are listed some of the structural decisions that help Ryanair be
a cost leader over the last years:
Meticulous and dynamic airport/route choice:
Choice of smaller and low cost airports (often tapping a whole new
market in regions that previously had no convenient connection), with
25 min turnaround times, and actively route management, focused on
keeping the most profitable.
Ancillary revenues:
Currently driving 20% of Ryanair’s revenues. These range from products
to services such as travel insurance, car hire, hotels, surface transport
and in-flight sales.
1.
2.
53
Lowest Cost Base - Sustainable Competitive Advantage
Ryanair consistently presents a lower cost per passenger inferior to their competitors
(Easyjet’s cost per passenger is 67% above that of Ryanair – excluding fuel costs)
[3]
This is only possible because Cost Reduction is deeply embedded into Ryanair’s DNA,
driving all decisions. Below are listed some of the structural decisions that help Ryanair be
a cost leader over the last years:
Meticulous and dynamic airport/route choice:
Choice of smaller and low cost airports (often tapping a whole new
market in regions that previously had no convenient connection), with
25 min turnaround times, and actively route management, focused on
keeping the most profitable.
Ancillary revenues:
Currently driving 20% of Ryanair’s revenues. These range from products
to services such as travel insurance, car hire, hotels, surface transport
and in-flight sales.
1.
2.
Competitive Advantages
54
Young single type aircraft fleet:
High seat density (189 seats vs. 174 seats on A320s), high load factors
(82% in 2012 against <80% for AEA carriers); less training expenses due
to standardized fleet; Greater fuel efficiency, lower maintenance costs
and better customer perception.
Productive and flexible labour force:
Not unionized; 50% of flight crews are contractors employed when
required
Innovation:
Ryanair was pioneer in setting bases across Europe after the EU aviation
liberalisation, abandoning free catering, moving away entirely from
travel agents to internet sales, removing check-in desks, installing non
reclining seats, putting advertising on boarding passes and overhead
bins, persuading passengers not to check in hold baggage. Even though
other companies follow the same strategies, Ryanair has gone further
more often than any competitor.
3.
4.
5.
Lowest Cost Base - Sustainable Competitive Advantage
54
Young single type aircraft fleet:
High seat density (189 seats vs. 174 seats on A320s), high load factors
(82% in 2012 against <80% for AEA carriers); less training expenses due
to standardized fleet; Greater fuel efficiency, lower maintenance costs
and better customer perception.
Productive and flexible labour force:
Not unionized; 50% of flight crews are contractors employed when
required
Innovation:
Ryanair was pioneer in setting bases across Europe after the EU aviation
liberalisation, abandoning free catering, moving away entirely from
travel agents to internet sales, removing check-in desks, installing non
reclining seats, putting advertising on boarding passes and overhead
bins, persuading passengers not to check in hold baggage. Even though
other companies follow the same strategies, Ryanair has gone further
more often than any competitor.
3.
4.
5.
Lowest Cost Base - Sustainable Competitive Advantage
Organizational Structure
55
Michael O’Leary
CEO
Howard Millar
Deputy Chief
Executive,
Chief Financial
Officer
Kenny Jacobs
Chief Marketing
Officer
Ray Conway
Chief Pilot
Caroline Green
Director -
Customer Service
Michael Hickey
Group Director -
Operations
David O'Brien
Chief Commercial
Officer
Edward Wilson
Director -
Personnel and In-
flight
Juliusz Komorek
Director - Legal &
Regulatory
Affairs, Company
Secretary
•Ryanair has a centralized functional structure, with the main decisions taken in
Ireland.
•Functional heads report directly to Michael O’Leary (CEO), as we can see in
the organizational chart above.
•Ryanair’s international strategy reflects its centralization, with extensive
transfer of structures, systems, processes and resources from the headquarters
to locations abroad (57 bases across Europe).
•A deep change in strategy would, of course, require a big change in the
organizational structure.
55
Michael O’Leary
CEO
Howard Millar
Deputy Chief
Executive,
Chief Financial
Officer
Kenny Jacobs
Chief Marketing
Officer
Ray Conway
Chief Pilot
Caroline Green
Director -
Customer Service
Michael Hickey
Group Director -
Operations
David O'Brien
Chief Commercial
Officer
Edward Wilson
Director -
Personnel and In-
flight
Juliusz Komorek
Director - Legal &
Regulatory
Affairs, Company
Secretary
•Ryanair has a centralized functional structure, with the main decisions taken in
Ireland.
•Functional heads report directly to Michael O’Leary (CEO), as we can see in
the organizational chart above.
•Ryanair’s international strategy reflects its centralization, with extensive
transfer of structures, systems, processes and resources from the headquarters
to locations abroad (57 bases across Europe).
•A deep change in strategy would, of course, require a big change in the
organizational structure.
“We’ve changed,” he proclaimed at a press event in London. “We’re changing some of the policies I’ve held
dear for many years because that’s what our customers want us to do."
“Also the fact I own four per cent of the company. It’s in my
interests to change the way the company communicates. I
am the one that will lead the charge. And as a shareholder I
expect to gain handsomely from it.”
CEO Dominated Organisational Culture
•Since it’s foundation, Ryanair has had a culture of being dominated by its
leader at the top – originally the Ryan family and then Michael O’Leary
(CEO) since his appointment
•While considered the brand’s strongest asset for much of this period,
more recently the CEO’s brash approach has been damaging to and a
potential weakness of the brand
•However, Ryanair and Michael O Leary have responded to shareholder
and customer complaints and more recently have acknowledged a change
is required
To date this has involved the appointment of Kenny Jacobs (head of
marketing) as the new PR face of Ryanair plus a move away from free
advertising generated by Michael O Leary’s controversial print ads &
statements to a multiplatform ad campaign and the appointment of an
advertising agency
Is this the first step in Michael O Leary’s long talked about ‘3 year exit’
plan?
56
dear for many years because that’s what our customers want us to do."
“Also the fact I own four per cent of the company. It’s in my
interests to change the way the company communicates. I
am the one that will lead the charge. And as a shareholder I
expect to gain handsomely from it.”
CEO Dominated Organisational Culture
•Since it’s foundation, Ryanair has had a culture of being dominated by its
leader at the top – originally the Ryan family and then Michael O’Leary
(CEO) since his appointment
•While considered the brand’s strongest asset for much of this period,
more recently the CEO’s brash approach has been damaging to and a
potential weakness of the brand
•However, Ryanair and Michael O Leary have responded to shareholder
and customer complaints and more recently have acknowledged a change
is required
To date this has involved the appointment of Kenny Jacobs (head of
marketing) as the new PR face of Ryanair plus a move away from free
advertising generated by Michael O Leary’s controversial print ads &
statements to a multiplatform ad campaign and the appointment of an
advertising agency
Is this the first step in Michael O Leary’s long talked about ‘3 year exit’
plan?
56
Business Policies
57
Human Resources
•Ryanair has two main types : Pilots which are hired as
graduates and crew staff which are also largely pre-
trained and required to multi-task to reduce cost.
•50% of all staff are on contracts and therefore can be
managed for seasonal variations. Non-unionized
workforce so less staff issues to negotiate.
•Recently hired new marketing head to improve brand
image and 200 IT staff to address new online strategy
Operations
•This is one of Ryanair's crucial business policies: as a low-
fare airline, the pressure on costs puts a special emphasis
on control of operations and its low cost base is a core
strength, allowing it to deliver on its low fare
commitment to consumers.
•Using a fleet of aircraft only from Boeing has allowed it to
achieve a modern, efficient fleet at aggressive prices and
reduces running and maintenance costs
Marketing and Sales
•Although Ryanair traditionally does not spend much on
advertising (relying on print ads and free coverage of
controversy) it is doubling its advertising budget to
launch it first TV campaign and is hiring a CRM. This is
part of its strategy to improve its customer image.
•In addition, Ryan is moving from its model of online sales
through its website only to building a presence on GDS
and with agencies to reach business consumers
Finance
•Strong operating margins has allowed it to build up cash
•This cash has allowed it return cash to shareholders
(dividends and share buyback) as well as fund capex
•Recently achieved a BBB+ rating which will allow it raise
debt to fund capex (incl. Boeing contract) also
•Efficient use of leases and hedging strategy allow it to
effectively manage costs
Information systems
•Strong on-line presence and regulatory requirements
require high robustness of IT systems.
•Relaunched website to improve user experience and add
features such as customer profile function, group
bookings, etc. to attract business, family and other users
R&D
•Although Ryanair has lots of innovative products, a lot of
the initiatives come from management and staff and
more traditional R&D is not a crucial area of the company
Ryanair’s strategy is supported by its activities in 5 of the 6 key functional areas as follows:
57
Human Resources
•Ryanair has two main types : Pilots which are hired as
graduates and crew staff which are also largely pre-
trained and required to multi-task to reduce cost.
•50% of all staff are on contracts and therefore can be
managed for seasonal variations. Non-unionized
workforce so less staff issues to negotiate.
•Recently hired new marketing head to improve brand
image and 200 IT staff to address new online strategy
Operations
•This is one of Ryanair's crucial business policies: as a low-
fare airline, the pressure on costs puts a special emphasis
on control of operations and its low cost base is a core
strength, allowing it to deliver on its low fare
commitment to consumers.
•Using a fleet of aircraft only from Boeing has allowed it to
achieve a modern, efficient fleet at aggressive prices and
reduces running and maintenance costs
Marketing and Sales
•Although Ryanair traditionally does not spend much on
advertising (relying on print ads and free coverage of
controversy) it is doubling its advertising budget to
launch it first TV campaign and is hiring a CRM. This is
part of its strategy to improve its customer image.
•In addition, Ryan is moving from its model of online sales
through its website only to building a presence on GDS
and with agencies to reach business consumers
Finance
•Strong operating margins has allowed it to build up cash
•This cash has allowed it return cash to shareholders
(dividends and share buyback) as well as fund capex
•Recently achieved a BBB+ rating which will allow it raise
debt to fund capex (incl. Boeing contract) also
•Efficient use of leases and hedging strategy allow it to
effectively manage costs
Information systems
•Strong on-line presence and regulatory requirements
require high robustness of IT systems.
•Relaunched website to improve user experience and add
features such as customer profile function, group
bookings, etc. to attract business, family and other users
R&D
•Although Ryanair has lots of innovative products, a lot of
the initiatives come from management and staff and
more traditional R&D is not a crucial area of the company
Ryanair’s strategy is supported by its activities in 5 of the 6 key functional areas as follows:
Recommendations
58
I. Ryanair should embrace social media and extend its
online presence to enhance consumer contacts
Attract larger numbers of customers in the Millenials
generation, increase their loyalty, create a communication
channel with them and increase mouth-to-mouth
advertizing
Transition already under way with website relaunch,
app on way and hire of 200 new IT staff
IMMEDIATE
II. Ryanair should target business customers to address
low winter season and improve margins
This will require adding frills (eg. flexible ticketing, seating
allocation, group bookings, wifi), flying to primary airports
and working with travel agents/GDS
Transition already under way to increase current 20% of
customer base
IMMEDIATE-24 MONTHS
58
I. Ryanair should embrace social media and extend its
online presence to enhance consumer contacts
Attract larger numbers of customers in the Millenials
generation, increase their loyalty, create a communication
channel with them and increase mouth-to-mouth
advertizing
Transition already under way with website relaunch,
app on way and hire of 200 new IT staff
IMMEDIATE
II. Ryanair should target business customers to address
low winter season and improve margins
This will require adding frills (eg. flexible ticketing, seating
allocation, group bookings, wifi), flying to primary airports
and working with travel agents/GDS
Transition already under way to increase current 20% of
customer base
IMMEDIATE-24 MONTHS
Recommendations
59
III. Ryanair should consolidate its position in existing and
new markets (eg. Scandinavia, Germany, Poland,
Slovakia)
Increase LCC penetration in new and old markets - take
advantage of traditional airlines undergoing restructurings
in other and target markets with rising incomes and rising
LCC consumer base
Already underway eg. flights from Norway to Canaries,
announced 3 new routes to Malmo and plans to establish
a base in Slovakia in 2015
IMMEDIATE-3 YEARS
IV. Ryanair should look to develop capabilities to move
into the long haul sector
Attractive growth opportunities in the long term
beginning with “close proximity” routes in Russia and
Israel as markets open up, transAtlantic when appropriate
airplane capacity becomes available and longer term the
Asia Pacific as most attractive emerging market
2-5 YEARS
59
III. Ryanair should consolidate its position in existing and
new markets (eg. Scandinavia, Germany, Poland,
Slovakia)
Increase LCC penetration in new and old markets - take
advantage of traditional airlines undergoing restructurings
in other and target markets with rising incomes and rising
LCC consumer base
Already underway eg. flights from Norway to Canaries,
announced 3 new routes to Malmo and plans to establish
a base in Slovakia in 2015
IMMEDIATE-3 YEARS
IV. Ryanair should look to develop capabilities to move
into the long haul sector
Attractive growth opportunities in the long term
beginning with “close proximity” routes in Russia and
Israel as markets open up, transAtlantic when appropriate
airplane capacity becomes available and longer term the
Asia Pacific as most attractive emerging market
2-5 YEARS
Conclusions
60
•Ryanair continuously innovates to maximize
their aircraft occupancy, reduce their cost per
passenger and find new sources of revenues.
•Imperative to be market leader to maximize
scale and scope economies and increase
bargaining power with suppliers and airports.
•New focus on enhanced customer service to
create growth opportunities and improve
margins as LCC sector matures in core
market.
•Having the Lowest Cost Base is Ryanair’s
Sustainable competitive advantage.
60
•Ryanair continuously innovates to maximize
their aircraft occupancy, reduce their cost per
passenger and find new sources of revenues.
•Imperative to be market leader to maximize
scale and scope economies and increase
bargaining power with suppliers and airports.
•New focus on enhanced customer service to
create growth opportunities and improve
margins as LCC sector matures in core
market.
•Having the Lowest Cost Base is Ryanair’s
Sustainable competitive advantage.
References
•IATA; “Airline Cost Performance; 2006
•IATA; Economics Reports; 2013
•Ryanair; Annual Report; 2012 and 2013
•BCG; “The New ‘Low Cost’” 2010
•BCG; Plane, Trains and Automobiles 2009
•Boeing; “Current Market Outlook, 2013-2032”; 2013
•Carlson Waganit travel; press release, 2014
•Euromonitor; Popova, N.; “New Travel and Tourism Research Helps Outline Major Trends Within the Airline
Industry“; 2013
•Euromonitor; Popova, N.; “Can a Leopard Change its Spots – Makeover for Ryanair or Further Trouble in the
Skies?”; 2013
•Euromonitor; “Low-Cost Carriers: Exploring New Territories”; 2014
•Euromonitor; “RYANAIR HOLDINGS PLC IN TRAVEL AND TOURISM (WORLD)”; 2013
•GBTA foundation; Press release, 2014
•ATKearney; “European Airlines: Meeting the Headwinds Head On”; 2013
•Morrell, P.; “Airline Finance – Third Edition”; 2007
•CAPA; “World airline industry in cyclical upswing - but in search of USD125 billion annually in financing”; 2014
•CAPA; “European airlines’ financial results in 2012; Net profit of biggest 13 down 72% for the year”; 2013
•IFP; “Fuels for the Aviation Industry”
•Independent.co.uk
•IFPEN; Fuels on the aviation industry, 2014
•Newsnow.co.uk
•PWC, “Experience Radar 2013: lessions learned from the airline industry”
•S&P Rating Report; “European Low-Cost Airline Ryanair Holdings Assigned 'BBB+' Rating; Outlook Stable”, 2014
•TravelMole; “Ryanair goes on GDS today”; 2014
•Ryanair.com
61
•IATA; “Airline Cost Performance; 2006
•IATA; Economics Reports; 2013
•Ryanair; Annual Report; 2012 and 2013
•BCG; “The New ‘Low Cost’” 2010
•BCG; Plane, Trains and Automobiles 2009
•Boeing; “Current Market Outlook, 2013-2032”; 2013
•Carlson Waganit travel; press release, 2014
•Euromonitor; Popova, N.; “New Travel and Tourism Research Helps Outline Major Trends Within the Airline
Industry“; 2013
•Euromonitor; Popova, N.; “Can a Leopard Change its Spots – Makeover for Ryanair or Further Trouble in the
Skies?”; 2013
•Euromonitor; “Low-Cost Carriers: Exploring New Territories”; 2014
•Euromonitor; “RYANAIR HOLDINGS PLC IN TRAVEL AND TOURISM (WORLD)”; 2013
•GBTA foundation; Press release, 2014
•ATKearney; “European Airlines: Meeting the Headwinds Head On”; 2013
•Morrell, P.; “Airline Finance – Third Edition”; 2007
•CAPA; “World airline industry in cyclical upswing - but in search of USD125 billion annually in financing”; 2014
•CAPA; “European airlines’ financial results in 2012; Net profit of biggest 13 down 72% for the year”; 2013
•IFP; “Fuels for the Aviation Industry”
•Independent.co.uk
•IFPEN; Fuels on the aviation industry, 2014
•Newsnow.co.uk
•PWC, “Experience Radar 2013: lessions learned from the airline industry”
•S&P Rating Report; “European Low-Cost Airline Ryanair Holdings Assigned 'BBB+' Rating; Outlook Stable”, 2014
•TravelMole; “Ryanair goes on GDS today”; 2014
•Ryanair.com
61
Appendices
62
62
Global airline market
63
Source: Euromonitor 2013, World Economic Forum Travel & Tourism Report 2009
63
Source: Euromonitor 2013, World Economic Forum Travel & Tourism Report 2009
Global airline market
64
Source: Navigating the Future (Global
Market Forecast 2012 - 2031) Airbus
64
Source: Navigating the Future (Global
Market Forecast 2012 - 2031) Airbus
Global airline market
65
65
Global airline market
66
66
Global airline market
67
67
LCC segment
68
68
LCC segment
69
69
LCC segment
70
70
LCC segment
71
Source: Euromonitor: Low Cost Carriers Exploring New Territories
71
Source: Euromonitor: Low Cost Carriers Exploring New Territories
LCC vs Schedule
72
Source: Euromonitor 2013
72
Source: Euromonitor 2013
LCC vs Schedule
73
73
LCC vs Schedule
74 Source: Euromonitor
Ryanair is starting to adopt some
characteristics of a traditional carrier
as opposed to typical carriers that are
starting to adopt some of the Low
Cost Carriers’ best practices.
74 Source: Euromonitor
Ryanair is starting to adopt some
characteristics of a traditional carrier
as opposed to typical carriers that are
starting to adopt some of the Low
Cost Carriers’ best practices.
LCC vs Schedule
75
75
Passenger Segments
76
PhoCusWright White Paper: European Managed Travel (May 2013)
76
PhoCusWright White Paper: European Managed Travel (May 2013)
Passenger Segments
77
PWC: Experience Radar 2013, Lessons
Learned From the Airline Industry
77
PWC: Experience Radar 2013, Lessons
Learned From the Airline Industry
Passenger Segments
78
78
Ryanair ≡ History
79
Source: Ryanair Annual Accounts 2013
79
Source: Ryanair Annual Accounts 2013
Ryanair ≡ History
80
Source: Wikipedia, Ryanair’s first airplane
80
Source: Wikipedia, Ryanair’s first airplane
Ryanair ≡ Industry Data (Euromonitor)
81
81
Ryanair ≡ Outlooks
82
82
Ryanair ≡ Porter’s 5 Forces
83
Porter's Five Forces' Analysis
Leisure Business
Intensity of Threat Intensity of Threat
Weak Medium Strong Weak Medium Strong
Intensity of rivalry is high when
Number of competitors is high x x
Industry growth is high x x
Fixed Costs are high x x
Storage costs are high x x
Product differentiation is low x x
Switching costs are low x x
Exit barriers are high x x
Force Level Strong Strong
•The number players in the low-fare market in Europe is relatively low
•The low-fare market in Europe has been increasing
•Fixed costs in both the industries are high
•If a company does not sell a flight for a given day, it can’t sell that particular flight
later. Its a selling opportunity that is lost forever
•Product differentiation is increasing due to increased competition
•Competition decreases switching costs, which applies to both segments
•Costs related to layoff staff can be high, depending on the legislation
83
Porter's Five Forces' Analysis
Leisure Business
Intensity of Threat Intensity of Threat
Weak Medium Strong Weak Medium Strong
Intensity of rivalry is high when
Number of competitors is high x x
Industry growth is high x x
Fixed Costs are high x x
Storage costs are high x x
Product differentiation is low x x
Switching costs are low x x
Exit barriers are high x x
Force Level Strong Strong
•The number players in the low-fare market in Europe is relatively low
•The low-fare market in Europe has been increasing
•Fixed costs in both the industries are high
•If a company does not sell a flight for a given day, it can’t sell that particular flight
later. Its a selling opportunity that is lost forever
•Product differentiation is increasing due to increased competition
•Competition decreases switching costs, which applies to both segments
•Costs related to layoff staff can be high, depending on the legislation
Ryanair ≡ Porter’s 5 Forces
84
Porter's Five Forces' Analysis
Leisure Business
Intensity of Threat Intensity of Threat
Weak Medium Strong Weak Medium Strong
Threat of substitute products is high when
The substitute offers an attractive price-performance trade-off x x
The buyer's cost of switching to the substitute is low x x
Force Level Weak Weak
•Other forms of transportation (Train) is negligible due to higher costs of those
products
•Passenger's ability to switch to other forms of transportation is negligible due to
higher costs of those products
Power of buyers is high when
Concentration of buyers relative to suppliers is high x x
Switching costs are low x x
Product differentiation of suppliers is low x x
Force Level Strong Strong
•Number of consumers is very high compared to the number of suppliers, therefore
consumers have high bargaining power
•Increasing competition and lack of brand loyalty decreases switching costs in the
market
•Increase in competition is creating a bigger differentiation of products by suppliers
84
Porter's Five Forces' Analysis
Leisure Business
Intensity of Threat Intensity of Threat
Weak Medium Strong Weak Medium Strong
Threat of substitute products is high when
The substitute offers an attractive price-performance trade-off x x
The buyer's cost of switching to the substitute is low x x
Force Level Weak Weak
•Other forms of transportation (Train) is negligible due to higher costs of those
products
•Passenger's ability to switch to other forms of transportation is negligible due to
higher costs of those products
Power of buyers is high when
Concentration of buyers relative to suppliers is high x x
Switching costs are low x x
Product differentiation of suppliers is low x x
Force Level Strong Strong
•Number of consumers is very high compared to the number of suppliers, therefore
consumers have high bargaining power
•Increasing competition and lack of brand loyalty decreases switching costs in the
market
•Increase in competition is creating a bigger differentiation of products by suppliers
Ryanair ≡ Porter’s 5 Forces
85
Porter's Five Forces' Analysis
Leisure Business
Intensity of Threat Intensity of Threat
Weak Medium Strong Weak Medium Strong
Power of suppliers is high when
Concentration relative to buyer industry is high x x
Availability of substitute products is low x x
Importance of customer to the supplier is low x x
Differentiation of the supplier's products and services is high x x
Switching costs of the buyer are high x x x
Threat of forward integration by the supplier is high x x
Force Level Weak Weak
•Even though Comac, a Chinese jet manufacturer is growing, the market is mainly
dominated by Boeing and Airbus
•Other forms of transportation exist (such as high-speed train), but due to higher
costs these don't represent a threat
•Since the airline industry is of critical importance to some of the suppliers (oil,
airports), companies in this market have high bargaining power
•Number of seats and energy consumption are critical key-buying factors to the
industry
•Low customer switching costs due to increased competition among airlines and lack
of brand loyalty
Very uncommon for Airway companies to be bought by suppliers
85
Porter's Five Forces' Analysis
Leisure Business
Intensity of Threat Intensity of Threat
Weak Medium Strong Weak Medium Strong
Power of suppliers is high when
Concentration relative to buyer industry is high x x
Availability of substitute products is low x x
Importance of customer to the supplier is low x x
Differentiation of the supplier's products and services is high x x
Switching costs of the buyer are high x x x
Threat of forward integration by the supplier is high x x
Force Level Weak Weak
•Even though Comac, a Chinese jet manufacturer is growing, the market is mainly
dominated by Boeing and Airbus
•Other forms of transportation exist (such as high-speed train), but due to higher
costs these don't represent a threat
•Since the airline industry is of critical importance to some of the suppliers (oil,
airports), companies in this market have high bargaining power
•Number of seats and energy consumption are critical key-buying factors to the
industry
•Low customer switching costs due to increased competition among airlines and lack
of brand loyalty
Very uncommon for Airway companies to be bought by suppliers
Ryanair ≡ Porter’s 5 Forces
86
Threat of New Entrants is high when
Economies of scale are low x x
Product differentiation is low x x
Capital requirements are low x x
Switching Costs are low x x
Incumbent's control of distribution is low x x
Incumbent's proprietary knowledge is low x x
Force Level Weak Weak
•The high fixed costs of the industries require high economies of scale
•Increasing competition in the market generates more product differentiation
•Airline industry has high capital costs
•Competition decreases switching costs which applies to both segments
•Due to the increasing importance of online sales as a distribution channel, incumbents
control is low
•Proprietary knowledge is not critical in both segments
Overall Expected Impact on Margin 6/10 6/10
Porter's Five Forces' Analysis
Leisure Business
Intensity of Threat Intensity of Threat
Weak Medium Strong Weak Medium Strong
86
Threat of New Entrants is high when
Economies of scale are low x x
Product differentiation is low x x
Capital requirements are low x x
Switching Costs are low x x
Incumbent's control of distribution is low x x
Incumbent's proprietary knowledge is low x x
Force Level Weak Weak
•The high fixed costs of the industries require high economies of scale
•Increasing competition in the market generates more product differentiation
•Airline industry has high capital costs
•Competition decreases switching costs which applies to both segments
•Due to the increasing importance of online sales as a distribution channel, incumbents
control is low
•Proprietary knowledge is not critical in both segments
Overall Expected Impact on Margin 6/10 6/10
Porter's Five Forces' Analysis
Leisure Business
Intensity of Threat Intensity of Threat
Weak Medium Strong Weak Medium Strong
Ryanair ≡ Cost Breakdown Comparative
87
87
Ryanair ≡ Cost Breakdown Comparative
88
88
Ryanair ≡ Cost Breakdown Comparative
89
89
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