Ryanair Case Analysis.

RYANAIR CASE ANALYSIS. EXECUTIVE SUMMARY RYANAIR CASE ANALYSIS 2 The purpose of this case study is to provide an analysis on Ryanair’s position and strategy in the airline industry. Potential problems such as increased competition, changes in legislation, controversial ancillary revenue, poor customer service, ethical dilemmas, and how they impact Ryanair’s future strategy and success are examined. Porter’s five forces model and managerial frameworks including the resource-based, industry-based, and institutional-based views are used to as a method of analysis. Results analyzing Ryanair’s competition, customer service, ethics, ancillary revenue, and reaction to legislation were used to provide recommended solutions for continued success in the airline industry. The case study finds that without the resolution of major weaknesses and threats, the current position and strategy of Ryanair will not continue to be successful. Recommendations to address Ryanair’s weaknesses and threats are provided from the perspectives of resource-based, industry-based, and institution-based views. After analysis, it is recommended that Ryanair maintain its cost-leadership strategy while gaining additional resources to meet the growing demand of its customers. Additionally, Ryanair must rebrand its image to reinforce and drive quality customer service and ethics. INTRODUCTION RYANAIR CASE ANALYSIS 3 In the highly competitive airline industry, Ryanair is Europe’s number one airline with a fleet of over 455 Boeing 737-800 aircrafts, operating more than 2,000 flights daily and carrying over 142 million customers annually. The company has another 210 Boeing aircraft on order which will be added to expand its fleet (Ryanair DAC, 2019). Based on the liberalization of air transportation in Europe, Ryanair gained its success by using a cost leadership strategy of being the lowest fare/lowest cost airline carrier serving short-haul, point-to-point routes. While this strategy has been successful, it has been controversial. Ryanair now faces issues with increased competition, changes to legislation and regulations, ancillary revenue, poor customer service and ethical dilemma. This analysis is to examine if it is feasible for Ryanair to maintain its position in the airline industry using its current strategy and how to address the issues it faces. BACKGROUND Ryanair was launched in July 1985 by the Ryan family in Dublin, Ireland. The company began with twenty-five staff members and a 15-seater Bandeirante aircraft which operated daily flights from Waterford in southeast Ireland to London Gatwick. From an institution-based view, Ryanair obtained permission from the regulatory authorities and challenged British Airways and Aer Lingus’ high fare duopoly and a year later began services on the Dublin to London route (Byles, n.d.). Ryanair experienced substantial growth and now operates in 37 countries, connecting 266 destinations from 84 bases, with a team of over 14,500 highly skilled aviation professionals (Ryanair DAC, 2019). From an industry-based view, Ryanair uses a cost leadership strategy, it created rivalry among its competitors when it charged less than half the price of the lowest fare charged by its competitors. British Airways and Aer Lingus responded by slashing their high prices, which resulted in Europe’s first fare war. Ryanair suffered severe financial losses as a result of the RYANAIR CASE ANALYSIS 4 intense price war (Byles, n.d.). Ryanair went through substantial restructuring and changed it strategy to adopt the Southwest Airlines’ low fare business model (Ryanair DAC, 2019). Ryanair’s strong industry position enhances its brand image on a regional and global scale. Under new management, the airline relaunched as the first low fares airline in Europe. Ryanair continuously implement new strategic initiatives to improve company performance (Ryanair DAC, 2019). From a resource-based view, Ryanair’s resources and capabilities allows it to sustain its low-cost advantage with five value chain activities, operations, human resources management, customer service, use of the internet, and ancillary revenue. Ryanair achieved success by offering the lowest fares in the market, frequent flights, using a single model of aircraft for cost control, eliminating free drinks and expensive meals on board, outsourcing ticketing and other services, and finding creative ways to generate ancillary revenue. It also uses productivity based-incentives in commissions for onboard sales by flight attendants and number of hours flown by pilots to increase revenues (Byles, n.d.). KEY ISSUES Problem 1: Increased competition Ryanair’s performance is based on the degree of competitiveness within the European airline industry. With Ryanair’s cost leadership strategy there is risk of being outcompeted on costs. While Ryanair has the lowest fare, its cost increases significantly when all the fees are added. This gives traditional carriers such as British Airways an advantage as their cost can sometimes be lower than Ryanair’s. This proves that Ryanair does not always have the lowest fares (Byles, n.d.). From an industry-based view, firms are less likely to earn above-average returns the stronger and more competitive the five forces are within the industry (Peng, 2017). Porter’s five forces framework is used to assess Ryanair’s position.