Ryanair – the low-fares Airlines Case Study

Ryanair – the low-fares Airlines Case Study. Why has Ryanair been successful thus far? Ryanair’s success can be attributed to quite a few factors  Successful adaptation of Southwest’s low cost model Michael O’Leary studied the low cost model of Southwest and successfully adapted the strategy to suit Ryanair - Flying to secondary cities and airports This is one of the founding cornerstone's of Ryanair’s strategy. By flying to secondary airports, Ryanair avoids huge gate and landing charges charged by the major airports. It also avoids the congestion at the major airports helping it improve the turn-around time for the planes as well as setting the benchmark in on-time arrivals and take-off’s - Point-to-Point flights Flying point-to-point helps Ryanair eliminate a lot of additional operations like baggage transfers etc. helping it to turn-around the planes quite quickly - Single type aircraft Ryanair’s decision to fly only a single type of aircraft has helped it lower it’s maintenance cost. This has also contributed to Ryanair improving it’s organizational memory of it’s maintenance engineers, contributing to innovations by the engineers to improve the efficiency of the planes. - Cost culture Ryanair’s low cost culture has permeated to all of it’s employees and is spread throughout the organization, making this an integral part of the cultural web.  First mover advantage Ryanair was the first airline in Europe to introduce low fares and it has successfully made use of first mover advantage by negotiating very good rates with secondary airports and locking in landing slots at these airports.  Michael O’Leary’s leadership Michael O’Leary has been the key ingredient of success for Ryanair. His understanding of the Southwest model and it’s successful adaptation has transformed Ryanair and has made it the leading low fares airlines in Europe.  Low cost operations Ryanair has the best run low cost operations helping it achieve the best operating margin in the industry. All elements of it’s operations are geared towards reducing cost and improving efficiency. 3/20 Ryanair – the low-fares airline Q2. Is Ryanair's strategy sustainable? Yes, Ryanair’s strategy is sustainable because it’s core competencies of ‘Low Price’, ‘Cost conscious culture’ and ‘R&D on aircraft design’ (A5) gives it competitive advantage.  Low Price Ryanair’s strategy is based upon this core competency. Strategies based upon core competencies are usually successful as articulated by Prahalad and Hamel in their article on core competencies [4] .  Cost conscious culture As we can see from the cultural web (A12), the low cost culture has spread throughout Ryanair’s organization. The structures and policies that Ryanair has in place will make this culture sustainable  Size Ryanair’s market dominance gives it advantages of size that will help it sustain it’s low cost operations as it can use it’s size to dictate terms with it’s supplier  Leadership Even excluding Michael O’Leary, Ryanair’s management from senior management down to front line managers is wed to the lost cost culture and they are geared towards maintaining and sustaining the low cost culture  Experience Curve Ryanair has built up a huge low cost operations experience curve which will help it sustain going forwards Analyzing these core competencies via the VRIO framework (A10) proves that the core competencies give Ryanair Sustained Competitive Advantage. Using Rumelt’s [1] techniques (A11) to evaluate the Ryanair’s key business strategy of Low Price shows that this strategy does not have any critical flaw. 4/20 Ryanair – the low-fares airline Q3. Would you recommend any changes to Ryanair's approach? Yes, I would recommend some changes to Ryanair’s approach. Some of the changes that I would recommend based on the TOWS (A4) analysis are  Improve it’s oil hedging & currency trading practices