In this report you will find that we have done an in-depth analysis of Ryanair and the

airline industry of which it operates in. We have used a range of sources and

strategic frameworks to obtain relevant information and data to allow us to research

the key strategic issues facing Ryanair.

Firstly, you will find a detailed account on the History of Ryanair and how it was

founded in 1984. Not only is it Europe’s largest airline but as measured by the

number of international passengers carried, it is currently one of the world’s largest

airlines and the largest low cost carrier. They operate a comprehensive network of

services across North Africa, the Mediterranean but mostly Europe, with their largest

base in London Stansted and a fleet of over 300 B727-800 aircraft.

Within the analysis section of our report you will find that we commenced by

completing a PESTLE analysis of the airline industry to analyse the macro

environment, with Political factors showing that this year airlines and their

customers are to generate tax revenues equalling 45% of GVA which will be paid to

governments and that due to the Open Skies Agreement international flights are

more heavily regulated than domestic flights. Economic elements that will have an

impact are interest rates, rates of inflation and fluctuations linked with the usual

booms and slumps. It is believed that this year passengers will benefit from the

decreased oil prices, therefore spending only 1% of GDP on air travel. Terrorism

threats, demographics and cultural trends are among the Social factors included

with Europe being described by other continents as unsafe to travel to due to the

high terrorism threats currently ongoing, immediately instilling fear to potential

visitors. Included in the Technological aspect is that of Wi-Fi currently being a

distinctive capability within this industry and with improved automation systems

airlines can operate more efficiently eliminating. However, as this industry relies

greatly on critical computer system infrastructures there is an increased risk of large

scale cyber-attack. Bilateral treaties, Regulations and corporate lawsuits all fall into

the Legal category. The bilateral treaties are known as service agreements which

contain provisions on things such as traffic rights, policy and security etc. With most

Countries having different regulations it can be costly to airlines and can also be

difficult to obtain operating licenses because of the different legal requirements.

Environmental factors include airlines being forced to adopt “green flying” in

response to concerns raised by environmentalists. The International Air Travel

Association has introduced several programs to benefit airlines in this area.

Following on from this we report briefly on the history of the airline industry which is

described as being a major industry as it is relied on by millions as a way of making

a living as well as transportation. Flying has been described as a risky endeavour

and even though the first scheduled commercial flight took off in January 1914, it

wasn’t until 1925 that it became commonplace. As airlines were being pushed in

every direction The Civil Aeronautics Act 1938 was enacted and this is when the

Civil Aeronautics Board was established. Their duty was to determine the routes of

travel as well as regulating the passenger fares. Congress also created The Air

Safety Board which was a separate agency but both were forced to merge in 1940.

It was 1980’s when the deregulation of the airline industry was marked resulting in

growth of smaller airlines and mergers of the larger carriers. Terrorist attacks in

2001 along with a global recession in 2012 forced a change in the strategic approach

of the industry.

Moving on we then describe the global and local market description where there are

approximately three hundred major airlines globally with the top five of American

origin. Whereas, locally in Europe there were about ninety airlines with Ryanair

being recorded as the airline with the highest growth rate. Here in Ireland there are

only two major airlines that dominate the industry and account for 80% of the traffic

in and out of Dublin which is our largest airport.

In our next part we concentrate on short haul low cost airlines while we complete a

five forces analysis. Bargaining power of Buyers is described as medium/high,

however in the low fare/short haul sector passengers hold high bargaining power

because of the low cost of switching and the substitutes available to the traveller.

Bargaining Power of Suppliers is high due to the cost of re-training staff, the long

term contracts with favourable credit terms, the limited number of suppliers and the

competition for slots in main airports. Even though the deregulation of the industry

has decreased the barriers to entry the Threat of New Entrants is still low as the

start-up and operation costs are high, it can be timely to build a well-recognised

brand and acquire a licence and you must adhere to strict government regulations

that sometimes can be costly to implement. The Threat of New Substitutes is

Low/Medium as substitutes such as trains, boats etc. are easily available and can be

more convenient, however air travel is fastest and can sometimes be cheaper than

other forms. We deem Competitive Rivalry to be High and intense within this

industry, it can be difficult for airlines to differentiate from competitors and very few

have any distinctive capabilities.

We then go on to list what we believe to be the key success factors of this industry

that need to be firstly identified and then implemented and include a highly qualified

and experienced workforce, service promotions and in-flight services, non-stop

flying, financial management, efficient management of cost, route system, and

finally, use of I.T and social networking.

This is followed by discussing the key strategies that would normally be pursued by

the major players within the short-haul industry through differentiation such as quality

of product/service, customer service, low cost strategy, strategic alliance and

adoption of innovative products. You will also see how we note Ryanair’s

commitment to Innovative Product and Route Destination strategy and the compare

them to one of their main rivals “Easyjet” who focus on delivering market leading

innovation in customer service while at the same time establishing a network of

routes.

We then decided to choose airlines that are in direct competition to Ryanair for

comparison and these include

Easy Jet, who differ mainly because they fly into primary airports and focus on

business passengers.

Aer Lingus, Lufthansa, Air France and British Airways which are all different to

Ryanair mostly as they accommodate transatlantic flights. You will see how we use

strategic group mapping to position these airlines comparing them on price and

product quality which position Ryanair as the lowest in price structure and product

quality which follows Ryanair’s low cost strategy. However, when we compare them

using destinations and market share Ryanair is marked high in both these

categories.

We also used the Boston Consulting Group Matrix where we found that Ryanair’s

cash-cow was the large portion of market share regarding the Dublin-London routes

whereas its stars were their main European routes and have proved a winner against

their main rivals. There are questions regarding their new routes and how they will

fair out.

When applying Ryanair to Porter’s Generic Strategies they are clearly set in cost-

focus segment as they chose to be a low cost carrier. Ryanair’s decision to favour

smaller secondary airports along with the fact they have no current transatlantic

flights would leave you to believe that they are at a disadvantage compared to major

competitors, however, they are clearly flying high with their low cost strategy.

Our internal analysis proves that their core competencies relate very much so to their

operational services with their high efficiency levels and strategic alliances

contributing to their financial resources. Physical resources such as their modern

fleet of aircraft allows them again to reach the highest level of efficiency within the

low fares industry with massive cost-advantages, while they also keep up the pace

with the vast speed of improving technology by implementing a more user friendly

website and creating mobile apps to bring convenience to consumers. Human

resources has always been a controversial topic within Ryanair but again they pride

themselves on their efficiency which unfortunately for employees means that they

will receive the minimum that regulators allow and this in turn leads to the perception

that they are merely a “training” airline for employees to gain entry to competitors.

We clearly see from the value chain that inbound logistics are of the upmost

importance to Ryanair, again by the use of secondary airports and distant gate

locations. High operating efficiency as we already know has been achieved due to

their concentration on keeping costs low. Outbound logistics is seen through the

most effective management of their routes. CEO Micheal O’Leary has been known

famously for his marketing antics over the years and attracted a lot of media

attention, however, with the more customer-friendly strategy that Ryanair are

promoting currently we can see that they are moving towards a more sophisticated

strategy. Their on-board services are where they gain most of their profits, due to

high-priced goods on board and strategic alliances. Ryanair have moved their

offices to Swords which is cheaper for them and it will also allow them to earn extra

income.

The SWOT Analysis we performed on the company clearly shows that their

strengths and opportunities far outweigh their threats or weaknesses. Strengths

such as economies of scale and ability to keep things at the lowest possible cost are

noted as well as their opportunities for expansion by becoming a feeder airline or by

acquiring the licence from the government in Cyprus. Weaknesses relating to

Rynaair is their reputation for their lack of customer service and their dependency on

one aircraft supplier. Threats that apply to Ryanair also apply to the rest of the

industry regardless of where they sit on the strategic mapping and include terrorism

threats, outbreak of diseases and weather conditions.

We then outlined three strategic issues facing the company which were the change

in Business Model, Expansion and Public perception, with each of them explained in

detail in our report. We decided to focus on one key issue which was public

perception due to the poor history with their employees, lack of customer service and

the adoption of controversial advertising campaigns. This is currently within their

strategic plan for the next number of years but we felt that it should be implemented

at the soonest point possible to avoid any negative effect on their growth.

We suggest that they appreciate the employees more by engaging with them to

ensure they feel valued as this will in turn improve customer care.

They obviously need to go deeper into the development with their website to reach a

standard similar to their competitors which will prioritise ease of use for passengers.

A reduction of the controversial publicity stunts is also suggested so as to ensure

that there is no negative effect on the company.

If possible to increase the use of primary airport locations for passenger convenience

and will appeal to business customers but especially to millennials within the next

five years.

This plan could be implemented by a reduction in dividend pay-outs to release funds

and cover the costs, employing young and innovative IT graduates so as to upgrade

their system even further and finally acquiring small/failing airlines in primary airports

to gain these slots.