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CASE STUDY
Ryanair: the low fares airline - future destinations?Eleanor O'Higgins
The case focuses on rhe analysis of rhe airline indusrry environment. Ihe inlernal resotJrces/capabililies of Ryanairand the concept of sustainable competitive advantage. The case illustrates how a strategy that i5 grounded in the
efficient deployment of essets/resources/competencies. whilst ildrJing perceived value 10 customers. delivers asustainilble strategic advantage. The case also illustrates the difficulties and obstacles that stand In the way ofachieving and retainmg such advantage through changing circumstances.
There is only one thing in lire world worse Ihan being lalkedabollt. and thai is no! being [(lIked abolli.
This is il quote Irom a novel by Oscar Wilde bUI it couldbe the mantra or budget airline Ryanair. Europe's largestcarrier by passenger numbers and market capitalisation in2009. The airline is often controversial. whether it was byannoying the Queen of Spain by using her picture withoutpermission. or announcing plans to charge passengers touse toilets on us nights. or engaging in high-profile battleswith the European Commission. Ryanair also made newswith its achievements. winning international awards. likeBest Managed Airline. or receiving a 2009 FT-ArctlorMirrnl80ldness in Busint~s Award. This Award announcementsaid that Ryanair had 'changed the airline business outsideNorth America - driving the way the industry operatesthrough Its pricing. the desunauons it nics to and thepassenger numbers it carries'.' Ryanair had been the budgetairline pioneer in Europe.' rigorously Iollowing a low-coststrategy. It had enjoyed remarkable growth. and In the
• • •five years to 2009 was the most profitable airline in theworld. according to o"1ir Transport magazine.
Despite this apparent success. Ryanair faced issues.The most pressing. shared by all airlines. was an industrythat was 'structurally Sick' and 'in intensive care'." withplunging demand in the global economic recession anduncertainty about oil prices. What strategy should Ryanairuse to weather this storm? Would the crisis produce a longterm change in industry structure? Could Ryanatr takeadvantage of the situation as it had in the past. by growingwhen others were cutting back) A predicament of its ownmaking was Ryanalr's 29.8 per cent sharcholding in Acrl.ingus. the Irish national carrier. following an eboruvetakeover attempt. Aer l.ingus' flagging share price hadnecessitated drastic write-downs. which had draggedRyanair into its first ever losses in 2009.
Overview of Ryanair
In 2009. Ryanalr had 33 bases and over 850 routes across2& countries. connecting) 4 7 destinations It operated afleet of 199 new Boeing 737-800 aircraft with lirm ordersfor a further 112. It employed over 7000 people and wasexpected to carry approximately b7 million passengers In2010.
Ryanair was founded in 1985 by the Tony RYilll familyto provide scheduled passenger services betwecn Irelandand the UK. a.~an alternative 10 the state monopoly airline.Acr Lingus. Iniually. Kyanair was a fuJlservlcc conventionalairline. with two chlsses of scating. leasing three differenttypes or aircraft. Despite growth In passenger volumes. bythe end of 1990 the company had faced many problems.dispoSing or live chief executives. and accumulating tosses
This case was prepared by Eleanor O·Higgins. Univl!rsity College Dublon. It is Intended as a baSIS for class diSCUSSion and not asan illustralion ot good Dr bad practice. <D Eleanor 0 Higgins. 20t O. Not to be reproduced or quoted without permission.
01lR£.20 mthe air line Ino frills calIDe SUCCCS!ream. led twas apponExchange iStock exch
Hixed res,Ryonair dron the ba:largest intonow the SIUS carrierfive years.largest arr
model SouRcleasi
Michael (Ryanair'sdoing rerrlowest co:pany repc(10.9 milcast loss (lalling 12Profits gu'rather ths
The aiIreland. )Prance. Gwere cutaverage 0routes inthe dernis
TheseIull-year .to a €18(was eradl..ingusshchilrge. Iprofits felThis wasrailed to
July lOt)against r
barrel fOIquarter -during IIfrom 50.
'analrin thl:
'crs alay of
n the
;sucs.IlStry
withand
anairlongtakewingownI Aer·rtiv!:had
gged
:ros.<;{'d a'!lerswasr.; in
milylandline.onll!rent,. by.!ms.·sse:;
,1 ilS
ofIRL20 million. Its fight to survive In the early 1990~ sawthe airline transform itself to become Europe's first low fares.no frills carrier. built on the model of Southwest Airlines.the successful Texas-based operator. " new managementteam. led by Mkh,leI O'Leary. at first a reluctant recruit.
HYANAIR THf. LOW FARES AIRLINE 619
cent to €40 and were forecast to decline steeply by it furtherI 5 to 2(J per cent to about f 32 in fiscal 2() IO. (Ryanair'sfinancial data (Ire gtven in Tables 1a and 1h. and operatingdata are given ill Table l c.)
The airline contended that it could offer the lowest fares
Exchange in IY9 7 and is quoted on the Dublin and London
Stock exchanges and also 011 the l\ASDAO since 2(J[)2.
was appointed. Ryanatr was floated on the Dublin Stock b~' cutting rusls to levels that rivals could not achieve. It
Mixed fortunes
was planning to recruit 1200 new employees to saYicc itsnew aircraft. bUI the Humber of passengers per employeewas still expected to rise thanks to economies of scale fromnew routes and OJ decline in airport charges by directingtrafllc toward airports offering bargain deals. Having beencaught short in us fuel hedging for lO(}X/O~. Ryanair tookadvantage of the low uil price to hedge (J(] per cent o~ itsIuel costs during 2009/10. locking in a full year fuel costsaving of about t'4hO million.
Mixed results
Ryanair designated itself as the 'World's Favourite Airline'011· the basts that In 200':1. lATA ranked it as the w orld'slargest international airline by passenger numbers. II wasnow the sixth largest airline in the world (when the largeliS carriers' domestic traffic is included). Over the next Ancillary revenueslive years. Ryanair intended to grow to become the secondlargest airline in the world. ranked only behind its rolemodd Southwcst
Releasing Ryanair's 03 1009 resul~ in January 2010.Michat'l O'Lear~' obscrved. 'The ell\'ironmt'nl is. fromK~'allair's rx~rsp<~ctive. great. because it is awful. We'redOlllg remarkahly wcll bccau:;t' lhis is the lime whcn thelowest cos! pfo<lucer willS."" For the quarter. th.~ COItl-
pany reponed a much smaller lIet loss than cxpccted ofno.Y million (t9.'Jm or S 1'iml. instcad (If an earlier fore-cast los$ of €.5 5 lIIillion. with beller thim expected yields.fallin~ 12 pt.~rcent rath('f than the forecast 20 per ('ent.I'roliL'i guidance for the full year improved to t:275 millionnltht'r than the lJri~inal C20() lIIillion fore,ast.
The airline had cut lo~slllakilljo\ routes ill thl' CK ilndIreland. replacing them with mort' profitable OIl(~S illFrant:c. Germany and Spain. Opcratill~ ,osl~per passcn~erwere cut hy 4 per ccnt. despite a ·1 p<~r(,f'lIt increase inaverage. IIlght di~tance_ Ryallillr planned to open 14(J newrOlltes ill 201() and to Incrcase lIIarket share thanks tothr dembe of several carriers."
These n~slllts and expectations for 20 I () followed Oil
full-year 20()Y results (see Tahle 1). whell Rvallair plungedto a £1 RO million loss. as its € 144 million opcralin~ profitwa5 l:radlcated by a Cl12 million write-down of its AerLingus shares and an a,ce!eralrd C'i 1.6 millioll deprcriatioll{·harge. Exdllding Ihese exceptiOllil1 charges. underlYingprofits fell 7K per cenl froOi t:1S0.1J million to f 10:; million.This wa~ dlW largcl~' to it sury,e in fllel prices as Ryanairfailed to hedi:>,c when oil pri,es rose to $117 iI barrel inJuly 200M. Th(~n. howing to ~hnreholder prt"sslIre to coveragilillst rocketinj! prices. it locked in fud costs at S 124 ahand for RO per cent of its col)sufIlplioli during the thirdquarter· JlIsl as Ilil pric('_,>crnslled 10 a low of S 33 a barrelduring that period. Passenger numh(~rs rose l'i per ('("nlfmlll 'i0.1) million to SR.5 million. Average farcs fell H per
Ryanair provides various ancillary servict~s connectedwith its airlluc service. mcluding in-flight beverage. foodilnd merchandise salcs. It also distributes accommodation.trav!'! insurance and rar rentals throllgh iL-;wehsite. Thisenables Ryanair to increase silles. while redudng unit COs~.
In 2009. Ryanair's websitc nll1ked 12th by number of visitsfor c-tailers in the [11\ (after EasyJel. which ranked II ch I.AnCillary scn:ict,~ <lccoullled for 20.) per cent of Ryanalr'stotal operating re\,cnut':S in 20()9. compan~1 to 18.0 percenl in 20mL In filCt. ancillary revellUCS had dimbed hy22 per CCllt. considerably faster than passcnger reVClluesal 5 per cent. I~enerating ~'I 0.20 I~r pasS('nger iind withhi\.:her margins.
Other allcill<lry rc\'cnue initiatives were Introduced. suchas onbtJilrd ilnd online gamblin~. and a trial in-tltght mobilephone service ill lOO'). A poll of Frnllllt'lai Tirm's n'adns hadprodncerl it 71 per CClit negative rc.~p(lllse to the quc.~tioll.'Should mobile phones he allowed on ilircraft!,' l!owevcr.~1ichad ()'J.~i1l)' df'.dHred 'If you want a quiet flight. uscanother airline. I{yauair is lIoisy. full and we arc alwaystrying to sell ~'ou something.''' /\ot all ancilhtry serviceinitiatives were succes.'iful. In 200:;. Ryanair plIlled nn in-fIj~ht entcrtalnment system when passcngl~rs had rt~btcdpaying "8 to [l'n! it gaml's and en(er!aillllwlll cons()it'.
Ryanair was tht: Iirst airline to in!rotiucc charges fordwt:k-in luggage. Virtually (III budgcl illrlil1l~ have folluwedSlli!. as they have with other Ryanair initiatives. II hascontinued to lind ways of charging passclI!I,ers for scrncesonce conSidered intrinSIC Lo cHI airline Il,kel. Passcngerswere chilrged extra for checking jn ilt the 1I1rport rathcrth'lII online (which also incurs it charge). althuugh thosewith hold luggage did not havc the option of dlcckin)( illonline. While avoiding pre-assigned seats. an extra ('hClrgeprocures 'priority hoan.lillr-:·_Interestingly. Acr lingus and13/\ have takell up a similar idea by ellablill~ passt:llgers topre-book scats ()llliue for iIIl extra dlarge.
620 RYANAIR - THF lOW FARES AIRIINF
Table 1a Ryanair consolidated income statement
Year end Year end Year end31 March 2009 31 March 2008 31 MMC1l200?
rc ODD) (e 000) (e DOD)------Operating revenuesScheduled revenues 2,3['3,868 7)75,692 1,8·}I.}91AncillJry r~vr.nur.-; - 5?8,097 1.8~!: 30 . 362..1.1..Q~
Total operating revenues - continuing operations 2 91.1 ~~~ 2713.82:2 b?3~1i.9~Operating expenses
Siaff costs 1309,296) [285.31.31 12?6.5801Deprecranon [756,1171 [175,9[,91 [l/.:J,5U31fouel and 011 [1,25'},0621 [791.3<"/1 (6~).:l311Maintenance. materrals and repairs [66,8111 [56,709[ 1/.2.01,6)Marketing and distnbunon C05tS 117,7531 [17,1681 123)951AIrcraft rent"I-; ('/8,2091 ('}2.6701 [58.1831Houtc charges (786,5591 [2'i9.7ElIlI 11'19.21.0)AIrport and hamHlnq char qes (4['3,38'11 [396.3261 17736131Other 0.39,11.01 . [1<'19701 ...!104,8~1
Total operating expenses (~,S49,334) (2,176.742) [!..1§5, 15~)
Operating profit - continuing operations 92,631 537,080 I.7 I,'}I.S
Other income/(expenses)
FinJnCe! income '/5,522 83,957 62.983l-mance exp(.ln~Je [ 130,51.1,) [97,0881 11J2.8761For erqn exchange gJln/llo~~e~) 1.,441 15,6U61 19061Loss on irnparrrnent of avauabte-tor- sale fHlan(ial a~.~.r.t 1222,537) 191,5691Gam on olsposal of property, plant and equipment - _'2,'5.~ 91.-
Total other incomellexpensesl (273.1'~.1 ~.531 . 120,7081
[Lossl/profit before tax 1180,4871 438,927 1.:>1.037
Tax on ltossl/prot« on ordInary acnvu.es 11,31/. 148,2191 115,4371
(Lossl/profit for the year - all attributable to equity holders 01 parent (169,1.731 390,708 435,6.0Q
BaSIC earninqs per ord,nary share [Eur o ccntsl (11441 2S.B[' 28.70Olluted earnlng~ per crdinary sharc [Eur o centsl 111 ['4) 2,.62 ')7 9'1Number of ordmary snares [tn OOCsl 1,1.78,1, 72 1,51:l.012 1.~t.I.,45"Number of diluted shares lin OOOsl 1,1,'/B,It'U 1.574,935 1.5S·} 503
SOIl((1' RYJnJ" Annll.)1 R~p0ft 7001
Some of Ryanuirs rcvenue-generaung ideas haveprovoked controversy - lind publiclty. One of the mosttalked about WiI$ us intention to charge passengers (1to use the lavatory onhoard, hy installing a coin slol oniLo; aircraft. While il has not implemented this COltc<!pt(itmay contravene security rules). thf' idf';) gencratcd llluchpublicity. Another idea mooted by I{Y<Ill<lirW<lS a '[allilx'for overweight passengers. In an online poll of over 30,000respondents, the fat tax id!':awas approved by one in three.Howevcr. the airline later anllounced tllill it would notImpl(:ment the surcharge because it could 1I0t collect itwithoUl disrupting it$ 25'miullte turnarounds and onlinecheck-ill process. The salllc onlinc poll, supposedly togenerate ideas for additional revenue, also gainc~d 2; percent approva[ for a t:) It!vy to llSt! onboard toilet papcrwith Michael {)'Leary'~ face OIl it.
Investor perspectivesSince its notation in 1996, Ryanair has never declaredor paid dividends on its shares. For the foreseeable future,Ryanair planned to retain any earnings to fund the husi·lIess opcnllions, including the acquisition of additionalaircraft rcqllirl'd for its planned entry into m:w markels,expansion of its existillg st!rvin~, and for ruutille n!placc·lIlenLo;of its current lIeet. The llo·.Ji\'idend poli(y, cOlllhint·dwith il~ healthy cash position, has causcd the companyto seek alternative ways of improving the liquidity andmarketahility of its stock, through a series of s~wn: buy-barks of the equivalent of about 1.1 pcr cent of the issuedshare capital hdwet!11 2006 and .lO()9. When a deal 10
p)ace illl aircraft order with l.3oeill~ foundcn ..'t.I, Rvanairannounced that it would prohahly suhstitute the c<lpilalit would have spellt to undertake a mixture of share
Table 11
Non-currPropcrty,Inlangrbl.MailableOeriviltl\l'
Total nor
Current,InventoroOther asCurrent·Trade reOerivallvRestrict!Fina ncra
Cash an.Total cu-
Total as'
CurrentTrade piAccruedCurrentCurrentDerrvau:
Total cu
Non-cutProvrsioOerivalif)dP.rreOther CINon-cu
Total m
Shareb-tssuen .Share ~CapitalRctalneOther I
Shareh
Total Ii
Sauro!.
buyba,
ciluslnRY1
and pimarkein theterm 1
PE rat
aPE rbudge
----_end:h 20071001-."/91::1.0_,-,-8J~
,580),5031,3311046)795)183)240161318591
!SDI745
}83l761106)
91
~~I37
3'n
20n)7J3
rredure,usi-malets.ICC-
ncdIllylllduy-wdtoairItalIrc
Table lb Ryanair consolidated balance sheet
- -- --.- - - --- __-Non-current assetsProperty, plant and equipmentInlanglble aSSl'15Avaita!J',e-for,salr finanCial assetsDerivative linanciill instruments,
Total non-current assets
Current assetslnventcnesOther assetsCurrent laxTrade rcce.vabtesl)erovilt,ve financ.at instr urnootsRestrocted cash~man(lal assets: cash > 3 rnonthr,Cash and (dsh cquivatcots
Total current assets
Total assets
Current liabilitiesI rade pilyablesAccrued expenses and other liabilitiesCurrent maturities ol debtCurrent taxDerivauvr- fmanci,ll in!.lrumenl~.
Total current liabilities
Non-current liabilitiesI-'ruviSlonsOerovilllve flnanr.lillln~trurncnis
Deferred rexOther creditorsNon-curr cnt rnaturinc» of ncbt
Total non-current liabilities
Shareholders' equityIssued share capitalShare premium accountCapita! rcdernpnon reserveRetamed earninqsOther reserves
Shareholders' equity
Total liabilities and shareholders' equity
SOlirce' Rva"~lr Annu"I, R~p~" 2009
buybacks and special dividends to shareholders after 2012.,causing a 7, C; per cent rise ill its share price,
Ryanair shares reached a high of (:6, 30 in Aprll 2007and plummeted to € l,Y7 in October 200R. as global equitymarkets reeled, III early LOIO. the shares were tradingin the t:~.30 to t: l,bO range. with an expected mediumterm target of €4.20, based Oil expected earnings and aPF. ratio of 1 ~, In mid-1009, its rival p.asyJd shares hadil PE ratio of 2Y, Ryanair had often underperformcJ otherblld~I:1 airlinc 11<:I:rson its PI-:ratio.
HYANAIR - THE lOW !-AR[S AIRL INE 621
J 1 March 2009 31 March 2008
3,644.8241.6.81. 193,15059,970
3,84'-.785
3,582.1261.6.81.1
311.462
3.940,£.79
2.07591.053
1,9'17169,580
1.~8S34,17810.228
29:>.431406.274
1,I.'/(),R49
/,38'/.127
6.]77,5!>1
1.1,791129.962291,601403,401
1,583.191.
2,543,077
6,387,862
132,671905.715202,941
1.25137.439
1.379.191
129.789919,3/.9366.801
141,711
1,!>5'!. 150
71.96451.,07/.
155,521.106,549
2.195.499
7,583,610
l.4,8107~J,685
148,08899,930
1.899,694
2,768.207
9.35/•617.426
4931,777.727
20,061
2.425,061
6,387,861
9,£.65615.815
:J'lB2,000.422( 123.8861
VJ02.194
6,327.551
Ryanair's operations
Michael O'leary said;
Any fool can sell low air fares and lose money. Thedillicult hit is to sell the lowest airfares and make profits,If YOII don't make profits. you Ci:I!I'1 lower your air faresor reward your people or invest in new aircraft or take011 (he rcally bi!o(airlines like BA (British Airways) amil.ufrJlansa, .,"
622 RYANAIH - rHI: LOW FARES AIRliNE
Table 1c Ryanair selected operatinq data
Average y;cld per revenue passenger m'le I'RPM'IIt:1Av~rilYC yield per available seat tnlle!> I"ASM'IICIAverage fuel covt per US 'lallo" IIICO!;t per ASM ICASMIICIBr euk-even load factorOperaunq marginTotill break-even load ractor'"Average booked piI%p.nger tare It:lAnCillary revenue per bool(ed passenger ((:1-------Other data:
Revenue pas<;cnger~ bookedRevenue passengN mllc~,Available seat milesBooked passenger toad factorAveragc length of passenger haul lrmteslSectors flownNumber of airports servedAverage daily flight hour utilisation lbours}Fmployees at period endEmployees per a.r cra!tBooked passengN5 pcr employee
2009 2008- -.--- ----
200? 2006-_. - --_
0,070 0.070o OJ'/ U 0581.8:16 1.C.790.054 0,O~2no/, 7:i%21% 27%66'k 6!>%
44.10 H2J8.!>2 '145--_
o 06U 00650050 O.O~G2351 1,(,71.0.056 0,0519R"Io '/9%5% 20%
79% 6'1''1,400/ 4:1.7010.21 9.58
.---
2009 2008
58,!:l6!:l.663 !:lO,931 ,72339.202 m 31.,457 m/,7.102 m l.l.31.2 m
81% A7%65/, 662
380,91!> 33lJ,S98143 1/.-,959 9,R7
6.616 5,97036 36
8.852 8,603
- ---200? 2006
,-- ---42,5C9.112 31.."l6B.81370.943 rn 20.342 m32,043 rn 24.282 m
R2% 83%621 585
2"12.889 227,31612:3 III977 960
4.462 3.1.533/, 35
9,527 10,069.._--'. Total bre~k·ev"n IO,111t,J<lor'~ ("Icul~ted on the b,lr,,~ C)! IUlal costs and revenues. ",clud'~9 Ihe CO"t~and revenues trom all anc,llary 5ery.r.es.
S~"rm; Ryan~" flr.nu"l Report 20C9
Certainly, Ryanair has stuck closely to the low-cost/I0w·fares model. Ever dccreasuig costs is its theme. as itconstantly adapts its model to the European arena andchanging conditions. In thts respect. Ryanair dtflers in itsapplication of the Southwest Airlines budget airline pro-totype. and its main European rival. casylet, as the lattertwo are not ,IS frlll-cutttng. One observer described theditTerencc between easy]ct and Ryanalr as: 'easYJet. youIIndcrstand is classy cheap, mther than just plilin cheap."'"
The Ryanair fleet
Ryanair conlin ned Its Ilt!Ct commonality policy. usingnoein~ 7 ~7 planes to keep starr training and aircran !nain·tenance costs as low as possible, with ,Ill expected f1~dof over 300 hy 2012. O\'er Ihe years. it has purchascdnewer. more environmentally rric~ndly aircraft. reducitlgthe i1verage age of Its aircraft to 2.4 },ear.;, the youngestIIct,t in Europe. The newer aircraft produce 50 per celtt lessemissions, 4 '; pt~rcent less fuel burn and 4:; per cent lowernoise emissions per SCilt. Winglet modification providet.lbl~tter performance and a 2. per cellt reduction in fuelconsumption, a silvin!?, which the company belic\'cd couldbe even further improved. Despite larger seat capacity.new aircraft do not require more crew. In 2009, in aircraftbuying mode, Ryanair sl)u~ht to repeat its 2()l)2 coupwhen it placed aircraft order.; at the bottom of the market.
However, in December 2009 a plan to purchase 21)0 [etsfrom Boeing was cancelled when negotiations over pricecollapsed: 'Eventuallv you lose interest dealing with a bunchof idiots who can't make a decision', declared MichaelO'Leary when the deal fell through."
Notwithstanding strict adherence to Boeing 717 planes,in an attempt to extract ever greater discounts from IkJc:ing.Ry,malr invited Airhus, the European aircraft lIlanufacturer,to enler into preliminary bidding for a multimillion·dollarord{~r for 200-plus short-haul aircraft. Howe\,er. AirhusrebutTed the Ryanalr Invitation, dedarinl!, this Silks cam·paign would he too expensive and time·consuming.
St;,f! costs and productivity
Ryanair"s 20()9 cll1plo~'ec counl of 63h9 people. compris·in!/,uver 25 different nationalities. had almost douhled overthe prcvious three years. This wa~ accounted for almostcntlrely by flight and cahin crew to service (~xpansion.Ryanalr'~ 2009 Annual Report claimed Ihat It~allcr<lge:pay.induding commissions to cabin crew for Oil-board s..l('s,was +:4 S. 33 3, hi!o:her than almust all olher maj(lr F.uropeanairlincs. Most of the compallY's pilots conc1udL'd negotiations.....llh RYilllalr to 1I100'e them to n~w roster patterns withsubstantial pay increases of up to €I O,O(lO pt'r caplain.Clbin c.:n~walso negotiated a new fiv(~·y~ar pay agrcementwith the: compallY. earning them significant pay increaSCs.
claimed RproductivEC regulato prcvenratio of l)
Passengt
Ryanair Ifor passepriority ~passeng«Iacillues ;passcngeluggage,Ryanairof passeltwo year200Y, itenablingf50mill
passer10 ancheckon Ill:willncarovourp
A naturto 100 Ibe hrouthey weas theymore efexpcn~i\baggag(t:ven ehthe conpasstnl!aircraft
Airport
Consist.were p'avoidilln~gionaput. Usthe cit~lIowhclloann()It USt~s I100 klfrom BI
J06
070058479052'5%'2%,S%1.23145
)06
S8,S1]342 rn282 m83%!l85
27,3161119.60
3,45335
1U,069
'(VICE'S.
10 jetspricemm:hic.har.1
lanes,xing,·turer,dollar\irbuscam-
npris-:! overIlmoslnsiou.epay,sales,;)pcanations; withplain.~menleases,
RYANAIR - THE LOW r snr s AIRLlN[ 623
clauned Ryanair. B~'tailoring rosters, the carrier maximised Authority rebuked Hyanair, and upheld a misleading
Airport charges and route policyConsistcnt wilh the budget uirline model. Ryanuir's routesWere rminl-to-point only. It reduced airport charges hyavoiding congested main airports, choosing secondary anclregionnl destinations, eager to increase passenger through-put. l)suall~' these airp()rL~ are significantly further fromthe cit~o t:entr(:$ the~' serve thall the main airports, 'fromnowhere to nowhere' in the words of Sir Stelios lIaji-Ioannou, founder of easyJel. Ryanair's higgest competitor.'"It IlSl.~ frankfurt Iiaim. 123 kilometres from Frankfurt: Torp,100 kilOllletres from Oslo: and Charleroi. flO kilometresfrom Brussels. In December 2()()~, t1w Advcrtising Standilrcl~ : BAA is o .....nL'l1 b}' Spanish {,()I!IPillly Fl'rwvial.
producuvlty and lime off for crew members, couiplyrng withEll regulations which impost' it ceiling OIl pilot flying hoursto prevent dangerous fatigue. Its passenger-per-employeeratio of 9195 was the highest in the industry.
Passenger service costsRyanair pioneered coxt-cuttlng/yk-ld-enhanclng measuresfor passenger check-In and luggage handling. One waspriority boarding and web-based check-in. Over half of lispassengers USt~this, thus saving on check-in starr, airportfacilities and nrne. Charging for check-in bags encouragedpassengers to travel with fewer hags or even zero check-inluggagr, thus savtng 011 costs and enhancing speed. BeforeRyanair began to charge for checked-in hag~, RO per centof passengers were travelling with checked-in luggage:two years later this had fallen to :Hl per cent. FWIII October
2009, it adopted a 100 per cent web check-in policy,enabling a reduction in starr numbers, calculated to save(;50 million per year. Ryanarr claims that:
passengers love web check-in, Never again will they haveto arrive I~arly at an airport to waste time in a uselesscheck-in queue. As more passengers travcl with carry-011 Illggilge onl~'. they arc clp.lighted to discov~r thaI theywill lu:ver again wast~ valuahle timt' al arrival bagKaf,ecawuseb either. These measures allow Ryanair to saveour passellKers vuluable Lime, as well as lots of mOlley_'
A natural Hext step announced by Ryanalr was a mm'eto 100 per cent carry-on luggage. Additional hags wouldbe brought by piissengers 10 tlw hoarding gale, wlwn:they would be placed In lhl' hold, and returnecl to themas they deplane on arrl\Oill. These cl1iclencic~ would allowlllOre p.Oid(~nt ilirport temlinals to he devdoped withoutcxpensivt: check-in desks, baggage halls, or computerisedbaggage systems. 'and enahle Hyanair to make lIying('ven cheaper, ea~ier and much more fun again', claimedthe company." The f~aslbility of the proposals to requirepasS(:ngcrs 10 carry hold baggage through security to theaircraft wa~ yet to be tested.
advertising complaint agalnst it for attaching 'Lyon to itsadvertisements for fhghts to St Etienne. A passenger hadturned up at Lyon Airport, only to discover that her flightwas leaving from St Etienne, 75 kilometres away.
Ryanair connnued to protest at charges and conditionsat some airports, especially Stansted and Dublin, two ofits main hulls. II opposed vehemently the British AIrportAuthority (BAA) 1 monopoly plans 10 build II '(4bn ~oldplated Ta] Mahal at Stansted which we believ« could hI'buill for f lbn'. The airline was:
deeply concerned by continued uuderstaffing orsecurity at Stansted which led to repeated passenger andflight delays ... management of Stansted security isinept, and RAA has again proven that I[ Is mcapableof providing adequate or appropriate. sec-urity services atStansted, This shambles again hlghllghts that BA:\ isan inefficient, incompetent airport monopoly.:"
When BAA appealed ito;hreak-up, ordcred by the UK C(.)!Il·
petition Commission in 2009, Ryanair S(~cured the righl tointervene in lhe appeal in support of tht: ulmmissioll.
In July 2009, Michael O'Leury mude a high-profileannouncemr.nt that Ryanair would cut winter capacily alStansled hy 4U per cent, because of Stansted's n:)t!rlionof Ryanair's demand for cuts in airport charges and theUK g()vernment'~ plan [0 raise departure Juty from (I (lto
I:11 ~r passenger. In protest at risiug charges at DuhlinAirport from January 201 () and a € I 0 per passengertourist tax In Irr.land. Ryanair was also intending to
n~llI(,!' liS Dublin lrallle by 2() per ccnt.Howcver. both BAA and some ohservers d!'rided
Ryanair's threats l<l cui traffic by 40 per cenl at Stansted.'Michael O'Leary's ability to spin a talc has reached anew level this week. Along with the gullibilily of pilrl'i ofthl' In(..'(lia in accepting il. Hook, line and sinker.'''' Thiswas hased on the contention that the airline should havecompared its projected winter t:ajlill'il~' or 24 aircral't atStanstt'.tl. 1101 with it~summer capadty of 10. but with it:;previolls winter c:apac.ity of 2H. Thus, lhe redllction wouldbe only 14 per cent. not 4() per ccnl.
Marketing strategyFollOWing tht: inlrooucllon ofns intem('t-ba~ed reservationsand Ilckding sen.'icc, enabling passengers to make reserva-tions ancl purchase tickets directly through the wehsitl'.Ryanair's relianr.(~ on travel agents has heen elil!lim1t(~d, Ithas promoted its website heaVily through n(~wspaper, radioand television adwrtisillK. As <Iresult, internet bookingsaccount for 9Y ~r cent of all reservations.
624 RYANAIR - THE LOW FARES AIRLINE
Ryanair minimises its marketing and advertising costs.relying on free publicity. by Its own admission. 'throughcontroversial and topical advertising, press conferencesand publicity stunts'. Other marketing activities includedistribution of advertising and promotional material andcooperative advertising campaigns with other travel-related entities, and local tourist boards.
As referred to earlier. one of Ryanairs publicity stuntswas Its unauthorised use of a photograph of SpanishQueen Sofia after she took a £13 flight from Santander inNorthcrn Spain to London. When tt tncurred the Queen'sdispleasure, Ryanair apologised and promised to donate€5000 to a charity of her choice. In another instance ofcontroversy over using pictures of the rich and famous,in 2008 Ryanair was forced to pay a fine of €60.000 toPresident Sarkozy of France and his Italian bride Carla Brunifor using their images with the slogan. 'with Ryanair. allmy family can come to my wedding'.
So, what about Aer Lingus?
According to a commentator in the Financial Times'Ryanair's bid for Aer Lingus was a folic de grandeur'." EvenMichael O'Leary admitted 'it was a stupid investment. Atthe time, it was the right strategy [0 go for one combinedairline but it has now proven to be a disaster.· ...
During 2007. in a shock bid. Ryanalr had acquired a25.2 per cent stake in Acr Lingus. only a week after theilotation of the national carrier. It subsequently increasedits interest to 29.8 per cent. at a total aggregate cost ofC407.2 million. By July 2009. the investment had beenwritten down to €79.7 million. At the time of the initialbid Ryanair declared its intention to retain the Aer Lingusbrand and:
up-grade their dated long-haul product. and reducetheir short-haul fares by 2.S per cent per year for aminimum of 4 years ... one strong Irish airline groupwill be rewarding for consumers and will enable bothto vigorously compete with the mega carriers in Europe... there are significant opportunities. by combining thepurchasing power of Ryanair and Aer Lingus. to sub-stantially reduce its operating cosl~. increase efficiencies.and pa~ these SClving~on in the form of lower far~ toAer Lingus consumers.""
It had been an achievement for the irish government finallyto have noated Acr I..ingus after several false starts over anumber of years. Aer Lingus and its board firmly rejectedthe Ryanair approach. stating that it had aCl.Cdin '(I hostile.anticompeUtive manner designed to ciiminal.C a rival at aderisory price'. A combined Ryaoair-I\er Ltngus operationwould account for 80 per cent of all flights between Irelandand other European countries. Affirming that his company
was fundamentally opposed to a merger with Ryanair.even if it raised its price. then Aer Ungus Chief ExecutiveDermot Mannion stated:
J cannot conceive of the circumstances where the AerUngus management and Ryanair would be able to workharmoniously together ... this is simply a reflection ofthe fact that these organisations have been competinghead 10 head, without fear or favour. for 20 years. Itwould be like merging Manchester United and Livcrpoolfootball clubs."?"!
In fact. the hid was opposed by a loose alliance represent-ing almost 47 per cent of Aer Lingus shares. This includedthe Irish government. which still retained a 25.4 per centholding. two investment funds operated on behalf of AcrI.ingus pilots accounting for about 4 per cent of shares. andIrish telecom tycoon Denis O'Brien. who bought 2.1 percent of shares deliberately to complicate Ryanair's move. Acritical) 2.6 per cent of the shareholding was controlledby the Aer Lingus employee share ownership trust (ESOT),which had the right to appoint two directors. and has astake in future profits. Its members rejected the Ryanairoffer by a 97 per cent majority vote.
Having abandoned this bid due to the shareholderopposition and a blocking decision by the EuropeanCommission on competition grounds. Ryanair renewed itsbid in December 2008. with an offer of €1.40 per share.a premium of approximately 25 per cent over the closingprice. It proposed to keep Acr Lingus as a separate companymaintaining the Aer Lmgus brand. to double Acr Lingus'short-haul neet from 33 to 66 aircraft and to create lOODassociated new jobs over a five-year period. It claimedthat if the offer was accepted. the Irish government wouldreceive over el80 million and the £SOT members andother employees who owned ] 8 per cent of Aer Linguswould receive over C137 million in cash. However, inJanuary 2009. when the offer was rejected by Aer Lingusmanagement and by the ESOT and other parties. Ryanairdecided to withdraw it.
Aer Lmgus' fortunes continued to detcnorate. announc-Ing losses for 2008 and projecting even worse for 2009.In July of that year its shares were trading at Ie.~s thanCO.50. In April. its CEO Dermot Mannion resigned aftercontroversy oller a potential secret pi.ly-off deal in the eventof a hostile takeover. While Ryanair did not have a scat onthe board. it continued to denigrate Aer Lingus. forecasting'a bleak future as a loss·making. subscale. regional airline,which has a high cost ba~ and declining traffic numbers·.m
Meanwhile. the two airlines continued 10 compete vigor-ously. especially Within the Irish market.
1 Manchester United and [jvcrpool have a longstanding legendaryr1valry in English football.
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In [uly 2009. Aer Lingus appointed .. CEO 10 replace[)crrnol Mannion. This was Christoph Mueller. known a~all 'axe mail'. former CF.O of Sabcna Airlines brIore it wentbust in 2001. Mr Mueller had already crossed swords withRyanair when it compared its fares to those of Sabeuain adveruscrncnts that were alleged to he misleading,orrt~lIsive and defamatory. When Ryauair lost it court caseover the matter, and was ordered to publish an apology inBelgian newspapers and on its website. it used the apologyto continue lis puhliclty about its relatively lower fares,
Risks and challenges
III addition to the fallout from us foray into Aer Liugus.Ryanair faced various challenges in 2009. SOflW spccifc toitself and some general to the aviation industry.
5harp econormc downturnThe recession of 100Hf()9 created unfavourable economicconditions such CIS high unemployment rates and restrictedcredit markets. with reduced spending by leisure and busi-ness passengers alike. This constrained Ryanair's scope tomise fares. putting downward pressure Oil yields. Continuedrecession could restrict lh~ company's planned pas~engervolume jl!rowth.
Growth iJnd redUCIng yields
Growth plan~ by Ryanalr cllwlled Investmcnt in new air·craft and roulcs. If growth in passenger traffic did not k~eppare with its pl;mned lIect expansion. overcapacity couldresull. Related pressnres were additional marketing cost:;and reduCl'd yields frolll lower f,lres to promote additionalrollt~S. esp!~('ially to airports new to the Ryanair system.In it~ drive for f,wwth. Ryanilir was likely to encounterincreased competition. putting evcn more downwardpressure on yields. as ilirlines strugjo\led to fill vacant scatsto cover fixed (:osfs.
..
Industrial relations[II the light of the rec<.~,>i()nand financial losses. 1{}'iHlalrtll'gotiated with illl employee grollP~ and secured a payfrce'lC for 2008/09 ilnd 2009/10. It also plannL'tllo make2')0 people redundant at Dublin Airport.
Hyanair cam~ ullder lire for refusinK to re.cognise L1niOIl~and alkgl'dly providing poor workill~ conditions (forcxample. to n~ucc the company's cleclricit}' hill. swff an~balln('d from ('harp.iJl~ their own mobile phont'5 at work). It
('onducts collectivc hargalning with employces on p<ly.workpractices aud condilions of employment thrOllgh illlemal(+ctcd Employee Representation Cmnmitt..ecs. However. then:W<'\s pressure from the British Airline Pilob As.'>or.iation(BALP t\) to enlist Ryanair pilots hased in Britain.
[n july 2006. the Irish High COUll ruled that Ityanairhad bullied pilots 10 acc<!p! new contructs. Whefl~ pilots
RYAI\AIR - T HI' lOW rARCS AIRllNF 625
would have to pay t:l :;.000 for re-training on new aircraftif they left the airline. or if the company were forced tonegotiate with unions during the following tive years. SomeRyanair managers were judged to have given false evidencein court. ~il~anwhlle. Rynnair was rontesnng the claims ofsome pilots for vlctimisalion under the new contracts. By2009. only 11 of the (J4 pilots who had lodged the claimremained with the company and still had claims.
Ryanair was ordered to pay 'well in excess' of f.l millionin legal costs after a court refused the airline iI(:ct:s.~ to thename ..'S and addresses of pilots who posted critical commentsabout the company on a site hosted by the British and Irishpilots' unions. Michael O'Leary claimed anonymous pilotswere USing a website to intimidate and harass foreign-basedpilots to dissuade them from working for the company.Nonetheless. Ryanatr appeared to have no problems recruit-ing crew. mcludmg pilots. to meet its needs.
Input costs
FuelPerhaps the greatest concern is fuel prices. let fuel pricesarc subject to Wide fluctuations. increases in demand anddisruptions in supply-factors which Ryanair Gill neitherpredict nor control. In such unpredictable circumstances.even hedgill!( is a risk. Th(~ situation is compounded hyexchaflf,e rate uncertainties. although a decline of the !:Sqollar ag,lInst the I'uro and sterling worked ill Hyanair'sfavour, a<; fuel prices arc denomlnau.-d ill dollars. Conver.;cly,a weak cum agaiffst the dollar works against Ryanair.Ryanair's dedaratioll (If 'no fu~1 surcharges f'ver' and itsrelianCt.~on low farf':; limit it<;capacity to pass 011 increasedfuel costs.
Airport charges and government taxesRyallair IS especially sensitive to airport..~which raise chilrgcs.like Stansted and Dublin. Indirectly. it is also vulnerableto extra taxes and charges. such as the C I 0 tourist talC
imposed by the Irish govemment.
Passenger compensationOn 17 l'cbruary 200'), a new Ell regulation cam(' into~fT(~ct.pw\'lding for standardised and immediate assistancefor air pas.<>engersat Eli airport..<;for delays. cancellatiofls anddellie(1 hOilrding. It was expected that ttw ('ompcnS(!tiollcos!s would amount to a st.'Ctor·wid(' bill of CWO millionanllually.
Passengers affeclc:'.d hy r.ancdlatlons must he offereda refund or rerouling and free care and assistance whilewailing for their rerollh~d flight specifically. meab.refreshments. amI hotel accommodation wh~re all over-night stay is flL'Cessary, Fillancial compensation is payable.unless the <.tirline cau prove unavoidahlf' exceptional
626 RYANAIR - THE LOW FARES AIRLINE
circumstances. like political instability. weather conditions.security and safety risks. or strikes. For Ryanair. the typicalcompensation cost would fall into the €2 SOcategory, basedon the average distance of its flights. Passengers subject totong delays would also be entitled to similar assistance.However. four years after its introduction the new regula-tion was largely ignored and had no material impact onRyanair. despite the emergence of online 'advisors' to helppassengers make claims when their flights have beencancelled or delayed.
Environmental concernsAviation fuel has been exempt from carbon taxes, butthe EU has established an Emissions Trading Scheme toencompass the aviation industry commencing in 2012.Ryanair was predicted to be the fourth most adverselyaffected airline in the world with a shortfall of 2.8 tonnes inCO2 allowances. equivalent to €40 million in extra costs.This is despite its young fleet of fuel-efficient. minimalpollution aircraft. Ryanair has contended that any environ-mental taxation scheme should be to the benefit or moreefficient carriers. Airlines with low load factors that generatehigh fuel consumption and emissions per passenger. andthose offering connecting rather than point-to-point flights.should be penalised.
Sundry legal actionsRyanair has been in litigation with the EU about allegedreceipt of state aid at certain airport s, An F.Uruling in 2004held that Ryanair had received illegal state aid frompublicly owned Charleroi Airport. Its Brussels base.Ryanair was ordered to repay €4 million. The Belgianauthorities were claiming back a further €2. 3 million in theIrish courts for Its reimbursement to Ryanair of start-upcosts at Charleroi. On appeal. the original EU decision wasoverturned In December 2008. Ryanair was refunded Its€4 million and the Belgian authorities withdrew their claim.Nonetheless, the EU launched further investigations intoallegations of illegal aid. subsidising Ryanalr at publiclyowned airports. such as Lubeck and Frankfurt Hahn inGermany. and Shannon in Ireland, Other legal challengeswere launched against Ryanair by competitors. On anotherfronl Ryanair was vigorously opposing french governmentattempts to protect Air France-KI.M by forcing easylet andRyanair to move their French-based stafT from Britishemployment contracts to more expensive French ones,
Often. Ryanair look the initiative on alleged illegal aid10 rivals. For example. it filed a complaint with the EUCommission accusing Air Francc--KLM of attempting toblock competition after the French airline filed a case alleg-ing that Marseille was acting illegally by offering Ryanairdiscount airlines cut-price fees at il.. second. no-frills termi-nal. That complaint came a month aftcr Ryanair called on
the Commission to investigate allegations that Air Francehad received almost €1 billion in illegal state aid. benefitingunfairly from up 10 SO per cent discounted landing andpassenger charges on flights within France. Adverse rulingson these airport cases could curtail Ryanalrs growth, ifit was prevented from striking advantageous deals withpublicly owned airports and was confined to the rewerprivately owned airports across Europe.
On another front. Ryanair was being sued by BAA forits refusal to pay increased landing charges at Stansted. Inother legal cases Ryanair has been accused of misleadingpassengers on its website by exaggerating price differentialswith its competitors,"
Customer services and perceptionsIn 2003. Ryanair published a Passenger Charier. whichincludes doctrines on low fares. customer redress andpunctuality. Its annual report offers figures claimingsuperiority over competitors with respect to punctuality,completed nights and fewest bags lost per 1000 passengers.
However. its Skytrax 2 star rating is among the worstfor budget airlines. In Europe, only bmibaby and WiT..talrachieve as low a rating. There have been suggestionsthat Ryanair's 'obsessive focus on the bottom line mayhave dented its public Image. In an infamous incident. ilcharged a disabled man (18 (€2S) to use a wheelchair ."1
In response to protests over the charge, Ryanair imposeda 50-cent wheelchair levy on every passenger ticket.Campaigners for the disabled accused Ryanair of pro-fiteering. declaring that the levy should be no more than3 cents. It was the only major airline in Europe to imposesuch charges.
There was growing attention to extra charges continu-ally being imposed by Ryanatr on passengers, many onunavoidable services, such as check-in. In some instances.these extra charges make Ryanair more expensive thanSA."H Examples were a family of four travelling to Ibiza
from l.ondon with three bags for a two-week holiday cost-ing ('1157 with Ryanair compared to (913 with BA and£634 with easyJcl. A single passenger travelling to Venicefrom London for a week at Christmas with one bag wouldpay a total £139 on Ryanair compared to (89 on BA andt: 121 on CilSY)Cl.
Ryanair features on many consumer complaint inter-active wcbsues. and some blogs have been establishedspecifically to disparage the airline. In a blog entitled '20reasons never to Oy Ryanair'. extra charges for bookingfees. baggage overweight and low weight limits. premiumrate helplines. and the fact that 'you are always beingflogged stuff' wcre cnumeratedz?" When the Irish Times putRyanair customers' gripes to its head of communications,Stephen McNamara, his response was to dismiSS them as'''subjective and inaccurate rubbish" and even implied
. they hatagenda'.'
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{hey had been made lip to further some antr-Ryanairagenda'.?" Among the complaints were:
Customers want to be treated like a human bemg. toget to their desired destination (not 50/60 rnlles away)... 10 be allowed to bnng luggage without persecution... a complete and utter lack of communication whenflights run late ... I'm sick of that miserable bookingcharge/service charge/adrrun charge system.
So. why are so many people willing to put up with analrline that. In the words of riw F.corwmht, 'has becomea byword for appalling customer service, misleadingadvertising claims and jeering rudeness' ?'" Ryanair hasresponded to such comments. declaring that, In effect,customers vote with their feet by choosing Ryanair for itsfour tenets of customer service - low lares. a good Oil-timerecord. few canccllanons and few lost bags. 'If you wantanything more go away'. warns Michael O·Leary."" The/-,ill(lrIciu/ 1'imrs aerospace correspondent observed thatRyallair still offered relative villue compared [0 rail altern-ativcs. at least on a journey from LOlldon to Scotland,even when Ryanair extras an~ factored in.
Other risks and chattengcsA51i~ted in its own report, Ryanairf<U.:ed other risks· pricesand availability of Of'W aircraft. threats of terrorist attacks,liepcndcnc:e on key per.;onncl (espt'cially Mir.hael O'Leary)alld on external service providers and its inleme! websiteand the continued acceptance of hudget carriers Wilhrespect to safety. Tied in with the latter arc potential rises ininsurance costs.
Ryanair's competitive space
Globally. the airline industry lost $11 hillion in 200CJ.011 top of $H.:; billion in 200H, with European airlinescontributing $1 billion of that loss. Of the large Europeancarriers. only Lufthallsa was expecting to make a profit.P,A. Air France -KLM and Scandinavian Air Sys[rms(SAS) experienced scv(!re losses. due to dcdllling trankfrom long-haul business class pas~lI~ers. The wocs of theselegacy carriers were compounded hy huge pension funddelkits.
Some industry ana Iysts considered the economic recession of 200'J c.ould olfer an oplXlrtunity for budget f.lrricr.;.a~ passengers who continued to tra~'el were expected 10
trade down. By mid-2009. budget airlincs accoullied rorovcr ~:; per c.~nt of scheduled intra·Europ<:an trafficRyanair was the clt'ar market share leader. with easyJ~1another dominant force (Table 2). The two were oftencompared an(l c:ontra~ted, since hoth operated mainly (lutor the UK and served the sallie markets. One issue waswlu:ther easy!et's usc of prilllary ilirlX)rL~would he helter
RYANI\IR· TH[ LOW FARES AIRLINE 627
than Ryanair at capturing the traffic trading down fromnetwork carriers.
Other budget carriers, of diverse size and gro wth urnbi-tions. trajectories and regional emphases varied in dlflerentlevels of services to passengers and usc of main versussecondary airports. The comparison with the (jS budgetairline market in Tahir 2 indicates that penetration inEurope Is less than In the (jS, which suggests scope forgrowth in the sector in Europe. II also raises the question asto whether the extent of dominance enjoyed hy Southwestoffers a model for Hyaualr to assert itself further. Anotherpossible development trajectory fur Ryanalr was to followup on its announcement in lO()7 to offer t~I () transatlanticIIlghL~, an Idea which had not taken flight and appearedto have been shelved as of 20()1).
Leading Ryanair into the future
'It L~good to have someone like Michael O'Leary around.lIe sc.art~speople to death.' This praise ofHyanalr's cr.o c.amefrom II(lJU~ other than his fellow lrishrmlll. Willie Walsh, <1:.0of BA.I>VhHe has been descrihed as 'at lurns. arrogant andnuie. then channing. affilhlt: and hum()rou~, has terrorisedrivals and regulator.; for more than a decade. And so fHr. theyha\'e waited ill vain for him to trip up or his enthusiasmto wane.' ... '" In filc.t, Michael O'Leary has been pronoullc-ing his intention to depart from the airlinl" 'in Iwo years'time'. lie has declared that he would sever all Imks withthe airline, refuslnA to 'move uJ)stairs' as chainnan .. Myoudon't need a doddery oldie hangitlR around the plal:c", heproclaimed. 'nil
O·l.eary ~tay~ in hudget hotcl~. always lIics Ryanair.startling fellow P;lssellger.; hy taking their boarding passesat the gatc and by hoarding the plane last whert' he invari-ably gets a middle seat. He does not sit in an executivelounge. has no BlackBerry and (lo('$ lIot usc email.
In 2U09. Michael O'Leary held 4.()6 per cent ofRyanalr's~harc capital. having sold 5 million share~ at ~~3.75, AlthoughO'Leary conSistently praised his management team. R~'<mairwas inextricably Idenrilied wilh him. He was credit~d wilhsingle-hamkdly transforming European air transport. In2UO1. O'Leary received the European Businessman of theYear Award from i-'orlUnl' magaZine: in 1004. tht' FinallcialT1mc1i named him as one of 2') European 'business star.;'who have made a difference. The newspaper described himas personifying 'the brash new Irish business elite' andpos-scssing 'a head for number~. a shrewd markt'ling brainami a ruthless c(lnlp!'titive streak'. '"
Pre..scnt and former staff have praised O'Leary's leader-ship style. 'Mlchael's genius is his ahility to motivate andrrlergisc pc(}pl~. There is an incredible enerAY in that place.People work Incredihly hard and get a lot out of it. Theyoperate a very lea II operation. It is without peer' said Tim
628 RYANAIR - THE LOW FARES AIRLINE
Table 2 Budget airlines sundry data - Europe and US (2008/091. ,. _._.-
European market position
Airfine Pax lrnl' Rating' Airports'.._- ... _-
AlgIe Azur 1.46 26Air Berlin 28.6 I, 126B('I1~ Air 0.1,6 '14Brnlbaby 3.8'J 2 17.Or ussels Airline!:> 5.1. :1 62Ch(kalr~ 6 J 3 40easv.Jet 446 3 liDf-lyBe 7.5 3 65Germanwlngs 7.6 3 "0Jet? corn 3.5 3 51Mendlilna 1.9 3 JUMonilrch Airlines 3.9 21Myair.com! 1.5 27Nlki Airline 2.1 :1 33Norwegian 9.1 3 85Ry~nillr 57,7 2 140Sky!:urcpe' 3.6 3 30Slerllng~ 3.8 39Svengellyg 0.5 15transavia.com 5.5 3 88TUIHy ros '/'JVuellng Alrllne~, 5.9 :3 45Wlndlet 2.7 26Will Air 5.9 3 58
US market position----- .__ ._-_Airline Pax (mIl-_Air Iran 21..6Allegiant Air 39Amencan Irons Air lATA I a I,Frontier Airlines 10 ICoJC't Airlines 1.5Horizon Airlines IAlaska Aid 65lsland Air Hawaii 0.5Jet Blue Airways 20,SMIdwest Airlme Inc. 30Shuttle Ameroca Corp. 3'JSouthwest Airlines 101.9Spirit Airlines 5.5Sun County Al(llne~ 13USA 3000 Alrhnes 08Vlrglll America 7..5
I SOllrr.~r.: F.~rop(,<l" Low F'Ht'S Airh:les AssoCialion IELFMI. Company reportsI SOtJl(.~~ f.rA, OUr4:.1U of Iransportanor' 5l\)tls~ics'Skylr;u ~:Jr raIn,\! Irorn 1 10 J - nut a.l arrunes rated.'Numb!:r of airports served. Soo;rccs European I ow Fare s A"h',e~ Assoclallon IELFAAI. Co'npany reports, 'I'('s(' alfhn('s have ceaf,ed opp.rahans. .
Tolal passengers (pax!Eurap('an budget airlinesRyanilrr ilS % 01 TOIJI - 269\
Key Population DataPCpul~!lon EU 27 Iml 500
Key Population RatiosBudg('t r JllO to Lu /,'1 populallon ().t.)
2239
Jeans, a former sales and marketing director or Ryanalr,currently CEO of a :;malllow ·cost rival. MyTravdl.ite, "TO
O'Leary's puhlicity se:l'king antics arc ICHcndary,Thesc included his 'declaration of war' Oil casyJd when,\,'earill~ an arm}' uniform, he drove a lank to casyjet'sheadquarters at I.ulon Airport. In another stunt, whenRyanair opened iLo;hub at Milan Hergamo he flew thereahoard a jet hearing the slogan 'Arrivtderci !\litalia'. He has"Iso dressed lip as St Patrick and as the Pope to promoteticket offers,
O'I.(:ary's OIlL~pok(:llness has made him a Ii~ure of
puhlic debate 'HI' is callt.:d e\'crythillg from "arrogant pig"to "messiah" ',"'" IIis avowed enemies include tradeunions, politicians who impose airport LaX(:S (he calledUK Prime Miuistcr (;ordon Brown a 'twit' and iI 'Scottishmiscr""'''), cm'ironmentalisL~, hlogg~rs who remt aboutpoor service, travel agents, reporters who expect fwe seats,
Total pax US budget airtinesSoulllw('sl <IS ;(; 01 roMI - ~~~
K~y Populatlon DataPopulation US 1m) 307
Key Papulalion Ratio~Budget rallO 10 US populal,on 0 6t
186,4
So, howwith MicRyanair?to Ryaruanswer t,
surprise I
RrICII~n(p~,'The FT A
·,~pplcm· K. Uo~c,2S M"rel
• P. Clark,1 F"bru~
n K. Done,
T'fTl"S. /1• Fmanctal
"'K. OOIlt!.next yea
"'llyanaJr.... J_ Guthr
FmanOJI
• P Clark,2009. p.
, Ryana,( I
U Ibid.,. S. LyJll.
YOlk lily.
- Ryanair., B. Groon LFX, Ry;
regulators anti the Ell Commission, and ain)ort owners likeBAt\, whom he once called 'overcharging rilpists', "'" AnEIJ C()mmi$siolU~r, Plulippe Busquin, delloullced ~1ichacl(rI.t'ary as 'irritating. , . and insists he is not Ihe onlyCOllllllissi()lIer who is i1l1eq~ic to the mere mention of lhename of Ryan air's arrogant chil'f'.xU\·
An Irish Timl',~ columniSt. John McManus, slIggrsled that
'maybe it's lime for Ryanair tojeUison O'[.t:ar)", assertingthat O'l.eary hilS become it caricature of hilllscif. Pcrh'lpsthe last words should go to Michael O'Leary himself: 'Wecould make iI mis(ake alld I could get hung', he said, lIer~itcratcd a point he had often made before:
It is okay doing (he cheeky chappie, running (If[)undEurope, thumbing your nose. but I am nOlllcrb Kelleher(lhe legendary founder of the origin,,1 hudget airline,Southwest Airlincs), lie was a genius and I am nol."'''
----Pax 1m!'--_2463.90.4
10.11.S6505
20.53.03,5
101,95.51.30.82.5
; like, An
lweIonly'the
thatlinglaps
'WeHe
IIldherlie.
So, how do these comments {and the Aer I.ingus hid) fitwith Michael O'Leary's declaration to pan company withRyall,lirt Would he Wilily go. and if :;0. what would happento Ryanair and its ambltions? 1\0 one really knows theanswer to these questions. hut it is O'Leary's propensity to
surprise his admirers and detractors alike.
WfINf'flCes:
"Tht' rT ArcclorMllidl Uoldnp~~ rn fI"~IIll'SS Awards·. FlnJnUdl r,m~s·,upple'T1en1. 20 M.)Cc~, 2009. ~ 2~.
.f{ ucnc. Airline IndUSfry In Inr~nSlve(~,r('·. FIn""'~(1.71 TlmlJ~.
25 MJrc;11 20UY, p 17.. p, C1dfk. 'Upbcal Ryanall r IdPf. ou: Ihe f,lo'rn . F,nJn(lai ',mes., I·cbr "ary 200Y. p 70
• K U.:>nt:, 'RYlJna'!" see~. npportU:\lhl''S In rlya~"j:dl,;rrP55". FUliln(l.J1
T,mn. 26 July 200? p, l!l• r'n~(I(lalllm~~. 9 Scptl'rn!>rr 2006. p It... K Done and T. Brallhwallr, 'Ryan~1( 10 allow Il'l0bi(e phone (albl1~xl year'. Finan< ,,,I limes. :1t Augu,.t 2006, p. 1
•• Ryanalr AnnUA! Report. 2001.~ J GuUlIle. '5" Stcllo~ bek'''9hled af, ~Ults prov., boldel Iisk la~el ';,f,,,.,,,o,,1 ',mes. 30 J"ly 2009.1'. 16
• P Clark, 'O'Leary "' ;)!lack 011Uoelng', rmiJnClai Tlmc~, 19 Oc(embe!2009, p. 1.
• Ryal),)lr Annual Repo,t 20U9h Ibid
p 5 Lyall. 'No apologies IrClT' Ihe bO$~ 01 a nO·hllls nlrl,"C·, Th~N~wYork Times. 1 August?OO9 flhe Saturday Prolilel
.• Ryanalr 7087 h~1I yearly rt'suitf.- A Groom, 'Hot ;11' Irom Ryani.llr'. FIIMII(1vi Time,. 23 July 7.()09. p. 16."I FX. flyunalr. Flnan<l~i l,me~.] June 200<1. p. 16.
RYANAIR - THl lOW FAflLS AIRIINi' 629
,..,.I . Noonan, 'O-leClry .admits s:.:tkc 111 Acr 11n9U~ was ~tupld c11~tlc.rf'r .Ir'S/llndepellcJl·nl. 6 M<lllh 7009.
n· Statement Irom Ryan,lIr s h~1I yeady resuU,. prcsertanoo.6 Novt'mbe: 2U06
"~S ~ogatchn;k, 'Acr LlnSu, rcr~(t~ fly.na" tAkeover ol!cr .8us"'c~s Week online, 3 Novp.mber 2006
~ Ryanalr I ull Year Ref.ulls 200Y.. flya nair pit"" r('leaf.~. 79 May 700Y... O. "'i(mo, }Iyana;r - the worl(fs lC<J,II.1VOU"lc dllhnc·.GUd,did". 26 Octobe 2UOl:
fl. R Wall(\ anc S. SWinford. 'Ry.,n.J1r mort' ~~I){~ns.ivc than RA nn .,ome-llights'. SUliday r,m~". 9 Augu~t ;>UOy
... Moncy C~"lral' Times Olll'n~ 'WI:lLG TWfOnty r easons never to flyRyan<Jlr', 70 Mar{h 7009
... C. Pope. 'Proccwalch n.),(y·. Insh TUlles, Ii. AU9u~1 700<;, p 11
.... Lyall, "No 3;:ologl('s 1, U'Jl the bo~~ or " (')0 'n~{s. air lint',
.~ Ibid,
.- K Uonp. 'O'L~ary .,haws It If. not yel Ihr end for b"d.e: A" '")v.,·,,>rnanc<.)[ T'm~s. ;> AuguSI lOOn. p ..11 .
._ 'The ~ r A·celod ...1,ltal f3o~dnc"~ '" OUSIl1~~" Awards', Frn,J"u~1l,me~ ~upplc",enl. 2U ~ilr:~ 20'JY. II 71.
... U. O~lby. 11"'1qOlll9 lor gOOd. O'leary t~lIf. Ryanair'. S"nd.?y T,m(,s .70 NovelllhN 2eOS, N'·W5. p. 3
I •• 8 (iroom. 'lci)dl".'"s 0: Ihl' new Eu(opp !jfJ~,"e~.s $taf!i c~art a(ourse for Ih! profll~ ollhe rllt.f(C'. rlllanc...li rimes. 2u April 200/ •.
... G, I:!owl~y. 'How low can you go" r,niJr.cral lurll'~ M;)gazlne.No, 9. 21 .Junt 2003.
.. h tbld .
.... Lyall, No apoI091l'~ Irem Ihe bo>s 0' ~ no·frllls dlrllne'
.... Ibid
IINS C,.~;.to~. 'TurlJul4"nt tln1~~. for Ry.1na,r"!, h'gh.fLl(~~".I"Sh Ilftj('$,
31 January 2l04...... Bowley, Hew low (.)n you g:lT
,l
' ..'
,'.1,,'J''f
