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Case Study: Ryanair Business Strategy Analysis

Ryanair is an Irish low cost airline headquartered in Dublin founded in 1985. It operates 181 aircrafts over 729 routes across Europe and North Africa from 31 bases. Ryanair has seen large success over the recent years due to its low-cost business model and has become the world’s largest airline in terms of international passenger numbers. Taking Porter’s generic business strategies into consideration, Ryanair operates a cost-leadership strategy to drive itself into achieving its mission of being the leading European low-cost carrier (LCC). Throughout this essay the business strategy of Ryanair will be analysed and the sustainability of their model evaluated.

Ryanair’s objective is to firmly establish itself as Europe’s leading low-fares scheduled passenger airline through continued improvements and expanded offerings of its low-fares service. Considering their objectives and mission, Ryanair’s decision on their cost-leadership strategy was based on a few main factors which are discussed below.

A major influence was the deregulation of the airline industry in 1978 which removed government intervention within the European continent. Under the new rules, routes and fare decisions were made by individual airlines which meant that they could compete on other factors besides food, cabin crew and frequency. As a result of deregulation, a large number of new airline start-ups emerged within the EU and competition among airlines increased dramatically resulting in downward price pressures. Ryanair was established to take full advantage of these market conditions. By offering low prices, Ryanair entered a huge and virtually unlimited market.

Having seen the major success of the low cost carrier Southwest in the United States, Ryanair decided to follow in their footsteps by establishing a LCC for the European continent that targeted fare conscious leisure travelers and regular low cost business travelers. By doing this Ryanair became the first low-fare airline in Europe. However, they took the Southwest model further by offering no drinks and snacks at all and abolishing the frequent flyer program which Southwest up to this day offers its customers.

The evaluation of Porters five forces influenced Ryanair’s choice of a cost-leadership strategy, as the threat presented by new entrants and the threat of substitutes could hinder their success. The threat of new entrants is high within the aviation industry which meant that low fares would help drive away any further competition. The threat of substitutes to Ryanair had to also be carefully examined. Their primary market, Europe, had the availability of high speed trains and car holidays. For Ryanair to be successful, prices had to be low to attract the public, and resist strong competition from substitutes like Eurostar.

As Europe’s largest low fare airline, Ryanair’s competitive advantage remains in their ability to continue as cost leaders; providing the cheapest fares to its customers. This dictates that the company must minimize its own costs to ensure that they are able to offer customers the service at a price below their direct competitors. This leads us to consider some key functional strategies which directly help Ryanair towards their ultimate goal to be Europe’s leading low fares airline.

The marketing strategy is perhaps the most obvious and significant functional strategy of Ryanair. Low fares are designed to stimulate demand, attracting fare-conscious travelers, those who may have used alternative forms of transportation or even those who may have not traveled at all. Penetration pricing as it is called helps gain market share and simply, more customers equals more revenue. Tickets are almost solely sold on their website ‘www.ryanair.com’ which very importantly keeps sales costs to a minimum since very few phone operators are employed and computers are able to cheaply handle all functions of sales. With ever increasing accessibility of the internet globally anybody with internet access can buy airline tickets from Ryanair, so distribution practically takes care of itself through this medium. Ryan Air relies on low cost promotions and in recent times has concentrated on their ‘One million seats at one pound’ which is usually advertised through their internet site, national press and bulletin boards. It is the simplicity of this promotion which helps keep costs low since expensive advertising agencies can be entirely avoided and advertising can be dealt with in house.

Ryanair’s operations strategy determines how the airline will deploy its resources and the policies it will operate by. To keep costs low they operate a ‘no frills’ service onboard aircraft. This means the fare only includes the flight. There are however a number of other measures directly related to a no frills service. These include ticket-less boarding, unallocated seats, one class of travel, costs for check-in baggage, no refund policy, basic seats (to increase aircraft capacity) and charging for any additional service. All this significantly reduces costs to Ryanair. The Achilles heel of Ryanair is their greater aircraft utilization through super quick turnaround times. Essentially this means the aircraft spends very little time on the ground, they achieve this through their human resource policies and by having none or very little cargo in the baggage hold to speed up loading and unloading of the aircraft.

Logistics strategy deals with the flow of products into and out of Ryanair. Again there is heavy emphasis on cost saving and reducing measures. Ryanair fly to secondary airports which are potentially much further from the City centre but accessible enough by other forms of ground transportation. At these airports Ryanair are able to negotiate extremely aggressively and demand the lowest landing and handling fees. Additionally Ryanair is usually able to gain financial assistance with marketing and promotional campaigns at these airports.

As cost leader Ryanair strives to undercut all its rivals but this means very low income per fare and requires maximum utilization of its resources. Fortunately their financial policy ensures they are able to still profit handsomely from rock bottom fares. The aim is to break-even on fares but to make their profits out of ancillary charges and commissions from their partners. Ryanair has a number of affiliates such as Hertz car rental, Acumus insurance and booking.com all of whom are advertised readily on the Ryanair website. Since the website has high website traffic its partners are able to reach out to Ryanair’s huge client base and are prepared to pay good commissions to the firm for this privilege. Ryanair also generate income from advertising on board the aircraft. Ancillary revenue is generated from many of the services that traditional airlines wouldn’t charge for, such as large baggage into the cargo hold, allocated seating, snacks and drinks.

Ryanair’s strategy when purchasing aircraft is to buy new, uniform aircraft. This is beneficial for a number of reasons all of which directly help cost saving measures. Firstly, by being able to order same aircraft in bulk they are able to negotiate a better price per aircraft. Secondly, uniform aircraft mean that there are potential savings in staff training; air stewards being more familiar with all aircraft and maintenance will be simpler. Finally by buying new, the company has safer, more fuel efficient planes with lower maintenance costs. Safer aircraft also means greater consumer confidence, equating to more fare sales.

Furthermore Ryanair aggressively hedge and fix as many of their costs as possible, such as oil and aircraft prices so they are not subject to future price fluctuations which could adversely affect profitability.

The human resource policy is again directly related to reducing costs. Employees are expected to pay for their own uniform and equipment. Training given is the required minimum and staff utilization is among the highest in the airline industry. Many staff are employed on performance contracts and those who do not meet their expectations are readily replaced. Staff are also expected to take on a number of roles, cabin staff will also clean the aircraft prior to the next service, check in staff assist in boarding the aircraft etc.

Ryanair has successfully experienced years of growth both in the number of its aircrafts and passengers since its launch. However, with the global financial system recently suffering its greatest crisis in more than 70 years, existing business models of many aviation firms are coming under great strain. As this economic downturn bankrupts LCCs like XL and Zoom with more expected to follow, the question is whether Ryanair’s cost-leadership strategy is sustainable or not as it continues to offer lower fares in the face of high costs. Although Ryanair has posted losses along with other aviation firms for the latest quarter, it is expected to emerge from this downturn with fewer competitors because its â €š ¬1.8 billon balance sheet is one of the strongest in the industry. Additionally, as the credit crunch takes its toll, traditional airlines are not in a position to cut fares and the threat of new LCCs is virtually eliminated due to the lack of financing. Although Ryanair faces competition from substitutes like Eurostar, it is at an advantage because of Eurostar’s limited destinations.

Ryanair is sticking to its mantra, when the going gets tough, sell more seats for almost nothing. By offering low fares, Ryanair expects passengers to trade down to the low cost airlines rather than stop flying completely. This trend appears accurate so far based on passenger numbers as recession forces millions of passengers to focus on price. Additionally, the latest statistics from The European Low Fares Airline Association members show a 15.7% year-on-year growth in the number of passengers for 2008, indicating that the LCC model is robust, even in times of crisis. Consequently, there is no doubt that Ryanair looks poised for substantial profits and passenger growth in the coming years. However, in order to compete with other LCCs and maintain its continued market share growth in the future, Ryanair needs to improve its poor customer relations.

The sustainability of Ryanair’s cost leadership strategy also depends largely on the price of oil and how effective the firm is in cutting costs in order to continue offering low fares. According to the firm’s latest financial report, Ryanair will enjoy significantly lower oil costs thanks to their recent hedging programme, when most of their competitors are already hedged at much higher prices. These lower prices will drive Ryanair’s traffic growth, maintain high load factors and capture market share from higher cost fuel surcharging competitors. In order to cut costs, Ryanair close all its airport check-in desks and have passengers check-in online instead. Other cost saving methods not yet implemented include charging customers for using toilets on airplanes. These cost cutting ideas are not very popular among consumers and it means that Ryanair needs to improve its already tarnished brand image in the future which it had attained through negative press reporting and misleading advertisements .

The current strategy at Ryanair is expected to work so well that despite the recession Ryanair’s CEO has underlined the firm’s commitment to expansion. The firm is expected to grow at 20 percent a year because of a 180 aircraft’s on order from Boeing. These expansion plans for the future will require the company to increase its landing slots at airports and recruit more employees. Currently Ryanair has limited access to landing slots in major airports and the secondary airports are long distances away from city centers which could make it less attractive in the future. However, a remarkable cut in flights by other European airline carriers due to recession is creating enormous opportunities for Ryanair, as many major airports compete to reduce charges in order to attract Ryanair’s growth. Availability of skilled personnel shouldn’t be a problem for Ryanair due to recent high unemployment levels. However, Ryanair needs to improve its current low level of empathy for employees if it is to retain them in the future.

Even though Ryanair’s cost leadership strategy is robust and it looks set to serve them well in the future, there are some key areas within the business that can be improved on to enhance the firm’s profitability and brand image.

Ryanair has always been criticized for many aspects of its poor customer relations. According to The Economist, Ryanair’s “cavalier treatment of passengers” had given Ryanair “a deserved reputation for nastiness” and that the airline “has become a byword for appalling customer service … and jeering rudeness towards anyone or anything that gets in its way”. If Ryanair is to maintain its large customer base, it needs to ensure that it acknowledges its customers’ concerns and maintains a service focused attitude at all costs. Ryanair needs to invest in servicing customers better by providing a non-premium contact number, improving its non user friendly website, and simplifying the terms and conditions of the flight service. Ryanair should also create a frequent flyer program to establish a fixed customer base and encourage customer loyalty.

Ryanair is notorious for its high staff turnover which negatively affects its reputation as an employer. Over utilization of employees, poor remuneration package , and minimal training are a few other critical items to be considered by Ryanair if it is to retain employees in the future. Ryanair needs to understand that although it is currently possible to replace outgoing employees, but with time Ryanair’s overall image will be tarnished. Resultantly, attracting new employees could become impossible and this will hinder their expansion plans. Ryanair should incorporate a flexible benefits package solely designed to improve employee morale such as flexible working hours and extra holidays. To improve its image amongst employees, training at all employee levels must include exposure to similar techniques and methods that help promote the development of a uniform company identity.

Following huge success in Europe, Ryanair should consider introducing low cost transatlantic flights to support its expansion plans and attain a larger customer base. With a high demand for certain routes like London-New York and room for negotiation in airplane prices and airport slots mainly due to the current financial climate, it is an ideal time to further reap the rewards of the cost leadership strategy that has served Ryanair so well over the years.

Ryanair’s model looks set to survive the current industrial downturn through its lower costs and substantial cash balances. No airline is better placed in Europe than Ryanair to trade through this downturn. It will therefore continue to grow, by lowering fares, taking market share from competitors, and expanding in markets where competitors either withdraw capacity or go bust. By taking the recommended improvements into consideration, it looks like Ryanair’s cost leadership strategy seems ideal for the future.

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How Ryanair's Relentless Cost-Cutting Redefined the Airline Industry

Ryanair, Europe's leading budget airline, has seen an extraordinary trajectory of growth, outperforming its competitors by a wide margin in the airline sector. Its relentless approach to low-cost and operational excellence, combined with strategic route expansion, has undoubtedly played large parts in assuming a dominant role within the European airline industry. Let's delve into the factors that enabled Ryanair to become one of the few companies to generate substantial returns for its shareholders in an industry that's usually not lucrative.

Key Insights

Inspired by Southwest Airlines: Ryanair's transformation into one of the world's leading low-cost carriers was significantly influenced by CEO Michael O'Leary's insights gained from Southwest Airlines.

Relentless cost-cutting: Ryanair's exceptional growth and competitive edge are rooted in its status as the lower-cost provider, achieved through strategic initiatives such as negotiating lower airport landing fees and adopting a shrewd fleet acquisition strategy.

Spillover effects: The cost reduction strategies not only generate significant savings but also attract publicity, enabling essentially free marketing and word-of-mouth promotion.

Financial performance: Ryanair's relentless focus on low-cost operations has enabled it to expand rapidly, doubling its size and significantly increasing its market share since 2016.

Founding Story

Founded in 1984 in Ireland by the Ryan family, with Tony Ryan at the helm, Ryanair began its operations with a single small turbo-prop plane. The airline's initial aim was to disrupt the duopoly held by British Airways and Aer Lingus (both are now wholly owned by International Consolidated Airlines Group ) on London-Ireland flights by offering a lower-cost service.

Ryanair's early days were marked by significant challenges. The airline struggled to find its footing in a market dominated by established carriers. Its initial strategy focused on offering simple, low-price flights, but without a clear business model to sustain its operations, the early days were marked by financial difficulties.

The turning point came in the early 1990s when current CEO Michael O'Leary, who was initially hired as CFO in 1988 by the founder Tony Ryan, took a trip to the United States. There, he met with Herb Kelleher, co-founder of Southwest Airlines , and was inspired by Southwest's successful low-cost model. O'Leary returned to Ireland convinced that Ryanair could revolutionize air travel in Europe by adopting a similar approach.

The Southwest Airlines Inspiration

The meeting between Herb Kelleher and Michael O'Leary is a pivotal moment in airline history. The meeting was intended for O'Leary to learn from Kelleher's experiences and insights into the low-cost airline business model.

Southwest Airlines' model was straightforward yet revolutionary: use a single model of aircraft to reduce maintenance and training costs, focus on quick turnaround times to maximize aircraft utilization, offer point-to-point flights to avoid costly hub operations, and eliminate unnecessary extras that contributed to higher ticket prices.

Inspired by this model, O'Leary transformed Ryanair from a small, struggling airline into one of the world's largest. The "stealing of the idea," as it is sometimes dramatically phrased, was more about adapting a proven business model to a different market. Isn't it fascinating how a single event, leading to one crucial insight, can entirely rewrite the future for companies and even industries? Let's explore this low-cost model in depth.

Ryanair: Low-Cost Squared

Ryanair began its operations in 1988, flying between London Gatwick Airport and Waterford, Ireland's fifth-largest city, with a single turbo-prop plane. Initially focusing on the London-Ireland flight market, which was historically dominated by British Airways and Aer Lingus, the company spent the next 30 years expanding into markets across Europe, route by route. As of 2023, Ryanair operates over 3,600 daily flights across 94 hubs, carrying almost 200 million passengers annually – a doubling of numbers since 2016.

The bedrock of Ryanair's spectacular growth is its status as the lower-cost provider – by a wide margin – in an industry notorious for inefficiency and uneconomical operations. Ryanair exemplifies the benefits of a substantial cost advantage: aside from fuel, Ryanair’s unit costs are around half those of its closest competitor, easyJet , and significantly lower than those of other rivals such as Norwegian and Air Berlin. This cost leadership compels competitors to price their fares at double Ryanair's rates, which explains why Ryanair continues to take market share across Europe.

Ryanair's low-cost strategy is founded on extreme operating efficiency, with its greatest cost advantage being airport landing fees. Unlike the common industry practice, Ryanair traditionally operates from smaller airports where it can exert influence over airport owners rather than adopting a position of subservience. As a result, even when primary airports raise fees, Ryanair often secures concessions.

Its second biggest cost advantage comes from shrewd fleet acquisition strategies. While other airlines, influenced by pilot-focused cultures, prioritize diverse fleets of advanced aircraft, Ryanair has built a uniform fleet opportunistically. For instance, in 2003 amid an industry slump, it made a massive purchase of high-quality Boeing 737-800s at reduced prices. This bulk purchasing strategy not only yields volume discounts from manufacturers but also facilitates staffing an in-house maintenance crew, which proves to be vastly more economical than external alternatives.

These two cost advantages are mutually reinforcing, creating a deep and increasingly strong competitive edge. The acquisition of inexpensive planes enables Ryanair to operate profitably at low fares to smaller airports, allowing Ryanair to dominate traffic at these airports, which in turn leads to significantly lower landing fees. A recent order to double its fleet over the next eight years will not only ensure the continuity of these dynamics but may also accelerate them, as no other airline is expanding as rapidly as Ryanair.

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In essence, Ryanair is renowned for rethinking traditional aspects of the airline industry and relentlessly pursuing cost reductions. Its strategies are often controversial, yet rivals invariably follow suit to capitalize on similar savings. Examples from its extensive list include charging for food and beverages, imposing fees for luggage and airport check-in, abstain from frequent-flier programs, and avoiding the use of air bridges. Such bold initiatives not only allow Ryanair to sell seats at lower prices but also generate substantial publicity – much of it critical – which serves as an economical means of capturing the attention of potential customers. As CEO Michael O'Leary explained:

"As long as you run around generating noise, it drives people on to our website. And we don't spend hundreds of millions of dollars on marketing to do it. Charging for toilets continues to be the number one story that resurfaces in the press and it's the gift that keeps on giving. We've never done it, but it keeps coming up on social networks every three or four months, the media picks up on it and then someone writes a story on it." – CEO, Michael O'leary

Epitomizing the strategy of combining low prices with additional benefits, Ryanair continually leverages its competitive advantages. Several times, it has capitalized on the profitability and efficiency stemming from its cost-conscious operations to secure aircraft acquisitions at prices significantly lower than those available to rivals, burdened by higher structural costs. Moreover, Ryanair has started to make inroads into primary airports and the business travel sector, gradually supplanting Europe's retracting legacy carriers. This cultural commitment to low-cost operations has resulted in margins and returns on invested capital that are unparalleled in the airline industry, with operating income more than doubling between 2015 and 2023.

Ryanair's revenue growth from 1997 visualized:

In conclusion, Ryanair's remarkable journey from a modest operation with a single aircraft to becoming a dominant force in the airline industry is a testament to the power of innovation, strategic foresight, and a relentless commitment to cost efficiency. By challenging traditional business models and continuously seeking ways to reduce expenses, Ryanair has not only transformed itself but also the landscape of the European airline industry, ultimately benefiting both its shareholders and customers significantly.

Its aggressive expansion and low-cost strategies have made it a case study in business and aviation circles alike. As the airline looks to the future, with plans to further expand its fleet and reach, Ryanair stands as a shining example of how disruptive business models can lead to unprecedented success, even in industries facing naturally tough economic conditions.

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The Bus in the Sky: Ryanair and Disruption

• 26 Jan 2017

I was flying on Ryanair a few months ago when my seatmate referred to the plane as a “bus in the sky.” I'd never heard such an accurate description! If you haven’t flown Ryanair, let me describe it to you. My round-trip flight was $30 and included two carry-on bags. But, that is where the perks stop. You have to pay for everything else - and I mean everything. Forgot to print your boarding pass out at home? You pay for it. Want a drink on the plane? You pay for it. Want to recline your seat? That isn’t even possible. And I wish I was kidding about that last one!

Despite the drawbacks, I have flown Ryanair numerous times and will continue to fly them. Why? Because I can fly to three different places, on three different weekends, for the same amount of money as one ticket would cost me flying to any one of those places on another airline in Europe. And I’m not the only one who flies Ryanair.

So, looking at this from the lens of disruption, where does Ryanair fit? By addressing overserved customers with a low-cost business model, it fits under the “low-end” disruption category. But, it also has made flying possible for many people who couldn’t afford to fly to these places. While they had the same job-to-be-done as the more affluent market - i.e., getting from point A to point B - these consumers would normally take the bus, train, or rent a car. This approach to non-consumers in the airline market also causes it to fit in the “new-market” disruption category.

That Ryanair was low-end disruption was fairly obvious to me, but the new-market disruption was something that only clicked when I thought about Ryanair as a “bus in the sky.” Ryanair isn’t just competing against other airliners; the bus, train, rental car, and non-consumers are also its competitors. Former non-consumers in the airline market now have an opportunity to fly to their destination instead of a different, generally cheaper means of transportation previously used. Given the option of an overnight bus ride to Paris from London or an approximately 1.5 hour flight for a similar, if not cheaper price, which would you prefer? That’s what Ryanair was banking on.

As Scott Anthony explains, what's even more impressive is that Ryanair has succeeded in a market that's typically tough to crack. It has learned how to make a profit by keeping ticket prices low, flights full, along with a whole host of other cost saving strategies as outlined in the article. Legacy carriers in the airline business can’t/won’t compete with its prices, and its competitors in other transportation markets can’t compete with the luxury of flying, thus Ryanair succeeds.

I know that for a cash-strapped student living in Europe, Ryanair has opened up the continent for me. I’ve done overnight buses, 37 hour train rides, and rented cars because they were cheaper. But with Ryanair I have been able to avoid many of those “great story” experiences and truly enjoy vacation, thanks to their disruptive strategy.

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Ryanair: A Low-Cost Business Model in the European Airline Industry

• By: Jashim Uddin Ahmed , Md. Muinuddin Khan , Ishrat Sultana , Asma Ahmed & Fatema Begum
• Publisher: SAGE Publications: SAGE Business Cases Originals
• Publication year: 2019
• Online pub date: January 02, 2019
• Discipline: European Business , Small & Medium Enterprise Marketing
• DOI: https:// doi. org/10.4135/9781526466846
• Keywords: airlines , business models , costing , Europeans , flight , industry , passengers Show all Show less
• Contains: Teaching Notes Length: 6,812 words Region: Eastern Europe , Northern Europe , Southern Europe Type: Indirect case info Industry: Air transport Organization: Ryanair Organization Size: Large info Online ISBN: 9781526466846 Copyright: © Jashim Uddin Ahmed, Md. Muinuddin Khan, Ishrat Sultana, Asma Ahmed, and Fatema Begum 2019 More information Less information

Teaching Notes

This case study investigates the key competitive advantages, business strategies, opportunities, and challenges of Ryanair, an Irish airline and the largest and most successful low-cost European air carrier. After deregulation in 1997, the European airline industry faced increased competition with the emergence of a variety of new low-cost airlines. Taking this opportunity, Ryanair rebranded itself as the first low-fare airline in Europe by following the low-cost model pioneered by American low-cost carrier Southwest Airlines. It operates about 2,000 flights daily from 87 bases that connect more than 200 destinations in 36 countries at the lowest fares possible. Ryanair is undoubtedly aggressive and fearless in tackling competition. However, it is facing challenges and uncertainty regarding its expansion plans as a result of Brexit. This study highlights how Ryanair is focusing on its business strategies to maintain its position in the industry and carefully planning to be more tactical in addressing the challenges lying ahead. Through the case, readers will be able to determine whether Ryanair’s low-cost model will sustain itself in the highly competitive and increasingly customer centric airline industry in Europe.

Learning Outcomes

By completing this case study, readers should be able to:

• Understand the competitive dynamics of the European airline industry.
• Discuss the aspects of deregulation in the European airline market.
• Identify the strengths and weaknesses of Ryanair in the European airline industry.
• Recognize the methods used to maintain the business and revenue model of Ryanair.
• Clarify the ways in which Ryanair adapts to growing rivalries and challenges.

Introduction

Ryanair, established in 1985, is an Irish low-cost airline with its primary operational bases at Dublin and London Stansted Airports. It began its journey with only 57 staff members and one15-seater plane operating on one route. Today, it is one of the most popular low-cost airline carriers in Europe. It flies to more than 200 destinations in 36 countries through 87 bases and runs 2,000 flights daily using its fleet of more than 360 Boeing 737 aircrafts. Ryanair is operating successfully with a team of 13,000 highly skilled aviation professionals who make it possible to deliver Europe’s No.1 on-time performance. It is also the busiest international airline by passenger numbers. The airline became a huge success due to two important factors: rapid expansion due to the deregulation of the airline industry in Europe in 1997 and its focus on being a low-fare airline with a “no frills” policy. This case study discusses the business strategy of Ryanair and the key to its success among the fierce competition in the European airline industry.

Brief History of the Airline Industry in Europe

After World War I, there were many privately owned, commercial airlines in Europe. However, the scheduled-service airlines operated more like a national project. Airlines such as Air France (France), Alitalia (Italy), and Olympic Airways (Greece) were state-owned and operated under majority government ownership as flag carriers (Pinkham, 1999). These airlines focused on international routes between European capital cities and between capital cities and colonies. Because of subsidized international service, the airfares of domestic routes were usually very high (Rivkin, 2007). This heavy regulation of the airline industry of Europe by governments took place for two purposes: public protection and national development.

The events of World War II brought many changes to the European airline sector. Foremost among these were the advances in aviation as a result of the war effort and the threat of American dominance in the industry. Moreover, it was noted that the bilateral agreements regulated and restricted air services between two countries, known as pooling arrangements , where two flag carriers combine capacity and revenue and are banned from flights that did not begin or terminate on national soil. As a result, domestic fares were set by governments to some extent and the entrance of new airlines into the market was highly discouraged (Rivkin, 2007).

Meanwhile, the regulation of the European airline industry faced many challenges. For example, the flag carriers of Europe refocused their routes across the North Atlantic with the arrival of jets capable of crossing the Atlantic. Additionally, due to dissimilar national interests, an attempt to unify the flag carriers of France, West Germany, Italy, and Belgium collapsed in the 1950s. Consumer dissatisfaction with higher fares grew as a result of inefficient and under-capitalized airlines. During the 1960s, charter airlines emerged rapidly as they were cheap and transported 60% of all European passengers by the 1980s. Moreover, the high price of jet fuel, recession, as well as high fixed cost, and unionized staff created huge pressure for European flag carriers (Rivkin, 2007).

Deregulation

In search of a change, UK policy makers negotiated with officials in the Netherlands and Ireland to liberalize the airline industry in order to minimize government intervention. In the other part of the world, U.S. Congress approved the deregulation of the U.S. airline industry in 1978 with the aim of relaxing restrictions regarding price and route scheduling. The European airline industry was highly influenced by the deregulation of U.S. airline policies and demanded elimination of price fixing, pooling arrangements, and government subsidies. There were several stages of the deregulation process. In the early 1980s, the European Community, applying the 1957 Treaty of Rome as a foundation, became involved as a change initiator of national transport entities. In 1987, the Commission decided that any licensed European carrier would be allowed to fly to any European destination, which opened an opportunity to a large number of new carriers. In 1990, the European Community took the power to establish airfare as a carrier could be prohibited from offering excess prices if it was not approved by member states. With the new regulation, the European Community hoped to prevent fares that are excessively high, which would exploit customers, or excessively low, which would function as a predatory pricing practice. Finally, in 1997, it was established that any European carrier would be allowed to fly to any intra-European destination (Adler, 1992; Pinkham, 1999; Rivkin, 2007).

The agreement in 1997 among the 12 European Community nations would mean more flights on more routes with added competition, resulting in lower airfares. As the European Community countries agreed to liberalize, the airlines enjoyed more freedom in setting rates and selecting routes and thus marked 1997 as the start of total deregulation (Adler, 1992).

Effect of Deregulation

After deregulation, airline industry observers generally anticipated that competition would increase in the airline industry and, as a result, airfares would decrease. It was also predicted that numerous new airlines would emerge that would give travelers additional options that operate different routes (Adler, 1992). As an immediate effect of deregulation, numerous new air carriers were formed and started operating in the European sky. This is when Ryanair came into the low-cost airline market and targeted established airlines such as Aer Lingus and British Airways, which previously enjoyed monopolies in this industry. Moreover, EasyJet and Debonair, new British carriers, also followed the low-cost model pioneered by the American low-cost carrier Southwest Airlines. With deregulation and the emergence of new low-cost airlines, the European airline industry faced significant competition (Pinkham, 1999).

The Concept of Low-Cost Airlines

A low-cost airline or low-cost carrier is an airline that offers lower airfares than traditional airlines. Also, low-cost airlines include only limited services, which is why they are also referred to as no frills or budget airlines or as discount carriers . Southwest Airlines, operating in the United States, is the world’s largest low-cost carrier and has been a major inspiration to many other low-cost carriers around the world. Established in 1967 by Herb Kelleher as Air Southwest, it adopted the current name Southwest Airlines in 1971. Headquartered in Dallas, TX, the airline has scheduled services to 101 destinations in the United States, operates more than 3,900 departures per day, and employs 53,000 staff members. The airline achieved success through features such as efficient employee management, aircraft productivity, low unit cost, and shorter turnaround time. The Southwest Airlines business model has been duplicated by many low-cost airlines worldwide.

Two airlines that have used the business model of Southwest Airlines are Ryanair and EasyJet, both operating in Europe. These two airlines are also operating successfully by following a low-cost strategy. Additional examples of low-cost carriers include WestJet of Canada, IndiGo in India, AirAsia in Malaysia, JetStar in Australia, and Volaris in Mexico. In addition, the term ultra-low-cost carriers is used to differentiate some airlines from typical low-cost carriers, as airlines in this special category are distinct from the standard low-cost carrier. For example, Spirit Airlines and Allegiant Air are ultra-low-cost airlines based in the United States that include fewer amenities with airfare and thus have a greater number of add-on fees.

The concept of no frills means that an airline offers only the basic services and charges extra fees for food, priority boarding, seat allocation, and baggage. Through this method, the airline companies are able to offer passengers decreased ticket prices. However, any full-service airline may also offer some reduced fares while maintaining traditional carrier services and should not be confused with the concept of low-cost airlines as there would be significant differences in the business model.

In order to understand the success factors of low-cost airlines, it is important to discuss the business model and operational strategies of these airlines. The business model may vary from airline to airline, but to understand better the low-cost airline business model, some common practices are discussed briefly in the following sections.

Classless Single Aircraft

The most common factor for a low-cost airline is to operate a single aircraft type with a single passenger class. As the long-range, wide-body aircrafts are very expensive, the low-cost airlines operate narrow-body, single-aisle aircrafts. Moreover, it was a common practice in the past to buy second-hand older aircrafts; however, that practice has changed in recent years. Nowadays, the airlines are purchasing new aircrafts because those are cheaper in the long run, can be bought in bulk, are more fuel efficient, demand lower training of personnel, and can be operated at a lower maintenance cost than older aircrafts. The interior equipment and offered services are also important factors for cost reduction. For example, seats in Ryanair flights do not recline and do not have rear pockets, thus the airline is able to minimize cleaning and maintenance cost.

Basic Operation

The low-cost carriers usually offer a simple, straightforward format for airfare. For example, the one-way tickets cost half that of the round-trip tickets and fares increase as the plane fills up, which speeds up the sale of tickets. To encourage passengers to take direct flights, many low-cost airlines do not transfer luggage from one flight to another. They usually offer one flight per day and per route to keep things simple. Moreover, low-cost airlines generate ancillary revenues by charging additional fees for all conveniences and services. For example, airlines may charge extra for food and drink (on-board catering services), a pillow or blanket, priority boarding, premium services, baggage handling, and Wi-Fi and internet access.

Bases and Secondary Airports

It is common for low-cost airlines to develop one or more bases to cover more destinations within a short time. Rather than using traditional hubs, these airlines focus on specific cities. Moreover, low-cost carriers prefer secondary airports, which are smaller and less congested than primary airports and usually fly in off-peak hours. As a result, they generally avoid air traffic delays, are able to offload and reload the aircrafts quickly, reduce landing fees, and they thus maximize aircraft utilization and minimize the turnaround time period, which leads to cost reduction and the operation of more flights per day.

Efficient Employee Management

It is a very common practice for low-cost airlines to engage employees in multiple roles. For example, at Southwest Airlines, flight attendants also work as gate agents, which helps to minimize personnel costs. Another strategy employed in recent years is the online check-in facility, which necessitates fewer personnel and thus reduces personnel costs. The opportunities for web check-in and machine check-in at the airport can significantly reduce the personnel cost for ground crews and desk check-in. Online ticket selling can also result in avoiding the cost of call centers or agents. In addition, the general cost of personnel is higher for traditional airlines as they employ experienced staff with better negotiation skills who receive higher salaries and benefits. In contrast, the low-cost carriers employ less experienced staff and pay them lower salaries, which reduces cost. This approach enables low-cost airlines to minimize the employee’s opportunity to negotiate pay increases and pension benefits as the staff members are usually beginners.

Pricing Strategy and Criticism

The pricing strategy of any low-cost airline is based on setting the airfare at a very low price compared to full-service carriers. As they offer a no frills service, the price is set based on very basic services provided by the airline. However, because most airlines do not include charges and taxes in their advertised price, which sometimes misleads the customers, this practice has become subject to criticism by governmental agencies and regulators. The low-cost airlines have been seriously criticized for the “hidden” charges. Even in the case of cancellation by the airline, many of these charges are non-refundable, creating a blatantly unfair situation for the customers. As a result, in 2007, the UK’s Office of Fair Trading gave all carriers and travel companies three months to include all fixed non-optional costs in their advertised prices to ensure that the passengers have a clear idea about the cost of traveling. However, many of the low-cost carriers did not comply with the regulation. Moreover, as a strategy to reduce cost, most of the low-cost carriers operate in secondary airports, which are far away from the main cities or passenger destinations. This eventually leads to delays in reaching the final destination and adds to the expenses of the travelers.

Ryanair: An Overview

Ryanair was founded by Cathal and Declan Ryan, whose father, Tony Ryan, had worked for Aer Lingus for many years. Tony was the co-founder of Guinness Peat Airline, the largest aircraft leasing company in the world. Because of his 10% stake in Guinness Peat Airline, it was possible for Tony Ryan to invest one million Irish pounds when his sons wanted to launch an airline (Rivkin, 2007).

Ryanair launched its first route in July 1985 with a 15-seater turbo prop Bandeirante aircraft, flying between Waterford in the southeast of Ireland and London’s Gatwick Airport. The initial objective was to demonstrate the ability to successfully operate a scheduled airline. In 1986, the airline obtained permission from regulatory authorities to operate between Dublin and Luton, in the outskirts of London. This put Ryanair in direct competition with British Airways and Aer Lingus, challenging their high-fare duopoly on Dublin–London routes. The competition was fierce as Ryanair offered its launch fare of GBP99 for a round-trip ticket, which was less than half the price of the BA–Aer Lingus lowest return fare of GBP209. In response to the first fare war in Europe, prompted by Ryanair, both British Airways and Aer Lingus slashed their high prices. Thereby, Ryanair successfully completed its first year of operation with two routes flying around 82,000 passengers (Ryanair, 2018, January 2).

Following the initial launch, Ryanair experienced three years of rapid growth and an intense fare war with competitors Aer Lingus and British Airways. However, by 1990, Ryanair had accumulated GBP20 million in losses and required serious restructuring. Thus, in 1991, the Ryan family decided to invest an additional GBP20 million to restructure the business and follow a low-cost strategy based on the American Southwest Airlines. One strategy was to schedule flights into regional airports that offer lower landing and handling charges than larger international airports. This change helped reduce costs. Implementing this low-fare model, Ryanair rebranded itself as the first low-fare airline in Europe. The airline disposed of additional expenses such as free in-flight drinks and expensive meals on board and therefore was able to reduce the lowest fares from GBP99 to GBP59 return (that is, round-trip) on the Dublin–London route, which no other airline could offer. Instantly, the strategy proved so successful that customers queued for three days to get the lowest fare tickets.

Low-Cost Business Model

Through continued improvements in cost containment and efficiency in operations, Ryanair strives to offer low fares that generate increased passenger traffic and firmly establish itself as the leading low-fare passenger airline. The basic strategy is to offer the lowest fares possible on all routes while avoiding fuel surcharges, which are extra fees that can be charged to cover the fluctuating cost of fuel. A number of airlines charge customers “carrier-imposed fees,” which include fuel surcharge costs. The Ryanair strategy also includes reduced delays, minimized cancellations, faster check-in times, and rapid refunds to customers. With a focus on reducing flight delays, Ryanair notifies passengers in the event of delays and cancellations as soon as possible. Customers can make alterations to their reservations for a nominal fee. Ryanair allows customers to check-in online as many as four hours before departure and customers can print their own boarding passes to make the process quicker (Dutta & Regani, 2003).

Ancillary Revenue

Ryanair generates 20% of its revenue from ancillary services, which come from sources other than ticket fares. To maintain its low-cost strategy, the airline charges for extras such as using airport check-in facilities instead of checking-in online. It also charges for checking luggage and for food and drinks on board. Ryanair claims that to provide customers the lowest possible price and the flexibility to choose what they pay for, it charges for extras.

In order to reduce handling and fuel costs, Ryanair charges high baggage fees. However, in an attempt to encourage customers to check their luggage, in early 2018 it reduced the price of check-in luggage fees from GBP 35 to GBP 25 and increased the weight allowance from 15 kg to 20 kg. On the other hand, it implemented a new baggage policy aimed at increasing the efficiency of checking in for flights. The new Ryanair baggage policy went into effect in January 2018. This new policy introduced priority boarding for customers at a fee of GBP 5 at the time of booking or GBP 6 as an addition to a booking as many as two hours (via the Ryanair website) or 30 minutes (via the Ryanair app) preceding the flight’s scheduled departure time. Subsequently, the policy restricts non-priority customers to one small carry-on bag. According to Kenny Jacobs, the Ryanair Chief Marketing Officer, delays occur because passengers take too much luggage on board. Hence, its new cabin bag policy is aimed at speeding up boarding. Based on the new rules, a maximum of 100 passengers per flight who pay for priority boarding will be able to bring their two cabin bags on board. Non-priority passengers with big cases will have them stored in the hold free of charge. Moreover, the airline aims to deal with the lack of sufficient overhead cabin space with the delivery of ten 737 MAXes in 2019. The 737 MAX includes Space Bins that will accommodate six standard size cabin bags per bin, which equates to a 50%increase in on-board storage space per passenger (Smith, 2018).

Single Fleet

Ryanair focuses on standardization of aircrafts as a key feature in keeping costs low. Thus, it depends entirely on Boeing 737s. There are several advantages of flying a standard fleet. The maintenance function is simplified as the airline does not have to stock spare parts for other types of planes and the parts can be purchased in bulk. By using a simple fleet, the training requirements for the pilots and the cabin crew can be reduced and operations can be maintained easily.

Ryanair does not serve food or complimentary drinks on its flights. It charges additionally for the snacks and drinks, including water, purchased on the flights. In this regard, Ryanair is not only saving costs but also making additional revenue through the sale of food and drinks.

Secondary Airports and Shorter Turnarounds

As an important element in keeping costs low, Ryanair uses secondary airports, usually located outside the main city to minimize time and landing charges. Moreover, the secondary airports provide the advantage of lower air traffic, minimum delays, and shorter turnaround time. For a short haul flight, Ryanair planes can usually manage a turnaround time of approximately 25 minutes, which is less than half the 50–60 minutes turnaround time of British Airways (Elliott, 2018). Rapid turnaround times allow a plane to fly more times per day than its competitors. Ryanair planes are able to make an average of nine trips per day, compared to six flights per day for larger airlines such as British Airways or Lufthansa. Ryanair also focuses on filling its planes to capacity as it is more profitable for a plane to fly if it is full at lowered ticket prices rather than flying a plane half-empty at a standard price. In this way, the unit cost per passenger is reduced.

Customer Services

In spite of having a successful business model, Ryanair has had a poor reputation for customer service from the beginning. As the airline is striving to keep the cost low, it is difficult to ensure high quality service to customers. In customer minds, Ryanair has the reputation of being a cheap brand rather than a quality brand. Initially notorious for its loudmouthed, customer-baiting, and aggressive ways, Ryanair faced much criticism during its early years. It offered no allocated seating, charged high baggage fees, and, at a point in 2002, even refused to provide wheelchairs for disabled passengers with the argument that it is the responsibility of the airport authority. Furthermore, there were complaints by customers about the difficulty in reaching the airline through email or other online platforms as well as the complex and misleading booking system Ryanair employed. Additionally, the infamous Ryanair crew charity calendar that portrayed bikini-clad female members of the cabin crew in provocative poses had a limited audience and received much backlash from the general public. Needless to say, the airline faced antagonism from its customers due to its poor treatment and unprofessional methods. Ultimately, Ryanair decided to do something about the antagonism. In February 2014, the airline appointed Kenny Jacobs as its first Chief Marketing Officer to address customer concerns. Sometime after his appointment, Jacobs admitted that the past ways of Ryanair were “cheap and nasty” and it was working on transforming itself into “cheap, straightforward and smart” (Topham, 2014).

Consistent with recent efforts, Ryanair eventually launched its Always Getting Better (or AGB) campaign in late 2014, aimed toward changing customer perceptions about the brand and moving toward establishing itself as a quality brand. In the blunt, however true, words of the company CEO, Michael O’Leary, it was high time for the airline to “stop unnecessarily pissing people off.” AGB is geared towards improving the overall customer service through a series of customer-service related initiatives. Since its inception, the AGB campaign has implemented various changes at Ryanair. Some of these improvements include digital enhancements such as redesigned website and mobile application, new uniforms and cabin interiors, allocated seating, a more customer-friendly baggage allowance. Consequently, the ABG initiative led to reduced passenger complaints, timely complaint addressing, and overall pleasant interactions with the passengers, which had a positive effect on the profitability of the company. Moving into the fifth year of the AGB program, the company introduced a price promise in early 2018 that would enable passengers who find cheaper fares on other airlines to be reimbursed the amount of the difference as well as a GBP5 bonus into their Ryanair account. However, this reimbursement is only applicable to flights between the same airports within two hours (Topham, 2018). These changes, implemented under the AGB program, are designed to improve the overall customer experience of flying with Ryanair.

The Competition

The competition of the European airline industry is intense, as there are several low-cost airlines, with the most established being Ryanair, EasyJet, Norwegian, and Wizz Air. Moreover, traditional full-service airlines also have subsidiary low-cost carriers such as Lufthansa and Air France–KLM. Moreover, Aer Lingus, traditionally a full-service airline, moved to a low-cost strategy in 2002, which immediately became a significant competitor for Ryanair. Airlines such as MyTravelLite, which started competing with Ryanair in 2003 on the Birmingham to Dublin route, eventually pulled out as Ryanair operated flights on few of the MyTravelLite routes. Similarly, Go Airlines started offering flights from Dublin to Glasgow and Edinburgh that created severe competition with Ryanair; however, Go eventually withdrew its services from Dublin. Ryanair fought back with fellow low-cost airline Wizz Air as well. When Wizz Air attempted to operate flights from Warsaw Chopin Airport in Poland to Modlin Airport, Ryanair responded with several new routes, similar to those flown by Wizz Air and from the same airport.

Ryanair enjoys some advantages over its competitors as it is the oldest low-cost airline in Europe. It has both long time experience and strong brand recognition in the industry. It also has a reputation for reducing air fares significantly to beat its competitors. After the deregulation of the European airline industry, Ryanair faced many challenges as several low-cost airlines were introduced. Among these, EasyJet became the biggest competitor of Ryanair. Headquartered in London, EasyJet was established in 1995 and flies 820 routes internationally in more than 30 countries. The key business strategies of EasyJet are acquisition and cost-cutting operations. For instance, in 2002, EasyJet beat Ryanair and reached top position as the largest low-cost airline in Europe by purchasing Go Airlines. Contrary to Ryanair’s operations at secondary airports, EasyJet operates at main destination airports, which are a preferred choice of business travelers, who are willing to pay higher ticket prices in order to save on travel time. However, EasyJet fares are almost 60–70% more than those of Ryanair. Moreover, Ryanair has a better punctuality record thanks to its impressively low average flight turnaround times (Dutta & Regani, 2003).

According to the ranking of the Centre for Aviation (CAPA) of the top 20 European airline groups (parent airline plus subsidiary airlines) by passengers in 2017, Ryanair lost its title of being Europe’s leading airline group by passengers to Lufthansa Group. Lufthansa Group was able to overtake the low-cost carrier due to its acquisition of Brussels Airlines and increased growth in subsidiary airline, Euro wings. Furthermore, the Ryanair winter growth faced a blow due to its operational problems and the ensuing rostering crisis and flight cancellations. However, despite all of the controversies and challenges, Ryanair remains Europe’s largest individual airline by passenger numbers. According to the CAPA airline company traffic reports, Ryanair flew 128.8 million passengers in 2017, 47.2 million more passengers than second placed EasyJet. Moreover, Ryanair is predicted to retain that position, and even reclaim its title of being the top European airline by number of passengers, in 2018 (CAPA, 2018).

Current and Future Status of Ryanair

Ryanair has been at the forefront of the low-cost airlines in Europe for more than two decades. The company has taken steps to promote its success but has also inflicted damage on its brand due to several decisions taken by company managers and by the actions and statements of its CEO. These decisions and statements have placed the company in damage control mode. On the other hand, some company challenges are not of its own doing. We next explore the challenges faced by Ryanair due to both internal and external factors.

Promotional Strategy, Publicity, and Controversies

Ryanair made every effort to manipulate social media, press conferences, and publicity to gain attention and visibility. By using unconventional and controversial marketing tactics, Ryanair has managed to make news headlines very often and is able to generate free publicity. With the notion that all publicity is good publicity, Ryanair has brushed off poor publicity in the past, such as customer complaints or brash comments from the pugnacious Michael O’Leary. O’Leary has been accused of making deliberately controversial statements to gain media attention, which has led to several complaints to the Advertising Standards Authority (ASA) and court cases. For example, in 2008 the airline was sued by the President of France, Nicolas Sarkozy, and his then girlfriend and later wife, model Carla Bruni, for using their photograph in an advertisement without consent and thus violating their privacy. The French court ordered Ryanair to pay symbolic damages of about GBP 1 to Sarkozy and approximately GBP 53,000 to Bruni (“Ryanair ordered,” 2008). Another provocative advertisement featured the Pope whispering into a nun’s ear, leading in 2000 to a press release by the Vatican protesting against the airline for insulting the Pope (Dutta & Regani, 2003).

The controversial tactics by Michael O’Leary can be further illustrated by the live BBC News interview in 2009 during which he commented that Ryanair was considering charging passengers GBP1 per toilet usage during flights. The announcement of charging customers for such an essential customer service drew much attention and made news headlines for several days. About a week later, O’Leary admitted that the incident was simply a publicity stunt aimed at gaining media attention and his statement was false.

Ryanair engaged in an aggressive rivalry with its competitors through inappropriate advertisements. In an offensive strategy that targeted the airfare of Sabena in 2001, it used a picture of the Manneken Pis , a famous Belgian statue of a urinating child, with the caption of “Pissed off with Sabena’s high fares?” This advertisement led to a court case filing by Sabena, and Ryanair was ordered to discontinue the advertisement by the court. Moreover, in 2000, Ryanair attacked British Airways (BA) with a provocative advertisement campaign headlined “Expensive BA” and “Expensive Ba****ds!” It was also involved in a controversy claiming that the BA fares were five times higher than those of Ryanair, which according to BA, is an exaggeration as the fares were about three times higher. Unsurprisingly, BA sued Ryanair over trademark infringement and malicious falsehood. However, the London Judge Jacob rejected the claims, stating Ryanair’s advertisement only amounted to “vulgar abuse” and that it was simply “honest comparative advertising.” As a result, BA was ordered to pay its own costs of approximately GBP 200,000 and an immediate payment of about GBP 60,000 towards Ryanair’s costs (Bowers, 2000). Similarly, these types of direct attacks at other airlines in the industry have led to many court cases against Ryanair.

Ryanair has been at the center of criticism for using provocative statements, irresponsible behavior, and demeaning women and celebrities in their advertisements, ranging from featuring a model dressed as a schoolgirl, accompanied by the statement “Hottest back to school fares,” to offering calendars featuring semi-naked cabin crew members, which created heated debate with the ASA on various occasions. Through these controversial events, Ryanair gained all the publicity it wanted; however, it failed to improve brand perception and customer loyalty due to its unprofessional and offensive behavior.

Moreover, Ryanair suffered from internal mismanagement in late 2017. By failing to account for planned leave of its pilots, the airline faced a shortage of pilots. This oversight led to cancellations of 40–50 flights per day between September and October of 2017, which disrupted the travel plans of approximately 400,000 customers. The rostering crisis and ensuing flight cancellations led to a sharp decrease in Ryanair status as the consumers were furious that their travel plans were disrupted. The airline has reportedly paid more than GBP 25 million in compensation to customers for the 2017 flight cancellation issue. Moreover, it ran into trouble with the Civil Aviation Authority of the UK for failing to properly inform passengers of their rights over cancelled flights during the rostering crisis. The Civil Aviation Authority threatened Ryanair with legal action for “persistently misleading” passengers about rights under European law (“Ryanair seeks,” 2018).

Additionally, there have been compensation issues where customers are late in receiving compensation for flight delays or cancellations. Initially, Ryanair outsourced customer service calls to call centers in Hungary and Romania. However, in order to improve efficiency in their claims processing, the airline shifted to an in-house compensation team of 50 dedicated members in Madrid in 2018. With this change, Ryanair hopes to process and pay valid claims within 10 days, less than its current 15 days average. Additionally, the airline is considering automatic payouts of fare refunds (Gerrard, 2018).

The Challenge Presented by Brexit

One of the biggest challenges to Ryanair is the uncertainty regarding Brexit. Ryanair has expansion plans for its new Belfast base, which are now in doubt as a result of Brexit. Michael O’Leary planned to operate in 40 destinations from Aldergrove, Northern Ireland. However, after the EU membership referendum, the expansion plans could be hindered. The expansion plan was supposed to create hundreds of jobs at Belfast International Airport. O’Leary has been a vocal supporter of remaining within the EU and confirmed that, due to the uncertainty around Brexit, the airline is delaying investment and expansion plans (Cunningham, 2016).

As a contingency plan to address the repercussions of implementation of Brexit in March 2019, Ryanair applied in the latter part of 2017 to the Civil Aviation Authority to secure an Air Operator’s Certificate under its subsidiary company, Ryanair UK. Once approved, the license will allow it to operate domestic UK air routes that may be necessary for its three UK domestic routes. According to Sky News, flights between the UK and EU are the major revenue generator of Ryanair, whereas internal UK routes account for less than 2% of total revenue (Kleinman, 2018). Unless an agreement is formalized to allow flights to continue between the UK and Europe, Ryanair plans to incorporate a Brexit refund clause for tickets for flights scheduled for April 2019 and onwards. Kenny Jacobs is hopeful that the Brexit clause will not need to be exercised as he believes that some kind of solution will be reached (Topham, 2018).

Future of Ryanair

At the Airport Operators Association conference in London in November 2016, Michael O’Leary expressed his ambition to offer zero air fares to passengers and claimed that many Ryanair flights could be free within the next 10 years. He stated that Ryanair has been offered attractive deals by European airports. There is a possibility of reduction or elimination of air passenger duty, which would allow Ryanair to offer flights at zero fares in future. The strategy for Ryanair would be to make money by sharing the airport revenues. As passengers travel through airports and pay for food at restaurants, bars, cafes, or spend on retail shopping, Ryanair would get a share of that revenue from the airports. Michael O’Leary is positive about the future opportunity and believes that this will happen for sure, if not at major airports such as Heathrow, but at other airports that are looking for huge passenger traffic growth (Topham, 2016).

Though the company CEO is known for repeatedly denying that carbon emissions contribute to climate change and has famously suggested shooting environmentalists in the past, Ryanair is planning to undergo a green makeover through its environmental plan. To earn its green credentials, in early 2018, the airline pledged to eradicate the usage of non-recyclable plastics on its aircrafts as well as at head offices and bases by 2023. It aims to become plastic free by switching to biodegradable cups, wooden cutlery, and paper packaging. However, Kenny Jacobs, the Ryanair Chief Marketing Officer, admittedly commented that “there will always be some kind of plastics” and the actual 100% removal of non-recyclable plastics still needs to be figured out. Moreover, Ryanair plans to introduce a voluntary carbon offset payment for customers when they book with the airline (Topham, 2018).

A key component of O’Leary’s low-cost strategy was refusal to recognize unions. However, when Ryanair refused to acknowledge the Irish Airlines Pilots Association (IALPA) as a union, the Dublin-based Ryanair pilots voted in favor of a strike just before Christmas in 2017. Consequently, in order to prevent the potential chaos that strikes cause during the holiday season, Ryanair agreed to recognize and engage with pilot unions in the UK, Ireland, Germany, Spain, Italy, and Portugal. Therefore, for the first time in the 32year history of the airline, it was forced to change its stance towards pilot unions in early 2018 (Delahaye, 2017). As the centerpiece of its fifth year of the AGB campaign, it hopes to create a stronger and more stable relationship with its customers and staff members.

Despite the impending uncertainty regarding Brexit and its impacts, Ryanair plans to focus on growing within Europe and continue to offer industry leading low costs while exploiting potential expansion opportunities. The company believes that, by 2024, it will fly more than 200 million passengers annually (O’Halloran, 2016). In order to further strengthen its position, Ryanair must act according to what consumers want—great service at an acceptable price. With its AGB company slogan, the airline promises low air fares, on-time flights, and growing numbers of routes to bring a wide range of destination choices to its customers through continuous improvements in its operations. Whether Ryanair can manage to sustain its low-cost model in the intensely competitive and increasingly customer centric global airline industry is up for debate.

Discussion Questions

• 1. What were the impacts of deregulation on the European airline industry?
• 2. Discuss the business and revenue model of Ryanair and recommend methods to make the model more effective and efficient.
• 3. Formulate a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis of Ryanair in the European airline industry.
• 4. Use Porter’s Five Forces to analyze Ryanair and its competitive market.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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