Graduate School of Business

MBA – Oil & Gas Management

Contemporary Management

Ryanair: the lowest cost airline in Europe

By: REDA Rashwan

ID: 18225389

Presented to:
Dr. Reham Adel
Table of Contents

1. Introduction....................................................................................................................2
2. External Environment Analysis.....................................................................................3
3. Internal Environment Analysis......................................................................................7
4. The Amazon of Air Travel...........................................................................................10
5. Recommendations.........................................................................................................11
6. Conclusion.....................................................................................................................12
7. References.....................................................................................................................12

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1. Introduction

Ryanair Holdings, Europe's largest airline group, is the parent company of Buzz,
Lauda, Malta Air and Ryanair DAC. Carrying 151 million guests annually on
more than 2,400 daily flights from 82 bases, the group connects more than 200
destinations in 40 countries to a fleet of more than 470 aircraft, with 210 other
Boeing 737 aircraft on request, which will enable the Ryanair Group to reduce
prices and increase traffic to 200 million passengers by 2025. Ryanair has a team
of over 19,000 highly skilled aviation professionals who deliver Europe's No. 1
performance on time, and a leading safety record in the industry for 34 years.
Ryanair is Europe's cleanest airline group, and customers converting to Ryanair
flights can reduce their CO2 emissions by up to 50% compared to other Big 4
companies in the European Union.
The purpose of this analysis in Ryanair case study is to assess the macro
environment, industry analysis and internal factors that will help Ryanair succeed
in the environment in which it operates. The analysis is divided into three main
components, focusing on internal and external environments and closing the
analysis with our recommendations.
For overall environment analysis and industry analysis, I will use important
models such as Pestel Analysis which describes external factors affecting future
business in the aviation industry. Models such as Porter's Five Forces model will
also be used to explain factors in the industry, how companies compete and how
they affect company profitability. The concept of strategic groups will also be
used to help explain Ryanair's major competitors and how they influence their
current strategy.

1.1 Airline Industry

The aviation industry is still a fast and growing industry. It facilitates

economic growth, global trade, international investment and tourism, and is
therefore central to globalization occurring in many other industries. This case
study focuses on Ryanair, the first non-congested airline for airlines in Europe,
founded by the Ryan family in 1985 to provide scheduled airline services
between Ireland and the United Kingdom. The case study provides an insight
and interesting insight into Ryan air's growth, the risks and challenges it faces
and its competitors and future succession and growth strategies.

According to the case study by the end of 1990, the company had flown
through a great deal of turmoil, getting rid of five CEOs, and accumulating
losses of 20 million pounds. Its battle to survive in the early 1990s saw airlines
successfully redesign themselves as the first low ticket prices in Europe, and
it's not an ornamentation company, built in the style of Southwest Airlines. A
new management team has been appointed headed by Michael O'Leary who
has made major changes to the airline. Michael O'Leary launched a £ 1.48
billion bid for the Irish rival, Air Lings, but Air Lingus and his board

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 subsequently rejected Ryanair's approach because, according to them, Ryanair
acted in a hostile, anti-competitive manner.

1.2 Ryanair Vision

Ryanair does not publish an official statement of vision or message. However,

their general trend is simply to continue to be the largest low-cost company in
the European aviation industry and to transport 50 million passengers by 2009.
Implementing this vision is a function of many individual tactics, including the
absolute dedication to low-cost performance all An element of the value chain,
rapid turnaround gates, non-union operations, performance-based incentive
compensation plans, standardization of one type of aircraft, and flight (in most
cases) to secondary airports, providing significant savings to Ryanair.

The strategy is an integrated and coordinated set of obligations and procedures

designed to exploit core competencies and gain a competitive advantage.
(Hubbard, Rice, Beamish, 2008).

The long-term purpose and goal setting of Ryanair is to establish itself as a

leading low-cost airline in Europe through continuous improvements and
expanded service offerings. I have conducted strategic analysis of the macro
and interior environment and industry analysis and recommended new
strategic initiatives to improve them.

2. External Environment Analysis

The overall environment describes all the factors that affect a company as a whole
but out of its direct control including broader social, political, and economic
factors (Hooley, Saunders, Piercy, 2004). It would be appropriate to conduct a
PESTEL analysis to identify and study external factors that are outside the
company's boundaries.
2.1 PESTEL Analysis
We investigate five factors in PESTEL analysis. The Pestle framework
classifies environmental impacts into six main types: political, economic,
social, technological, environmental and legal. These factors are not
independent of each other. Linked a lot. For example, technological
developments are changing the way people work, their standard of living and
their lifestyles. As any of these factors change, it affects the competitive
environment in which organizations operate. (Jerry, Scholes, Kaifan, 2005)
2.1.1 Political Environment
The health and safety regulations became especially important after the
September 11 attacks, according to the August 2006 case study, UK
authorities imposed strict security measures at all airports. Ryanair had to
cancel 279 flights in the days immediately after the accident and recovered the

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e2.7m price to nearly 40,000 passengers. Ryanair is estimated to have incurred
a loss of 1.9 million in reduced bookings.
In February 2005, a new regulation was introduced for the European Union. It
aims to reduce the inconvenience caused by air travelers due to delays,
cancellations and denial of boarding by offering a refund or re-orientation and
free care of passengers. Depending on the average distance of its flights to
Ryanair, compensation costs likely will fall in the e250 category.
Ryanair is facing increasing union pressure in Europe. Some countries in
Europe have formed a trade union amongst themselves, thus pressuring
Ryanair to do business in these countries

2.1.2 Economic Environment

The instability of fuel prices is a major economic concern for airlines.
Hedging deals will push airlines toward the risks of exchange rate fluctuations.
This is also a major economic concern for Ryanair. According to the case
study, Ryanair was vulnerable to higher fuel prices in 2005 due to the low
price policy. Fuel costs accounted for 35% of operating costs in 2006,
compared to 27% in the previous year. Ryanair didn't drop early, so she was
paying $ 70 to $ 74 a barrel until March 2007.
In 2006, airport and handling charges increased by 21%, slower than the
expansion in passenger numbers. Road fees also increased by 21% due to an
increase in the number of operating sectors and an 8% increase in the average
sector length as Ryanair flew to the new EU countries. These numbers can be
explained by an increase in the average price. European Union inflation rate is
1.7 (NA, Eurozone annual inflation down 2006). Inflation rates can increase
production costs and airline prices. However, the relatively stable inflation rate
is a good sign for Ryanair's future and the economy as a whole.
It was noted that the unemployment rate decreased to 8.7% (unknown rate,
unemployment in Europe 2006). This data provides a positive indication of the
distinguished economy in Europe. This will obviously affect Ryanair's
decision making in various matters. A stable economy is the key to growth and
may be one of Ryanair's motivations to consider acquiring the Irish plane,
“Aer Lingus”.

2.1.3 Socio- cultural environment

Increased travel lifestyles will affect Ryanair's business. For example
educational trips, backpacks, family trips, and business trips. People choose to
use budget airlines for short-haul flights because they are so inexpensive, and
they save time especially on business transactions. This has turned into a
social trend.

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After the terrorist attacks, people looked for alternative ways to travel, such as
train and ferry services that were safer than flying. Air travel was not only
more complicated, but also somewhat negatively affected on the financial side,
especially for budget airlines.
People have a very bad opinion on budget airlines. These stereotypes have
been a major concern for airlines like Ryanair. Baggage restrictions, flight
delays, cancellations, and general inefficiency increased the tension between
management and passengers. According to the case study, Ryanair accused a
man of cerebral palsy e18 for using a wheelchair, many clients believed
Ryanair was unethical by doing so.
2.1.4 Technological Environment
Ryanair keeps maintenance costs low, using Boeing 737s. Ryanair has
replaced its fleet of old aircraft with new, more environmentally friendly
aircraft and reduced the average fleet life to 2.4 years. Ryanair uses fleet
modification software to provide better aircraft performance. New aircraft
produce 50% less emissions, 45% less fuel combustion, and 45% less noise
emissions per seat. Therefore, it is clear that Ryanair must invest in
appropriate technology and maintain its technology in order to remain
competitive.
2.1.5 Environmental Factor
Every government is concerned about global warming and the effect of
greenhouse gases on carbon emissions. The aviation industry is responsible for
2.6% of carbon emissions. Airlines are looking for ways to reduce noise to
prevent noise pollution. The environment is clearly a major concern for
companies operating in the aviation industry. This may also have a financial
impact due to severe penalties and penalties. The political impact will also be
significant due to intense pressure from environmentalists.
2.1.6 Legal environment
Illegal subsidies from airports are a crime in Europe. Therefore, legal means to
obtain this advantageous port support will be sorted out afterwards, in order to
remain competitive.
Alleged misleading articles on airlines will also lead to legal action. According
to the case, the UK authorities have denied allegations that Ryanair has
published such articles on Channel 4. Such a legal action would financially
harm the budget airline. It has also been previously mentioned that
environmental concerns and stipulated emission fee violations may also lead
to legal action.

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2.2 Porter's Five Forces Model
Porter's Five Forces model examines five forces that influence or determine
the structure of industries, and thus the average profitability or attractiveness
of these industries. For each of the five powers, Porter identified a set of
factors that would determine the presence and strength of forces in a particular
industrial environment. (reference)
2.2.1 Threats to new arrivals - low
When focusing on factors such as economies of scale, technological
innovation, government policies and capital requirements, and high
competition, it is not easy to enter the aviation industry. Ryanair has a strong
identity in the aviation industry and, according to the case study, Ryanair
claims it is number one in terms of punctuality among other European airlines,
it is difficult for new arrivals to enter the industry and compete with these
famous airlines. So the number of companies involved in the aviation industry
is low.
2.2.2 Bargaining power for suppliers - high
Ryanair is a low-budget airline that has business with industry giants. When
dealing with aircraft suppliers, fuel suppliers, and other essentials, it is
difficult for Ryanair to conduct negotiations. According to the case study,
Ryanair aircraft supplier is Boeing, which is a much larger company in the
aviation industry. Therefore, we can say that the bargaining power of the
suppliers is high.
2.2.3 Bargaining power of buyers
New consumers from European countries are growing because of their interest
in traveling from one destination to another using a low-budget airline, so
given the time and speed that most consumers choose to travel by plane.
According to the case study, in 2006 Ryanair provided online check-in and
boarding priority. Ryanair should maintain its competitive pricing in relation
to the industry level.
2.2.4 Threat of alternatives - high / medium
There are many other budget airlines as well as major carriers that offer new
low-ticket rates that can be directly replaced. There are also alternatives to air
travel such as traveling by train or using ferry services or boat services. If it is
a family trip consumer can choose train or ferry services because it is safer and
if they want to travel to more destinations, but for commercial transactions
people use air travel because it is less time-consuming and lower in price, then
the relative trains in continental Europe are expensive. So overall, it's safe to
say that there is actually a very real threat to alternatives to Ryanair.
2.2.5 Competitive competition - high

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 Due to deregulation and increased competition, and due to increased
competition on more roads, buyers are getting stronger. Airlines are trying to
counter increased competition by forging various strategic alliances even by
merging with other airlines such as Air France-KLM. According to the case
study, Ryanair launched a bid for its Irish rival, Aer Lingus, by combining
purchasing power to cut operating costs and create lower prices. These airlines
offer different rates, flyer programs, discounts, and franchises to attract
consumer attention and increase customer loyalty.

3. Internal Environment Analysis

In this section, we mainly focus on the unique and necessary resources and of
course the core competencies of the company. These are the factors that
constantly drive the company's competitive advantage.
3.1 VRIO Model
It is understood that, as part of the company's internal environment, the most
important factors are its resources and capabilities. This form helps us categorize
available resources and / or capabilities according to their valuableness, rarity,
inimitability and being organized.

3.1.1 Valuable
It is vital to know whether the resources or capabilities allow the company to
meet market demand or protect the company from market uncertainty. This is
what is measured by the value of resources or capabilities. Ryanair is able to
take advantage of both tangible resources like aircraft and intangible resources
like intellectual property like the most profitable airline award in the world.
Capabilities such as online booking and point-to-point guidance have also
added significant value to their service.
3.1.2 Rare
It is important to know if competitors have these resources widely or are they
scarce in demand. For some material resources like airplanes, Ryanair's
competitors clearly possess it widely. Even capabilities such as online
bookings and online check-in are widely used by competitors like BA and
Lufthansa. On the other hand, some resources such as rewards that Ryanair
possesses are rare, and therefore will add unique value.

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 3.1.3 In-imitable
The model also looks at the extent to which competitors can substitute or
emulate resources and capacities. It is important that resources or capabilities
be endless and irreplaceable to give a valuable competitive advantage.
Ryanairs' core competencies of frill strategy, low cost and mentoring policy
strategy are all fairly imitated. However, aircraft may be a non-replaceable
resource. This resource cannot be replaced without completely leaving the
aviation industry. And human resources are not endless, because competitive
airlines have the same roles as employees.
3.1.4 Organized
It is important for resources and capabilities to be exploitable. The model
mainly focuses on whether the company is able to use its capabilities and
exploit its resources to directly influence its profitability by stimulating its
competitive advantage.

3.2 Value Proposition

The value chain describes activities in and around an organization that together
creates a product or service. It is the cost of these value activities and the value
that they provide that determine whether the best value products or services have
been developed. The concept was used and developed by Michael Porter in
relation to competitive strategy. (Johnson G; Scholes K; Whittington R, 2005)
Core activities are directly related to creating or providing a product or service.
On the other hand, support activities improve the effectiveness or efficiency of
initial activities. (Johnson G; Scholes K., Whittington R, 2005)
Our main concern is whether the company uses its capabilities and resources
efficiently to add value to the service. The most important driver for Ryanair is the
potential cost advantage that seeks to eliminate unnecessary costs and reduce all
costs from those activities that add value to the service. These cost cuts will allow
the company to be more competitive.
The company can also focus on its core competencies, thus providing better and
more outstanding service to its customers. This also adds value because customers
will get more benefit.
Technology is perhaps the most effective factor in the aviation industry. The
added value through technological progress is noticeable. So, it is important to
renew and modernize technology in order to reduce costs as well as increase the
benefits associated with it, and thus create greater value.

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3.3 SWOT Analysis

3.3.1 Strengths

 Ryanair has developed a recognized brand name over the years, and has a
reputation as the largest budget airline in Europe.
 Ryanair offers online ticket booking - it is cost effective for its customers and
eliminates the need for travel agents.
 Ryanair offers lower prices better than its competitors. They provide
entertainment on board and find revenue from those sales.
 Ryanair got the publicity because of Michael O’Leary's CEO and his
controversial cases.
 Ryanair's fleet-wide policy to keep employee training and aircraft
maintenance costs low with Boeing 737s.
 The high performance of the service in punctuality and the seating area was
considered to be quite average as in the on-board restaurants, where the high
flight completion rate has built a good corporate image.

3.3.2 Weaknesses

 Bad publicity about customer abuse, training policies, aircraft hygiene, and
poor employee morale.
 Restricted expansion potential because it is a niche market
 Currency fluctuations made fuel costs either expensive or unexpected for
Ryanair.
 Customers were unhappy because Ryanair was very cost-conscious, a
wheelchair tax was imposed on every passenger ticket, and insurance fees
increased.
 Outsourcing services outside Ireland may reduce employee liabilities.

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 3.3.3 Opportunities

 The enlargement of the European Union will open new travel destinations.
 The economic slowdown is actually helping Ryanair - changes in corporate
culture, "stealing" customers from traditional transport companies as they
seek lower wages.
 Potential opportunities to acquire market share.
 138 new aircraft launched to attract different types of consumers, ranging
from families to businessmen to increase cash revenue. It will allow Ryanair
to double the volume to 80 million passengers annually by 2012.

3.3.4 Threats

 Dependence on oil markets and the economic cycle: Fuel costs depend on the
oil market.
 Increased competition for low fares by other budget airlines.
 Change of government regulations of the European Union.
 Increased air traffic control fees due to increased aircraft. According to the
case study, traffic in November 2006 increased by 23%, with total revenue
increasing 33% to 1.256 billion, and auxiliary revenue increasing by 33%.
Unit costs increased by 7.5%. Although fuel costs increased 42% from
e337m, Ryanair after a half-year tax margin rose one point to 26%.

4. The Amazon of Air Travel

Ryanair is set to compete in the accommodation market, as it launches "Ryanair
Rooms" in her bid to become "Amazon of Air Travel".

The airline already offers customers the opportunity to reserve hotel rooms when
purchasing flights, but the new service will expand this to include hostels, bed and
breakfasts, vacation villas and accommodation options. The current hotel
reservation is provided in partnership with the Booking.com residence website.

The company is now seeking applications from companies that want to partner
with Ryanair to provide accommodation through the new service.

Kenny Jacobs CEO of Ryanair said the airline is planning to change the
reservation for accommodations.

“More and more customers are looking to Ryanair for products other than flights,
and we consider this a natural advance towards Ryanair.com to become Amazon
Air Travel,” he said.

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 "It also reflects the change in customer demand for different types of
accommodations, which will in turn be reflected in a variety of Ryanair rooms -
from five-star hotel rooms to independent accommodations."

Ryanair said the move was part of the "always improving" program that she
started three years ago in an effort to improve customer service. Improvements
included the repair of its website, the addition of boarding passes to the mobile
phone, and the reduction of fees for registered bags.

The company also implemented a package targeted for business travelers and
another for families, provided reserved seats and unveiled a new application with
the service "My Ryanair" that aims to provide a more personalized service for
those who register new addresses focused on strategic digital technology.

5. Recommendations

Ryanair should focus on new opportunities in order to enhance its current market
position. They can provide packages for tourists to different destinations which
can open up better market potential.

Another key point Ryanair should focus on is managing human resources more
efficiently, according to the case study, some of her crew members were caught
from a nap in the job as they had compact work schedules.

Ryan Air can also boost market share by providing better conditions for
passengers by reasonably increasing baggage weight, reducing wheelchair costs,
and building customer relationships and loyalty.

It is also a good idea for Michael O'Leary and other future CEOs to have a more
professional view of the business, which will directly affect the company and its
overall image. Michael O'Leary once wore the Pope to promote ticket shows; this
would have a negative impact on the corporate image.

Ryanair's business strategy must focus on its position, and it should primarily
target short haul routes rather than compete with established dominant airlines
such as British Airways by focusing on Ryanair's stature that will be able to gain a
competitive advantage over its competitors.

Ryanair should pay more attention to climate and economic situation, focusing
mainly on oil prices and other economic factors, Ryanair should hedge against
negative economic changes to reduce its risks from unexpected changes in the
economy.

Aircraft refinance is an important strategy that Ryanair should focus on. Despite
the growth of the European aviation industry, Ryanair must control its costs and
control its risky investments such as the decision to invest in "Air lingus".

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6. Conclusion

Ryanair's analysis explains environmental characteristics by exploring the internal

and external environment using theoretical models. I have recommended new
strategic initiatives and areas to improve strategy implementation for Ryanair's
senior management team so that it can gain a competitive advantage over other
competitive airlines such as EasyJet, Lufthansa, Air Lingus.

Ryanair is the first low-cost airline in Europe with the ability to succeed in the
environment in which they are currently. In order to more effectively achieve their
goal, strategic planning must be undertaken regarding Ryanair's history, trends,
and future technology for the aviation industry.

7. References
[1] Corporate.ryanair.com. 2020. Ryanair's Corporate Website. [online] Available
at: <https://corporate.ryanair.com/> [Accessed 7 May 2020].
[2] Dr. Riham Adel Lecture Notes.
[3] Kenny Jacobs How Ryanair plan to become the Amazon of air travel. 2017.
[video] Youtube: Youtube.com.
[4] Ukessays.com. 2020. The Macro Environment of Ryanair. [online] Available
at:<https://www.ukessays.com/essays/business/the-macro-envrionment-
elements-of-ryanair-business-essay.php> [Accessed 7 May 2020].

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