Ryanair Case Submission - Group Number 4

Members: Gaurav Maniyar (2021PGP128), Edupuganti Sandeep (2021PGP118), Jayesh Gaikwad (2021PGP124),
Gandi Manas Naidu (2018IPM037), Prachit Hage (2021PGP133)

Section I - Statement of the Problem

The problems facing the Ryan Brothers:
a. Ryanair was planning to commence services between Dublin-London, where they expected to face stiff
competition [British Airways(BA) and Aer Lingus(AL)], who were operating profitably on that route
● British Airways was a formidable competitor - it was operating in 145 destinations across 68 countries with 163
aircrafts, carried more international passengers than any other airline in the world, sold tickets via a network of
171 retail shops and 49,000 independent travel agents, and was earning record profits
● Aer Lingus was weaker as compared to BA, they had diversified into airline services & non-airline businesses
to make up for losses in the airline business
b. The customer base had limited growth prospects - at most 1.25 million potential customers
● The total number of passengers that flew on this route were 500,00 (hadn’t grown in 10 years). About 750,000
people travelled via rail or sea since it was a cheaper proposition
Thus, the Ryan brothers had to figure out how to build a profitable & sustainable business in a market that was
extremely consolidated and had profitable competitors competing for a customer base with limited growth prospects.

Short term and long term problems:

Short term problems:
● Stiff competition from profitable competitors like British Airways and Aer Lingus
● Small customer base (at most 1.25 million customers) with limited growth prospects
● Regulatory issues given that Ryanair does not have government support unlike the competition
● Small fleet size with a small capacity per aircraft: 4 aircrafts with a maximum capacity of 44 passengers/aircraft
Long term problems (PESTEL framework):
● Political: Governments promoting local carriers, as against private airlines like Ryanair
● Economical: Volatile fuel prices could increase expenditures which may make the low-cost model unsustainable
● Social: Risk of building the image of a “cheap + low-status airline”, thus hurting brand value
● Technological: Larger airlines like BA can take advantage of technological advancements leading to efficiencies
in operation and a correspondingly lower operating expenditure
● Environmental: Replace older aircrafts to obey emission norms and keep up with the push to be
environmental-friendly

Decisions facing the Ryan Brothers:

● Along with attracting the segment that uses rail and ferry services, should Ryanair also try to attract customers
from BA and AL (for which they may have to increase prices)?
● What should be Ryanair’s launch strategy, and how should they assure customers of quality and safety, given
that they’re positioning themselves as a low-cost airline?
● What should be Ryanair’s marketing strategy to ensure high occupancy rates?
 ● What does Ryanair need to do in order to ensure that their cost of operations is as minimal as possible?
The outcome of this case would be to get answers to the above questions. We explore solutions that Ryanair could
adopt for each of these in Section III, and then zero in on the recommended solution in Section IV.

Section II - Causes of the Problem

● Rivalry among existing competitors:
○ Competition from 2 airlines - BA and AL both of which are partly government sponsored thus providing
them a safety net
○ Both AL & BA cater to the needs of the business traveller and have prominent fleets covering a wide range
of destinations
The current market lacks any “real” market competition in the low-budget space. Hence the existing market rivalry
can be categorised as “Low”.
● Threat of new entrants:
○ The airline industry is extremely volatile (per exhibit-1), has tight margins and high fixed costs which make
it all the more difficult to run a “low-cost” airline
The threat of entry is “Low” since organisations need solid financial backing to enter the market
● Threat of substitutes:
○ Ferry & Rail (being used by 750,000 people) are attractive due to low prices
○ These modes however take 8 hours longer than air travel
The threat of substitutes is “Low” since there is a clear value proposition for air travel: Savings of 8 hours!
● Bargaining power of suppliers:
○ The power of airline operators is exemplified by the high pricing adopted by AL & BA
○ The lack of strong competition and the consolidated nature of the market means that prices can be
manipulated easily
○ Further, the system of flag carriers being the only airlines operating to and from certain routes (IATA
agreement) means that customers have limited options
The bargaining power of suppliers is currently “High” mainly due to lack of options
● Bargaining power of buyers:
○ The main switching costs for buyers moving towards other alternatives is the “time-cost” or the increased
travel time across various modes of travel
○ Although air fare is significantly higher than rail and ferry, the travel time is proportionately lower
The bargaining power of buyers (in this case the travellers) is relatively “Low”. This is because if customers want to
travel in a short period of time airlines are their only option

Section III - Decision Criteria and Alternative Solutions

Ansoff Matrix for RyanAir:
● Market Development: Expand to other profitable routes, move from secondary to primary airports, expand
customer base to business travellers
● Market Penetration: Focus on catering the customers who are in it for the short-haul, operate on the
Dublin-London route, and build the image of a low-cost + customer-first carrier
 ● Product Development: Expand fleet size and provide in-flight amenities and frequent flyer programs
● Diversification: Expand to other businesses like hospitality, consulting, airline services
Our recommendation would be to focus on market penetration - build the brand first, establish credibility in the
market, capture a customer segment and cater to their needs, and become profitable post which market & product
development can be looked at.

Decision Criteria:
● Cost to customer
● Trade-off between cost and customer service
● Distribution channels
● Size & variety of fleet

Alternate Solutions:
Decision Criteria Solutions Pros Cons

● No competition in the ● Will not be able to cater to the needs

“low-budget” airline
segment - first mover
advantage
● Potential to attract a major
Low Cost,
chunk of the customer base:
Single Fare
750,000 customers that use
ferry & rail(i.e. passengers
who are in it for the short
haul)
Cost
of passengers who are in it for the
long haul and deliver premium
customer service
● Brand building may be difficult since
people may view it as a “low cost +
low status” airline
● Dealing with sudden fluctuations in
fuel prices may be painful since
operating expenditures will shoot up
suddenly

● Increase in revenue due to ● High barrier to entry - since there

expensive tickets being sold
● Cater to a different customer
Tiered Pricing
segments - passengers who
- Economy &
are in it for the short and
Business
long haul
Class
● Better suited to deal with
fluctuations in exogenous
variables
will be direct competition with BA
and AL for their customer base
● Risk of flights going empty and low
occupancy rates due to presence of
established competition
● Increased operating expenditure to
match customer service to justify
cost to customer

Provision of ● Premium customer ● Increased cost of operations to

frill services experience that matches that provide top-notch customer service
Trade-off & in-flight of the competition ● Balancing cost to customer and cost
between cost and amenities ● Generation of an additional of operations to ensure the
customer service (food, travel source of income apart from proposition remains attractive for
insurance, merely ticket purchases ferry and rail customers
membership ● Potential to attract ferry and
 benefits, rail customers with these
frequent flyer incentives
programs) ● Building the image of a
“rich” brand thus helping
build brand loyalty

No provision ● Reduction in cost of ● Negative impact on customer

of frill operations experience
services & ● Contributes to building image of a
in-flight “low cost + low status” airline
amenities

● Engage customers directly, ● Increased cost due to setting up and

helping build brand value maintaining direct channels of
and emotional connection communication (eg - call centers)
Interface
● Access to first-party ● Slow growth since scaling this
directly with
customer data & feedback engagement may take time
customers
● Provide easy accessibility
Distribution and convenience to
Channels customers

● Increased market reach to a ● Increased cost due to commissions

Interface with
variety of customer ● Gap in engagement between
customers via
segments customer and the brand
travel agents
● Potential of increasing ● Low sales if agents/shops promote
and retail
customer base by attracting the competition due to selfish
shops
customers from BA interests (eg- higher commissions)

Operate using ● Lower maintenance costs ● Small capacity so limiting scope for
a single type ● Reduced personnel training growth
aircraft model expenditures ● May be incapable of handling sudden
(44-seater ● High occupancy rates spikes in demand due to seasonality
turboprop) ● Greater fuel efficiency
Size & Variety
of Fleet ● Increased revenue as a result ● High fixed costs and thus increased
Operate using of capacity increase barrier to entry
a variety of ● Increased revenue and faster ● Increased training costs and time of
airplanes in growth by expansion to personnel
the fleet other lucrative routes ● Risk associated with running empty
flights due to low occupancy rates

Section IV - Recommended Solution, Implementation and Justification

Ryanair should position itself as a “low-cost, single fare carrier”
● Why?
○ Will stimulate demand and be an attractive option for ferry & rail customers (trade-off between 110 pounds
& 8 hours) who represent the bulk of the market share
 ○ These passengers are in it for the short-haul, and thus price will be an important factor for them
○ If Ryanair offers premium services, BA may drop prices pushing Ryanair to the brink of bankruptcy
● How?
○ In order to offer cheap tickets, Ryanair will need to focus on cutting costs aggressively
○ Operate only at secondary & uncongested airports since primary airports have higher landing costs & high
traffic which may increase turnaround times
○ Operate on close-by destinations leading to short flights and the flexibility to eliminate all in-flight services
○ No stopover flights to eliminate baggage transfer, and customer service charges
○ Eliminate dependencies on travel agents, and allow customers to book tickets directly using the Internet
○ Leverage economies of scale & reduce maintenance costs by operating on a one-type aircraft model
○ Encourage high productivity of employees & don’t hire from unions

Ryanair’s should enter into strategic alliances with other organisations to drive customer experience
● Why?
○ There may be apprehensions about quality & customer service due to the “low-cost” model
○ Adoption may suffer if consumers think that the flights are not maintained, their safety is at risk, the service
is unreliable and not punctual and they can expect frequent delays
○ This may lead to low occupancy rates - which can be detrimental to profits given that the maximum capacity
of the aircraft is very low initially
● How?
○ Ensure flights are punctual with minimal delays, cancellations, and lost baggage - will happen if Ryanair
operates on secondary and uncongested airports, as previously stated
○ Enter into partnerships with other businesses - eg: car rental companies, hotel booking services, in-flight
caterers. This will enhance the overall customer experience, and lead to the generation of ancillary revenues
○ Ensure easy booking of tickets for customers via the Internet

Ryanair should interface directly with the customer, instead of depending on travel agents and retail shops
● Why?
○ Increase in cost due to commissions and is against our “low-cost” policy
○ May promote BA and AL (since they may earn higher commissions from them), and tarnish Ryanair’s
reputation in an attempt to promote their own self-interest
● How?
○ Heavy promotions via newspapers, television and the radio
○ Allow customers to book tickets and make reservations directly via a portal on the Internet
○ Set up a call center for resolving customer service issues and complaints