At first the company offers only flights between the Irish city Waterford and London Gatwick. In the following years they offer more and more flights and not only betwee Ireland and England. The amount of passengers increase but the two competitors Aer lingus and British Airways embattled Ryanair more and more. And after the outbreak of the gulf war the passengers traffic collapse and the amount of passengers decrease. Ryanair had to reduce their flight routs dramatically from 19 to only 6. But when in 1993 Michael O’Larry become the chairman everything chanced.
2. Why has Ryanair been successful thus far?
2.1 ‘no-frill’ concept
The success of the Irish Airline Ryanair have a few factors which differs them from other Airlines. But the most noticeable factor is the ‘no-frill concept’ which is a step for a company to reduce the costs of his good or service. The focus of the concept is located on the efficiency of the product and not for example at a nice breakfast. The target of the ‘no-frill concept2’ is to give the end-consumer a cheaper product and so, to work out a competitive advantage. This concept was first used in the food industry and later used in the airline industry. Ryanair pursued this concept based on following measures: They only operate with the same airplane type called Boeing 737-8003. To operate with only one type have a few advantages like saving money for inventory holding, maintenance personal and trainings for pilots which means that every pilot of Ryanair is able to fly each airplane. And to save cost of upkeep’s, they continuous buy new airplanes and sell old ones. So they have one of the youngest aircraft fleet of the world. This means that the airplanes are very secure because of the less failures of different parts of a airplane. Another factor of the concept is to save money at the airport. Because at each airport within Europe, customer have to pay an airport fee when they arrive at the airport. But the customer don’t pay the fee locally, instead they pay the fee when they buy the ticket. So in each ticket price is the airport fee included. But bigger airports want a higher fee from the customer. So Ryanair only approach airports with a low airport fee to reduce the ticket price for the customer and make their offers thereby more attractive. But this has a little problem because airports with a low fee are almost little airports in little cities. Capitals and big cities like Berlin, Frankfurt and Munich will be omitted from Ryanair. Therefore the customers have to realize that if they want to visit for example a big city in Germany that they cant arrive straight to their destination.
2.2 Point-to-point
Furthermore choose Ryanair only point-to-point flight routes4, this means that they avoid stopovers and so have no problem with luggage management and minimize the risk for missed connection flights of passengers. Also they are faster like others because a stopover wasted a lot of time and money.
2.3 Bad economy in Europe
But all of this savings couldn’t work without two important factors. The bad economy in Europe5 and the consequential effect that the people have no money. Otherwise passengers would fly with luxury airlines like Lufthansa where the ticket price is much higher but also the passengers have more comfort during the flight. Enough leg space, free meals and no advertisements are only a few examples of the comfort of a luxury airlines which people are willing to give up, only to save money. And this is very successful because more and more people fly with the Irish Airline instead of other Airlines. The fact that most of Ryanair pilots are underpaid6 and have to do a lot of extra hours is acceptable for the passengers. They only think about their cheap flight and don’t care about the Pilots, which have no chance to change the situation.
2.4 The CEO Michael O’Leary
The cost model of Ryanair is credit of only one men. His name is Michael O’Leary7 and he is the CEO of Ryanair since 1993 and under his management Ryanair rose to Europe’s biggest Low-cost Airline and third biggest airline company of Europe. Before O’Leary’s start as CEO, Ryanair was a little airline which offers only flights between Ireland and England. All attempts to enter the lucrative market of the route Dublin ‘ London failed because of the two big competitors Air Lingus and British Airways. Ryanair was at the point of collapse when Michael O’Leary start his job as CEO of the Airline Company and he adapt the low cost model of the US Airline company Southwest Airlines which rescued Ryanair. And only in a few years O’Leary overtake his rival Air Lingus and tried to buy it which wasn’t possible because of the fact that Ryanair otherwise would have a monopole in Ireland for all flights. In Summary the success of Ryanair is credit of Michael O’Leary who effectively adapt the low-cost model of a US Airline into Ryanair which become the biggest low-airline in Europe and transports more and more passengers each year in all country’s of Europe.
3 Is Ryanair’s strategy sustainable in the long run?
3.1 Five Forces:
But is this strategy of Ryanair sustainable in the long run? Will the customer stay with Ryanair or will he chance to another airline with maybe better comfort or a cheaper price? If you look at the Five Force Analysis you will see that the airline will be sustainable in the long run but maybe not so effectively as now but sustainable.
3.1.1 Threat of new entrants
At first Force8 has Ryanair a low threat of entry because of their high profit which is a result of their low cost. This low costs come from deals with airports and aircraft manufacturers which leads to very low ticket prices. New firms can’t set their prices to this low level which means it is difficult for them to compete with Ryanair.
3.1.2 Threat of substitute products or services
The second Factor is the threat of substitutes9 products or services which is also low. Because no other means of transportation is so cheap and less time consuming like an airplane. To travel by car, bus, train or ferries cost much more and often you have to combine transportation to arrive at your destination.
3.1.3 Bargaining power of customers
The high bargaining power of the customers10 is a huge problem for Ryanair because nowadays there are a lot of low-cost airline which makes it easy to change the airline for passengers. And Ryanair has a very low brand loyalty because of unfriendly personal and the limited weight of luggage allowed in the air planes. But O’Leary had intimated that Ryanair will provide friendlier personal and more weight of luggage is allowed on an plane. Maybe this measures will increase the brand loyalty to the airline.
3.1.4 Bargaining power of suppliers
Their concept of using only one model of aircraft11 give them a high bargaining power against Boeing. Ryanair is the biggest buyer of the 737 model and is the fastest growing airline of the EU. If Ryanair change their airplane model, Boeing will have a massively lost of profit. So Boeing need O’Learys company more than Ryanair needs Boeing.
3.1.5 Intensity of competitive rivalry
All this factors lead to the last Force the intensity of competitors12. Their growing fleet and low ticket prices makes them to the largest low-cost airline in Europe and every year more and more passengers travel with Ryanair. This makes it difficult for new competitors to access in the market.
3.2 Analysis of their competition and strategic groups
Their competition with other airlines is unique in the market and requires a little bit bravery. Because some of their airplanes are painted with sentences like ‘bye bye Latehansa13’ which is a hint to Lufthansa. Thereby with ‘bye bye’ they refer to Lufthansa’s decreasing amount of profit and the lost of passengers every year and if they don’t chance anything they will disappear in the market. The changed named to ‘Latehansa’ is a hint to the waiting times between stopovers which Ryanair avoids because they only fly routes where they don’t have to make stopovers. So Ryanair show his superiority to other airlines with sentences on his airplanes and other measures. A nice side effect is that people see and believe for example what Ryanair write about Lufthansa whether it is true or not.
3.3 SWOT-Analysis14
But what is Ryanairs strength and has the company any weaknesses or are there opportunities or threats?
3.3.1 Strength
Ryanair have a lot of strengths15 and the important one is their low cost model. They have the lowest cost per passengers in Europe which lead from contracts with airports, high seat density, high load factor and efficiency deployed personal which only works when it is required. But also their new innovations like advertisements on boarding passes, exclude meals on flights and only internet ticket-sales, are a huge strength which give them an advantage against other airlines. Over the last five years shareholders could be glad about Ryanair’s Financial performance which brought them high dividends for their shares.
3.3.2 Weaknesses
But Ryanair has a few weaknesses which should be consider like their contracts with secondary airports16 to save money. This secondary airports are often in little cities or miles away from big cities or capital. Another weakness is the bad image of the company. Bad news like the less amount of fuel during flights or unfriendly personal leads to a bad image for Ryanair.
3.3.3 Opportunities
Regarding to their opportunities, Ryanair have good chances to increase their amount of passengers17 and to increase their profit. But this depends on their future investments on airplanes. Also when they have contract deals with Boeing, a Chinese manufacturer offers Ryanair a new model of airplane with a higher amount of seats.
3.3.4 Risks
At least there are some risks for them but the biggest is the increasing cost for fuel18. The price of fuel is the biggest part of their cost and with increasing pricing their cost will increase. In Summary Ryanair have more strength than weaknesses and the risks are small but they have to utilize their opportunities to remain the biggest low-cost airline.
4. Would you recommend any changes to Ryanair’s approach in view of the changing environmental circumstances?
4.1.1 Change of low cost model
Ryanairs ‘no-frill’ concept base to reduce the cost to offer the passengers the lowest price for a ticket which is possible. This was a very good idea because people will go without comfort, leg space or friendly personal if they can have a very cheap flight. This functioned very good when Ryanair was the first mover with this idea but more and more low-cost airlines appear in this market and make it difficult for Ryanair to keep their passengers. The other low-cost airline have more expensive ticket price like Ryanair but offer more comfort and friendlier personal. More and more people place value on other things like the price. Maybe Ryanair should offer free meals, soft drinks or friendlier personal on their flights.
4.1.2 Change of secondary airports
Their deals with secondary airports like Frankfurt-Hahn was a good idea to save money but for the passengers begs the question how they get on their destination for example Frankfurt. For sure there are trains, buses and cab driver which transport safely and punctually to the destination. But this cost a lot of time and money. More and more passengers think about to spend more money but arrive at their destination without using a secondary transportation. So Rynair have to think about to change their deals with secondary airports to airports in big cities which is more expensive but will attract more passenger to fly with Ryanair.
4.2 Introducing long haul flights
The question is if the low-cost model of Ryanair will be successful for long haul flights? Will passengers go without comfort for a long time like 20 hours? Or is it sustainable to offer this flights
4.2.1 No ‘no-frill’ concept
When Ryanair wants to enter the market of long haul flights19 they have to quit their ‘no-frill’ concept. Because on flights which lasts 6 hours or longer is it necessary to offer free snacks or soft drinks. Because when people have to pay for every snack they want to take at a long flight, they getting poor during the flight. Furthermore is it necessary to offer more leg space20 than in short haul flights because no passengers want to sit uncomfortable for a long time even the ticket price is cheaper. So Ryanair have to decrease their amount of seats at their airplanes which leads to higher cost of a customer per kilometer. Also their concept with secondary airports is useless because after a long flight passengers want to arrive at their destination and not at a other airport which is miles away from the original destination. Also some entertainment have to be installed on the plane because on long flights a book is often not enough and passengers sits often next to passengers they don’t know. Boredom can be worse than other things and with no entertainment on board people will never fly on a long haul flight with Ryanair. If Ryanair change all this factor to make long haul flights for passengers attractive, will there be a price difference to other intercontinental airlines? Probably yes because of the other innovations of Ryanair which decrease their ticket price like the advertisements on boarding passes or the online ticket-sales.
4.2.2 Makes it strategic sense?
At first Ryanair have to buy new Airplanes because the model Boeing-737 is only a short/middle haul aircraft. Even if they have deals with Boeing for special prices for airplanes, to buy new long haul aircraft will be an expensive project. One aircraft is not enough so a few new airplanes are needed if they want to offer not only one long haul flight route. Also the jet fuel price could be a problem because on a long flight an airplane need much more fuel21 and the fuel price increase each year. Already now are the cost for fuel the biggest part of their cost and after they offer long haul flights the cost will dramatically increase.
However it is more important that enough passengers will make use of this offer. It is hard to enter a new market especially there a lot of other competitors which provide good offers. So the question is will people fly with Ryanair and how much? But long haul flights are very expensive and people think twice about to book a intercontinental flight. It weren’t surprising when a lot of people choose to fly with Ryanair because of the cheap ticket price like a lot of people do every year for short haul flights through Europe. And is the ticket price cheap enough, passengers will not disturb about the missing comfort or the extra price for food or drinks. Ryanair has to do a lot of investments at the beginning for new airplanes, personal and equipment but with their cheap ticket prices they can attract enough passengers that it will be sustainable.
5. Please evaluate the role of Michael O’Leary as strategic leader
5.1 History
Michael Kevin O’Leary was born at the 20th march in 196122 in Mullingen, Ireland. When he was young he became friends with Cathal and Declan Ryan which are the sons of Tony Ryan. In 1985 Mr. Ryan founded the airline company Ryanair in Dublin. After 3 years Michael O’Leary became the personal adviser of Mr Ryan. He tried to reduce the cost to save Ryanair but it was useless. In 1992 traveled O’Leary to America to visit the Southwest Airline. After he studied the low-cost model of Southwest , he traveled back to Ireland and transmitted the concept at Ryanair but more effectively and extremer as Southwest Airline. In 1993 became Michael O’Leary the chairman of Ryanair and under his leadership, Ryanair increased to the biggest low-cost and the third biggest Airline in Europe.
5.2 Public image of O’Leary
He tried to push Ryanair into the spotlight of the media with ideas of introducing fees for using the toilet23, standing room in the airpline or other crazy suggestions. For Michael there is no difference between ‘good publicity’ and ‘bad publicity’, he says that every type of publicity is good publicity. That’s why his interviews and comments are mostly cheeky and foul-mouthed. For example he once explained: "We want to annoy the fuckers whenever we can. The best thing you can do with environmentalists is shoot them. These headbangers want to make air travel the preserve of the rich. They are Luddites marching us back to the 18th century. If preserving the environment means stopping poor people flying so the rich can fly, then screw it."24 With this statements he call the attention to oneself only to bring Ryanair into public. And it works every time and every day Ryanair is in the media because of Michael O’Leary.
5.3 Strategic Leadership
But what is Strategic Leadership and what are the tasks? A Strategic Leader needs follow attributes to be successful: 25Decision making, People Skills, Driving Forces and Goal Settings. At first it is important to be good at decision making. This means to find every time the best solution for a problem and sometime to take a risk to achieve the goals of the company. So did it O’Leary when he take the risk to adapt the low-cost model of Southwest Airline. But more important is the fact that Michael O’Leary improve this concept and makes it more effectively. With this two steps the adaptation and the improvement he rescued Ryanair. Second it is important to have good people skills and to be good at communication because a leader has to manage his workforce and be able to talk to customers or other chairman’s. The CEO of Ryanair have very good people skills especially with reporters or critics because no question is to difficult for Mr. O’Leary. And in every delicate condition he finds always the right words. Also the driving force of an Leader is very important. This force motivates his employees and keep their eyes on the task to improve the profitability of the company. Which is no problem for Mr. O’Leary because he only focuses on the company and he wants to make Ryanair bigger and better. This works very well but at the cost of the employees. Most of them are underpaid and have to work a lot of after hours. At last it is important to set goals for the company. If you want to be successful with your organization you have to set goals which should be achieved to give your company the right direction for the future. Is the goal achieved it is necessary for a Strategic leader to set new goals to keep the company on the right path. The CEO O’Leary have clear defined goals for the future like the increasing amount of passengers during the next years. In Summarize Michael O’Leary is a good Strategic Leader26 because of his clear vision for the future of Ryanair. He rescued Ryanair from collapse and after that he set a new goal to make Ryanair the biggest Airline in Europe and he worked really hard to achieve this goal. His energy and motivation is the engine of Ryanair and the secret formula for the success. Also when his methods are different like methods from other CEO’s of big company, his success proves that his type of leading a company is the right one.