Ryanair's Competitive Advantages

Last Update:15.Sep.2009

About Ryanair Founded in 1985:

2 Aircrafts Carried 82,000 Passengers

1991: Michael O’Leary Appointed Transformed to Low Cost Airline 1997: Floated on Dublin SE and Nasdaq Rapid Expansion (2008 Figures):

169 Aircrafts 794 Routes 148 Destinations, Across 26 European Countries 58 Million Passenger AnnuallySource: European Low Fares Airline Association,2009

Ryanair’s Integrated Business Strategy

Resource-BasedView

(Inside out)

Marketing View

(Outside in)

Variety of Destinations &Routes

Competitive AdvantageCompetitive position

Low Cost Airline Business Model(Passes the costs directly to Ryanair’s

customers)

External Analysis:Porter’s Five Forces

Threat of New Entrants

HIGH

Threat of Substitute Products

MEDIUM

Buyers’ Bargaining Power

LOW

Suppliers’ Bargaining Power

LOW

Industry Competitors

Rivalry Among Existing Firms

HIGH

External Analysis, PEST Analysis

POLITICAL(Low impact)• Inside Europe Political stability • Outside Europe Middle East OPEC ,a political force

ECONOMICAL(Low impact)• Inside Europe Stable economy Stable consumers

• Outside Europe (undeveloped market) non- stable economy non -stable

External Analysis, PEST Analysis(Cont’d)

SOCIAL(Highly Impact)• Changing consumer

demographics • Fluctuating consumer

preferences

Technological(Low impact)• Aircrafts

• Supply chain software's programs

Ryanair: Value Chain

Infrastr.HRMTech. Dev.Proc.

Margin

Mar

gin

Minimum Corporate HQLow Cost Training

InternetBoeing Discount

Quality Training

Low Cost Suppliers

Airport Agreements

No Frills

Low Cost*

Quick Turnaround

Reliable Service

Low Cost Promotions

Free Publicity

Controversial

Internet Sales

Yield Management

Limited Resources

Basic/Low Cost

High Productivity

Inbound

Logistics

Operations Outbound

Logistics

Marketing

& Sales

Service

Limited Crew

Internet Information

Alliances

Management Control

Integrated Systems

Outsourced

In-houseLow Tech Marketing

Internet Sales

Private

Performance Contracts

n/a

Low Cost

Business Model

Full Service( Traditional)• Using Hub& Spoke network• Congestion during peak hours• Delay of only a few inbound

flights Will spill over across large portions of the network

• Low average daily utilization of aircraft, higher costs per seat mile

• Enormous transaction costs• Complex fare structure

Low cost(LCC)• Non-stop point-to-point services• High seating density and load

factors• Uniform aircraft types (usually the

737-300)• Direct booking (internet/call centre

- no sales commissions)• No frills such as “free” food/drinks,

lounges or ‘air miles’• Simple systems of yield

management (pricing)• Use of secondary airports to cut

charges and turnaround times

Average cost per seat Mile Low Cost (LCC) vs. Full service (Traditional

)

Breakout :, Cost per seat Mile Gap Low Cost (LCC) vs. Full service (Traditional )

Break Down of Cost SavingLow Cost (LCC) vs. Full service

(Traditional )

RYANAIR Competitive Advantages

Online Bookings One Class Travel Ticketless Boarding Unallocated Seats Flying to Secondary Airports Point-to-Point Flying In-house Marketing No Frills Reduced Turnaround Times No Refund Policy Corporate Partnerships

No Cargo Service Bargaining Power New Aircrafts Owns Own Fleet Operations Denominated in

Euro Hedge Fuel Risk Highly Successful Ancillary

Service Offering Outsourcing of Services at

International Airports

Limited Airport Transportation

Advertising on Airplanes Yield Management Uniform Fleet High Productivity High Service Levels General Cost Reductions

Eliminating seatback pockets

No blankets or pillows Airsickness bags

distributed on request Charges larger penalties

for overweight luggage

RYANAIR Competitive Advantages(cont’d.)

Cutting costs:“Race to bottom”

Ryanair, the World’s favourite airline, today (9th July) launched an online poll to ask if passengers would

‘stand’ on short flights if it meant they could travel for FREE, or pay 50% less than seated passengers. Ryanair is gauging passenger demand for its ‘vertical seating’ which will allow passengers to travel – for free – in a

secure upright position on short flights of approximately one hour.

Source:http://www.ryanair.com/site/EN/news.php?yr=09&month=jul&story=gen-en-090709

Europe short haul market(TOP.6)• Lufthansea

Passengers – 5.53m Market share – 7.8%

• Ryanair Passengers – 5.12m Market share – 7.2%

• Air France Passengers – 4.64m Market share – 6.6%

• easyJet Passengers – 3.53m Market share – 5%

• Iberia Passengers – 3.3m Market share – 4.7%

• SAS Passengers – 3.23m Market share – 4.6%

Ryanair, World’s N0.1 CarrierRanked By IATA(2008)

Ryanair’s Future Plans

Cutting Costs No Window Blinds No Reclining Seats,

Leather Seats Velcro Headrests Carry-on Luggage

Revenue Enhancement Satellite Television Internet On-board Rented In-flight

entertainment

Ryanair’s Future Plans(cont.)

“Free tickets. In a decade or so, airlines will pay travellers to distribute people around Europe.

The airline industry is Tesco, is Ikea, is network TV in the way viewers watch for free and advertisers

Pay for access to them, is the internet in the same way that websites earn money for delivering click-through

traffic or other sites.”

Michael O'Leary ,Chief Executive Officer of the Irish airline Ryanair

Conclusion

Ryanair rapid growth is due to:

• Low cost Airline Business Model that restructured European Aviation Industry

• Pioneer innovative cost reduction methods

• Creative alternative revenue generation &free flights goal in next phase evolution

Q&A

Questions ?

Thank you!

References• www.ryanair.com• Analysis of Ryanair’s competitive advantage ,November ,2008 by Jess Mun www.associatedcontent.com/1159874