Ryanair Market Strategy - Case Study Example

?Ryanair Market Strategy Introduction Ryanair was founded in the year 1985 as a low cost flight with the first flight taking place between Waterford,Ireland and Gatwick in London (Fottrell, 2004). It was founded at a time when travel by air in Europe was much regulated, but its initial aim was to break the monopoly held by two airlines plying the Ireland-England route dominated by British Airways and Aer Lingus (IBS Centre for Management Research, 2003). Later in 1986, the European Union allowed international travel by air between two nations as long as the countries had bilateral agreements on the same. Ryanair took advantage of the higher fares offered by its competitors to make air travel cheaper between two routes namely London and Dublin. The airline grew at a faster rate through the acquisition of new planes and expanded route offerings that were made more appealing through such initiatives as frequent flyer program and business class seats. Despite the rise in the number of passengers, Ryanair continued to make losses due to the fact that it offered low fares though it was not a low-cost airline. As competition soared in the airline industry, the competing airlines, Ryanair was forced to lower their prices even further and eliminating the costly routes and increasing presence in the profitable routes. Through flying to regional airports that have lower costs of landing and faster turnaround times, Ryanair started attaining profitability through offering cheap flights across Europe. The cheap flights were obtainable through the elimination of free meals during flights that led the company to improve their profitability in successive years. In 1997, Ryanair put on offer an IPO that managed to raise it a lot of capital that made it easier for it to acquire other aircraft thus increasing its fleet. In the year 2000, Ryanair started making its bookings online that made it increase the number of passengers that it transferred across destinations. Further, in the year 2003, it acquired KLM and Buzz that made it increase the number of routes to one hundred and twenty seven. Profitability increased further in the years after 2004 after the opening of Eastern Europe characterized by increasing passenger numbers and revenues amidst attempts to acquire other airlines such as Aer Lingus which was flatly rejected. Amidst intermittent performances in the year 2009, Ryanair made other strategic changes aimed at reducing costs such as elimination of check-ins in favour of baggage drops that returned it to profitability (Ryanair. n.d). With time, the company has been able to make several strides as regards profitability albeit with numerous challenges and obstacles. Currently, Ryanair is the most favoured airline in the world with bases in forty one airports operating across twenty six countries with over two hundred aircraft transporting about 80 million passengers in the year 2010/2011. As at the moment, it prides itself as having the cheapest air ticket as compared to its competitors namely easy Jet and Aer Lingus and this has contributed to its profits to grow by an average of 25% that totals about 503 million Euros. Market Entry Strategies adopted by Ryanair Ryanair embarked on adopting certain market entry strategies aimed at positioning itself as the leading low-cost flight in Europe through continuous improvement of its services and route offerings. Therefore its main objective was to offer low fares that can translate to increased flow of passengers that is aimed at containing the costs as well as reducing the costs of operation. Through offering low fares, Ryanair was able to stimulate demand that may be derived from those that are aimed at those that are conscious of the fares they pay or those who may opt for alternative modes of travel. To achieve this, it offers its tickets through travel on a one-way basis thus minimizing requirements that may be pegged on the basis of stay requirements. Ryanair sets fares or travel costs on the basis of demand requirements of specific flights and in reference to the date of departure, meaning that those routes or destinations that have a higher demand fetching higher fares are booked nearer the date of departure. For example, its main route that is the London-Dublin route with the highest number of passengers, Ryanair offers competitive fares while maintaining the one-way policy that is favourable as compared to its competitors. Offering the best customer service to its customers is one strategy that Ryanair utilized to break even in the market that was otherwise dominated by its competitors. According to The Association of European Airlines, Ryanair offers better customer service in terms of punctuality, few lost luggage and less flight cancellations as compared to other competitors offered the same service. This is achieved through focus on the execution and improved performance of these functions and operation from airports that are less congested (Playle, 2009). Ryanair also adopted a strategy of offering frequent point-to-point flights on short-haul flights to secondary and regional airports while focusing on markets and destinations that have high population concentrations. The short-haul routes allowed Ryanair to provide frequent services without the extra services that are characteristics of long-haul flights while offering point-to-point flying eliminates costs of providing through services such as connections. As a choice of these routes, Ryanair flies to secondary airports that have convenient transport connections to major populations as well as regional airports. This is due to the fact that most of these secondary and regional airports are less congested and therefore less time spent in clearance and turnaround and offer competitive rates of airport handling. The result of this is that Ryanair had a short turnaround time of about twenty five minutes at the airport that is far much shorter as compared to its peers in the airline industry. In order to reduce its operating costs, Ryanair strived to control four of its primary expenses that included lowering aircraft equipment costs, personnel productivity, customer service costs and airport handling and access costs. Initially it bought used aircraft but later resorted to purchase of aircraft from a single manufacturer that is Boeing in order to reduce costs associated with personnel training, maintenance and purchase of spare parts and ease of scheduling of crews and equipment (Noack, 2013). In terms of personnel productivity, Ryanair controls its costs of labour by improving the productivity of their employees through continuous training and refresher courses that make them be up to date with the requirements of the aviation industry. Under customer service costs, Ryanair enters into agreements with other contractors that serve in offering services such as passenger and aircraft handling that eliminates costs which it would otherwise have borne. Ryanair controls airport access fees through flying to only those airports that offer competitive terms and costs that also allow the negotiation of favourable contracts with these airports. Ryanair resorted to online marketing and booking to reach markets and customers that it would not otherwise have reached them through the changing of its reservation system from the British Airways Booking System to a more improved system known as Flight speed operated by the Accenture Open Skies. The Flight speed system with the accompanying software allows those customers wishing to fly Ryanair to reserve and pay for confirmed reservations for flights in real time that has resulted in increased internet bookings that accounted for about 96% of all its bookings as at September 2004. The commitment to safety and quality maintenance by Ryanair helped it break even in the market that was dominated by other airline players who did not have perfect safety and quality maintenance standards. This is ensured through proper hiring and the training of its staff from the pilots and those involved in maintenance that must adhere to the highest standards set by the regulatory bodies in European airline standards. The result of this is that in about two decades of its existence, Ryanair has not had a major accident that occasioned severe injuries to its passenger that has made it a traveller of choice for those flying around Europe. The aircrafts are maintained by specialists that are approved under Part 145/JAR 145 of the European airline industry standards relevant for maintenance of aircrafts. Breaking even in the market by Ryanair was aided by the provision of ancillary services such as provision of merchandise and accommodation services as well as travel insurance that has led to increased sales and reduced costs per unit basis (Michaels, 2011). This is evidenced by the 13.9% of operating revenues that it attained for the period ended March 31, 2004 that greatly improves its overall revenue base. Challenges However, Ryanair did encounter challenges in its attempt to break even in its marketing strategy mainly due to competition, uncontrollable factors such as the costs of fuel and regulatory policies enforced by the European Union. Competition has led to the shift of the demand of the services offered to consumers by Ryanair that occasionally forced it to raise its prices in line with the market and airports that it had previously enjoyed at less congested airports. Increase in the costs of fuels also play an integral role in hindering the airline from offering services that are low costs and when this occurs it is forced to increase fares that turns away customers to competing airlines that may offer services that are relatively cheaper. The European Union has got strict air transport regulatory provisions that hinder the emergence of low-cost carriers that may intent to break even in the markets. This requires that before the airline got to offer continental flights throughout Europe, it must adhere to the provisions and the attendant costs of the airline industry. However, Ryanair overcame these obstacles when the aviation market was deregulated to accommodate other smaller airlines as opposed to national carriers. Other threats to the success of Ryanair as a mode of air transport of choice in Europe are the unethical behaviour that is perpetuated by some of its staff who do not adhere to the company policies (The Economist, 2007). These were overcame by the management adopting a strict company policies aimed at ensuring the company achieves its missions and aims to ensure continuous profitability. In an effort to streamline its labour force in line with strategy to break even in the market, Ryanair has encountered criticism in terms of its employee relations in that it has refused to recognize unions that are known to fight for better employment rights to employees. This has had the poor effect of the company being perceived as not being receptive or tolerant to the general welfare of the worker despite the employees generating a lot of revenue for the company. Ryanair has also faced serious challenge in the expansion of its fleet that has been caused by late delivery of aircraft contrary to the company’s strategic plan of having the requisite number of aircraft to serve its growing number of customers. Similarly, the Ryanair has met obstacles in its attempts to acquire other airlines to minimize competition as shown by its three failed attempts to acquire Aer Lingus partly due to regulatory provisions and the business strategies of its rivals. Conclusion Ryanair achieved its market dominance through the adoption of low cost airline market in Europe that coupled with its perfect leadership led to competitive advantage that is characterized by low costs, rapid expansion and higher profits. This requires that the airline maintains its competitive advantage in order to maintain profitability and maintain its position as the ultimate low-cost carrier in Europe. As a way of focusing on the future and its growth, Ryanair can build on its successes in the United Kingdom-Ireland market and its increased expansion in Europe. This is achievable through initiation of additional routes that are served by higher cost carriers and increasing the frequency in routes that are already served. It could also start operating new domestic routes within the European Union (EU) and considering acquisitions that look viable in future. It could also conduct what is known as triangulation that is connecting other airports with its existing route network and the establishment of other new routes and bases in Europe and beyond. As Ryanair expands and ventures into new markets, it is important that they continue to adopt innovative ways aimed at lowering costs as well as offering the cheapest airline tickets to its customers. As of now, Ryanair will continue growing in bounds as it offers low prices for the air tickets, reliable air travel and advertising which has at some times been described as controversial. The company can also endeavour to acquire aircrafts that are fuel efficient that will help a great deal in lowering the operation costs of the airline and therefore lead to the maximization of profits such as the new Boeing Dreamliner that has been proven to consume less fuel. It can also in future avoid unhealthy competition that forces it to undercut its fares that eventually leads to diminishing revenues. Finally, it is important to engage all the stakeholders in the industry such as the government and competitors in order to come up with regulatory practices that help the cause of all concerned in order to have the best airline transport industry. References Fottrell, Q. 2004. "The rise and rise of Ryanair". THE POST.IE. [Online] available at: [Accessed October 7, 2013] Noack., T. (2013) Ryanair Fleet Details and History. [Online] available at: [Accessed October 7, 2013] "Snarling all the way to the bank". 23 August 2007. The Economist. [Online] available at: [Accessed October 7, 2013] IBS Centre for Management Research. 2003. RyanAir: The ' Southwest' of European Airlines [Online] available at: http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy1/RyanAir-European%20Airlines.htm [Accessed October 7, 2013] Michaels, D. (21 February 2011) Ryanair to target ads on boarding passes Wall Street Journal. [Online] available at: [Accessed October 7, 2013] Ryanair. n.d. FAQS: What snacks and drinks are available onboard?". Ryanair. [Online] available at: [Accessed October 7, 2013] Read More