Case Study: Ryanair Business Strategy Analysis

Ryanair began in 1985 with just 57 staff members and a single 15-seater turboprop plane, operating from the southeast of Ireland to London-Gatwick, transporting 5,000 passengers on one route. In 1986, inspired by the story of challenging major players, they broke British Airways' high-fare monopoly on the Dublin-London route. The staff grew from 57 to 120, and the airline carried approximately 82,000 passengers on two routes. By 1989, the company employed 350 staff and increased its passenger count to 600,000. In 1990-1991, the passenger count rose to 700,000.

Despite the passenger increase, Ryanair struggled with cost management and was losing money. A new management team re-launched the airline as a "low fares, no frills" carrier, modeled after Southwest Airlines in the U.S. In 1994, Ryanair acquired its first Boeing 737 aircraft, carrying over 1.5 million passengers. By 1995, it became the largest passenger carrier on the Dublin-London route and the largest Irish airline on all its routes, transporting 2.25 million passengers that year.

In 1997, EU air transport deregulation allowed Ryanair to open new routes to Continental Europe, carrying over 3 million passengers on 18 routes. The airline launched services to Stockholm, Oslo, Paris, and Brussels, and floated Ryanair plc on the Dublin and NASDAQ Stock exchanges. In 1999, it was awarded Airline of the Year by the Irish Air Transport Users Committee.

In 2000, Ryanair announced 10 new European routes for the summer and launched an online booking site, which received over 50,000 bookings a week within three months. By 2001, the company had more than 1,500 employees and transported over 10 million passengers to 56 cities in 13 European countries. In 2002, they opened their second continental European base at Frankfurt-Hahn and announced a partnership with Boeing to acquire up to 150 new Boeing 737-800 aircraft from 2002-2010.

The website bookings increased to 94%, likely due to the addition of 26 new routes. In 2003, Ryanair experienced rapid expansion, ordering an additional 100 Boeing 737-800 aircraft to support their European growth. They acquired Buss from KLM, re-launching 13 routes, and opened their first base in Italy at Milan-Bergamo, and a Stockholm base in Sweden with six new European routes. By the end of 2003, Ryanair operated 127 routes. In 2004, Google named them the most popular airline on the web. Ryanair opened bases in Rome Ciampino and Barcelona Girona, added more routes, and surpassed British Airways as the UK's favourite airline in both the United Kingdom and Europe.

Ways which factor applies to Ryanair

Strengths

• Marketing – strong branding and reputation, aggressive price strategy.
• Low cost due to airport operator deals.
• Reputation as the biggest budget airline.
• Lots of publicity due to O’Leary and controversial issues.
• Air Transport World magazine announced that Ryanair was the most profitable airline in the world.
• 2006 Annual Report, Ryanair designed itself as the ‘World’s Favourite Airline’.

Weaknesses

• Cash tied up in the purchase of new planes.
• The entire company is based in the European low-cost airline market.
• Shock profit warnings may have used cash reserves and weakened fiscal structure
• Refusal to back down over issues such as EU Commission
• Poor employee relations
• Total dependence on the CEO Michel O ‘Leary

Opportunities

• Possible new routes,
• New planes = larger capacity.
• Advertising space on website and planes, more revenue
• International Airline collaborated
• EU expansion

Threats

• Competitors – BMI Baby, Easyjet, ThomsonFly.
• An economic recession would mean less disposable income.
• EU Commission could put restrictions on companies if do not adhere to state aid rules
• Substitute transportation like cars and high-speed trains. Fluctuations in fuel prices

Conclusion

Overall, Ryanair appears to be following a strategy that works well for them. They are clearly attuned to their business environment and understand the importance of monitoring it, as demonstrated by their successful rebranding over a decade ago.

However, they must remain vigilant, as this environment is continuously shifting and evolving. Keeping a close watch on these changes and being prepared to adapt should be a core component of their strategy.

Recommendation

Ryanair aims to keep fares low, primarily by not introducing fuel surcharges. Such actions, which are heavily publicized, ensure that Ryanair consistently attracts customers.

Part of Ryanair's success stems from its lean operation and service model. O'Higgins (2004) notes that when Ryanair dropped their cargo services, they initially lost £500,000 in annual revenue but reduced aircraft turnaround time from 30 to 25 minutes. This attracted more business travellers who valued punctuality.

Innovative decisions like these have ensured Ryanair's sustainability and will continue to support its future success. Predicting major industry changes is challenging, so recommending significant alterations is difficult. However, the budget airline is expected to continue thriving, with passengers enjoying affordable short breaks. The introduction of new routes will also attract more customers from both departure points.

If demand decreases, Ryanair might need to make subtle strategy adjustments. For instance, offering drink vouchers for future flights or forming alliances with hotel groups to provide complete travel packages, rather than just selling advertising space on their website, could entice more customers.