Performance Relative To Airline Sector

Published Date: 02 Nov 2017

Select a major company in the Irish business sector: review its history over the past five years and write a report on the company’s business strategy and performance over that period;

Introduction

In the business world it is critical for any company to outperform its competitors in areas it can if it is to survive. Companies do this in different ways, by being unique, by being the cheapest, by being the best quality, but for companies to find and exploit their niche in their respective market they need to formulate a strategy.

Ryanair has been an Irish company that has gone from strength to strength and outperformed all other European airlines thanks to its clear, concise and innovative strategies that are executed by its CEO Michael O’Leary.

Southwest Airline’s Low-cost Airline model, Ryanair’s Operational Template

In the 1980s, the airline business had become one of the worst with many Airlines such as Eastern, Pan Am, Braniff, Continental, and Midway going bankrupt, with several others on the verge of also tanking. In this disastrous period, Southwest Airlines outperformed and prospered thanks to its new approach of a stripped down budget airline model. It garnished superior profits not from what it did but what it didn’t do, lt didn't fly long-haul, it didn't serve inflight meals , didn't leverage up too much to over expand its fleet, it didn't overpay management, and didn't mistreat its employees.

Southwest Airlines was the lowest-cost operator in the industry and by looking over the operation it wasn’t difficult to see why. Southwest Airlines headquarters operated for 8 years out of a warehouse in Dallas that provided the bare minimum in comforts to management. In 1990, the company splashed out and built a new three story Headquarters to replace the barn. Even in the new headquarters though, their roots were not forgotten and attempts from the interior designer to place grand paintings on the walls was suppressed by management and staff in favour of employee award plaques and photographs of company picnics. CEO Herb Kelleher fired the decorator and spent the weekend rehanging the plaques and the photographs himself. Kelleher was key to Southwest’s success and non-pretentious grounding. His office was decorated with turkeys and the annual company party was a chili cookout.

Pay raises for management were limited and kept in-line with the same percentage increments of all other employees. One day a month, all the senior management including, the CEO, would spend the day working as counter agents or baggage handlers to keep then humble and grounded. Southwest's Airhostesses wore blue jeans, T-shirts, and sneakers, meals were limited to peanuts and the pre-flight safety demonstration was delivered as a rap song.

While other airlines were flying their wide-bodies nationally between states in the US, Southwest found its niche in short-haul using cheaper narrow-body planes. It called itself "the only high-frequency, short-distance, low-fare airline." As the others killed themselves off, Southwest grew from a four-plane operation in 1978 to the eighth largest carrier in the US.

Ryanair was Europe’s first budget airline in the early 1990s but founded in 1985 by the Ryan family and headed by Tony Ryan. When founded the Company had taken the traditional approach of full-service airlines with different ticket classes, 3 types of aircraft and by the early 1990’s had run into a lot of trouble, loss making and without leadership. Ryanair then reinvented itself under the leadership of Michael O’Leary who remodeled the airline off Southwest’s budget model and since has been a huge success. O’Leary himself often admits and praises Herb Kelleher’s model saying: "It is okay doing the cheeky chappie, running around Europe, thumbing your nose, but I am not Herb Kelleher. He was a genius and I am not."

Today, twenty years later, Ryanair now has a market cap bigger than Southwest, is biggest budget Airline in Europe and 3rd biggest of all European airlines and 7th biggest in the world, so although Ryanair and O’Leary did not pioneer the budget model, they have certainly been the most successful with it.

Ryanair Company Overview

When Ryanair was founded in 1985 there were only 25 staff and one plane, a 15-Seater Bandeirante plane from Waterford in south Ireland to London-Gatwick which carried 5000 passengers on this one route that year.

By 1990 the company was making a 20m loss and decided to Change management and restructure the company based on Southwest Airlines budget Airline Model. It was at this Point that Michael O’Leary became CEO and started his mission of building Ryanair into a lean budget airline. Ryanair went from a slightly cheaper Aerlingus alterative to a low cost, high frequency Airline that replaced comforts with savings.

In 1994, Ryanair bought its first Boeing 737 aircraft, receiving 8 in total that year and replacing Aer Lingus on the Dublin-Gatwick route after Aer Lingus pulled out making Ryanair the biggest passenger carrier on the Dublin-London route, as well as by 1995 being the largest Irish Airline operating as they carried 2.26 million passengers.

Today Ryanair is the largest European discount airline, operating over 1,500 daily flights across 28 countries and 168 destinations with a young, fuel-efficient fleet of 294 Boeing 737-800 aircraft. In an extremely competitive industry with a notorious combination of poor profitability, insufficient return on capital, high capital intensity, a cash generation profile that results frequent bankruptcies, the company provides a exception to the rule and has a demonstrated track record of outperformance in any environment. The company has consistently delivered growth in profitability facilitating constant market share gains at the expense of rivals that are forced to consolidate ( KLM-AirFrance/Lufthansa Group/IAG) , reduce capacity or go out of business as evidenced by Ryanair’s passenger figures growing from 51 million 5years ago in 2007 to 75 million in 2012. For fiscal year 2013 (ended March), management forecast passenger growth to have continued up to the 79 million mark. To sustain growth, it has added bases in Cyprus, Denmark, Spain, Poland and Hungary, which are experiencing high passenger traffic, and sees significant opportunities for more expansion in Europe as secondary airports aggressively compete to attract Ryanair’s traffic to boost tourism, permitting the airline to negotiate considerable discounts on airport fees and secure marketing support for its activities (a cornerstone of its strategic model).

The focus on undercutting competitors to win market share or in some cases force bankruptcy is possible and ultimately successful due to its unmatched ultra-low cost structure, diverse route network and extremely strong financial standing. The airline holds the preeminent position in Europe across many metrics, including the lowest average fares (for the most recent quarter, its €44 average ticket price compared to €78 for the next-cheapest airline EasyJet, a 77% premium), international traffic (75 million passengers versus second-placed Lufthansa with 44 million according to IATA published statistics for the latest fiscal year), densest network coverage with 1,500 routes and highest customer service rankings for most on-time flights and fewest lost bags.

Performance over the last 5 years

(In Millions)

FY 2013

FY 2012

FY 2011

FY 2010

FY 2009

FY 2008

FY 2007

For the period ending

31/03/2013

31/03/2012

31/03/2011

31/03/2010

31/03/2009

31/03/2008

31/03/2007

Market Cap

 

6,515.24

5,003.48

5,442.48

4,265.37

4,174.25

9,019.18

  Cash & Equivalents

 

3,480.50

2,897.70

2,745.60

1,986.60

1,877.12

1,939.19

  Preferred & Other

 

0.00

0.00

0.00

0.00

0.00

0.00

  Total Debt

 

3,625.20

3,649.40

2,956.20

2,398.44

2,266.50

1,862.07

Enterprise Value

 

6,659.94

5,755.18

5,653.08

4,677.21

4,563.63

8,942.05

 

 

 

 

 

 

 

 

Turnover

4,874.82

4,390.20

3,629.50

2,988.10

2,941.97

2,713.82

2,236.90

  Growth %, YoY

11.04

20.96

21.47

1.57

8.41

21.32

32.16

EBITDA

1,031.00

992.40

765.90

637.50

348.75

713.03

615.25

  Margin %

21.15

22.60

21.10

21.33

11.85

26.27

27.50

Net Income

560.90

560.40

374.60

305.30

-169.17

390.71

435.60

  Margin %

11.51

12.76

10.32

10.22

-5.75

14.40

19.47

Adjusted EPS

0.39

0.34

0.27

0.22

0.07

0.32

0.26

  Growth %, YoY

12.90

26.30

25.00

204.23

-77.67

22.31

30.01

 

 

 

 

 

 

 

 

Cash from Operations

988.85

1,020.30

786.30

871.50

413.13

703.90

900.84

Capital Expenditures

-321.50

-317.60

-897.20

-997.80

-702.02

-937.12

-525.96

Free Cash Flow

667.35

702.70

-110.90

-126.30

-288.88

-233.21

374.88

As seen from the table above (financials from the last 5 years), you can see that Ryanair has consistently managed to increase its revenue every year while at the same time maintaining a double digit EBITDA margin. While Other airlines were making significant losses the last few years since the financial crisis in 2008, Ryanair only made a loss in 2009 but while maintaining positive EBITDA. Ryanair has been able to keep its debt under control while growing Cash as well as revenue so it remains one of the healthiest balance sheets of any European Airline today.

Performance Relative to Airline sector

Name

Mkt Cap (Million Euro)

Est P/E Curr Yr

Est P/E Next Yr

Price/Book

FCF Yld %

Average

3,521.88

13.83

10.05

1.68

1.26

RYANAIR HOLDINGS PLC

8,617.19

15.47

13.91

2.67

3.10

EASYJET PLC

5,175.38

14.08

12.89

2.46

1.46

AIR FRANCE-KLM

2,057.40

N/A

6.55

0.41

N/A

INTL CONSOLIDATED AIRLINE

5,266.79

24.26

10.17

1.11

-16.07

DEUTSCHE LUFTHANSA-REG

6,434.66

11.06

7.09

0.78

5.76

NORWEGIAN AIR SHUTTLE AS

977.95

10.02

7.54

3.03

-10.20

SOUTHWEST AIRLINES CO

7,328.90

13.22

10.98

1.37

6.98

WESTJET AIRLINES LTD

2,459.92

11.87

10.62

2.23

13.36

KOREAN AIR LINES CO LTD

1,772.36

N/A

N/A

1.01

35.36

AIRASIA BHD

1,959.38

8.83

8.16

1.45

-7.79

THAI AIRWAYS

1,594.41

10.88

9.08

0.88

12.84

JETBLUE AIRWAYS CORP

1,547.31

12.18

9.90

1.07

7.70

ALLEGIANT TRAVEL CO

1,309.89

16.94

13.99

4.27

4.25

VIRGIN AUSTRALIA

850.22

15.54

9.89

0.98

-41.15

AEROFLOT-RUSSIAN AIRLINES

1,385.41

5.58

5.70

1.18

10.51

LATAM AIRLINES GROUP SA

7,612.97

23.66

14.22

1.95

-7.24

Ryanair’s biggest rival in the budget space is Easyjet which has a market cap 2 thirds the size of Ryanair and is valued a little cheaper than Ryanair Based off their Price/Earning Ratio numbers. Cash never lies and is a good indicator of profitability as it shows cash being generated so with Ryanair’s 3.1% it is twice that of Easyjet. Ryanairs Success has allowed it to out-grow Southwest Airlines market cap although currently Southwest does move more passengers then Ryanair showing the market has priced in a good deal of potential Growth in Ryanair’s Future.

Since the major oil bubble and subsequent market crash and recession, Ryanair and slowly and steadily recovered and today is up at its highs before the crash in 2007 that was based on frothy market speculations and crazy valuations. Given Ryanair’s consistent growth it deserves its current market premium as has been reflected in its second time about €6 a share.

Strategy Analysis overview

The Firm

Ryanair uses powerful marketing strategies that leverage its unbeaten prices and superior on-time track record to re-enforce its branding and reputation. Ryanair’s growth into the biggest airline in Europe has helped it stay on the forefront of customers minds all the while, Michael O’Leary’s flamboyant and controversial showmanship keeps Ryanair constantly in the news. Despite the very basic service and additional charges so many people get caught out with, Customers still keep coming back as the value for money on getting where they need to go is unmatched. Ryanair is constantly expanding their ancillary services to try tap into every demand possible of their customers whose attention they have on flights. Ryanair scratch cards, call cards, smokeless cigarettes and fare raffle tickets are all innovative new ways to squeeze additional yield from each flight.

With the low cost structure and additional charges the firm risks irritating customers who are not overly price sensitive and can therefore choose to fly with a different airline. To ensure Ryanair does not fall behind in cost structure it must ensure its fleet are kept up-to-date with the latest in fuel efficient airplanes. Ryanair invests time and money training staff so it is critical they can maintain commitment and loyalty from staff, due to the low cost nature and tight margins, Staff can often have issue with the inferior pay received compared to their counterparts in competing non-budget airlines.

The Industry Environment

Ryanair has managed to significantly increase capacity throughout Europe over the last few years and done so by being affordable to a far bigger cost conscious demographic. Ryanair has only started to expand out into Eastern Europe with many local airlines still holding the majority of traffic which can be Ryanair’s for the taking. Due to the short-haul model Ryanair is not interested currently in flying to the USA or Asia but does have the opportunity in the future to open a base of operations in these regions to compete nationally with low-cost airlines. Ryanair is also trying to make a value proposition to get more business travelers due to the superior margin on such fares. As world economy improves and people become less price sensitive, this may start to erode Ryanair’s growth into the future. With Ryanair already being the biggest airline in Europe, the market is to a degree saturated and once again stunts growth for the company. With the tight margins Ryanair run on, relying on volume to gain superior return, they are sensitive to fuel prices and although hedge a lot of their fuel costs, cannot stop a general upward trend from eroding their margins and forcing their fares up.

Industry Analysis - Porter’s five forces

Porter’s five forces are the key structural forces that impact company’s competitiveness and in-turn profitability as Identified by Michael Porter of Harvard Business School. Although there are more influences outside the main four/five, most influences can be grouped or categorized into the five and allow for analysis of what drives the intensity of competition and the profitability of the industry.

Competitive rivalry

Increased rivalry with Easyjet is keeping Ryanair on its toes as it is the only Airline able to compete near Ryanair’s low costs. Easyjet tries to avoid competing directly on routes as it will be price cut every time. Easyjet operates London to Belfast route for example with Ryanair currently having no routes to Belfast.

Deregulation in 1997 allowed Airlines to expand out of their domestic market across the EU making competition more intense and the need for value and differentiation more acute. Ryanair capitalized on this deregulation expanding its operations into Europe where Budget airlines were not operating and therefore a welcome change.

Increase in competitors will always happen in the Airline industry as they see other airlines operating successfully and underestimate the difficulties. The has become less of a threat as of late with many small players being squeezed out of the market

Formation of strategic alliances are sometimes done by airlines who see the common threat of another airline eating away at their market share, although this was what was happening in the earlier times of the low-cost carrier expansion, Many airline have now instead needed to turn to an all-out merger/acquisition model with the biggest airlines teaming up, KLM-Air france, Lufthansa Group and IAG ( British Airways and Iberia). It is hoped the reduced cost structures and diversification of routes will allow them to survive as the industry mutates to a budget airline focus.

Increased customers loyalty can be attained through frequent flyer programs "FFP" and is used by many competing Airlines in an attempt to keep customers coming back. The programs are expensive to run and as mentioned before, Ryanair dumped theirs FFP back when they changed into a low cost carrier. For people who are less price sensitive though, FFPs offer reward for loyalty and a bit of luxury they expect.

Competitors on different value offerings with the most obvious and common being comfort and extra services. These Extra services boost higher yields as well as business travel customers and all other special treatments that can be added.

Global downturn had reduced international flight to more local European destinations as well as a focus on lower fares with Europeans being price sensitive

Iberia’s network capacity to reduce by 15% in 2013 (9 Nov)

SAS’s headcount to reduce by 40% and Wideroe to be sold (12 Nov)

Polish LOT’s headcount to reduce by at least 30% (3 Jan)

Air Berlin’s headcount to reduce by 10% (15 Jan)

Flybe’s headcount to reduce 10% (23 Jan)

Potential Entrants

In Europe, EU deregulation was passed to remove barriers and allow airlines to expand in their neighboring Countries. This means that any Airline in Europe will be easily be able to move into another airlines jurisdiction and potentially start stealing market share. Ryanair has been more the protagonist of this more than ever falling victim. In Ryanair’s domestic market, the only competitor is the incumbent Aer Lingus that now only transports 10% of the volumes that Ryanair fly in Ireland.

New Entrants into any market face large financial hurdle as the cost of planes and Airport slots can be costly and difficult to justify in the medium term. There is only Finite capacity throughout European Airports and with a lot of Airports near capacity there is no room to start up a new airline as there is nowhere to centrally hold the fleet. Available slots in Airports are quickly taken by current industry players so it makes it very difficult for a new Entrant to even get their foot in the door unless they operate out of a secondary airport that is unlikely to get the traffic needed to meet costs.

Suppliers

Fierce rivalry between Boeing and Airbus has resulted in an oversupply of aircraft and components pushing prices down for the Airlines.

Fuel supply and demand fluctuates and in-turn so does the price. Fuel hedges can be bought to decrease risk on these fluctuations , Ryanair always hedging out a large proportion of their 12 month fuel costs

Airports can be broken down into primary and secondary. Primary are more central higher traffic airports that demand higher fees while secondary are more rural airports that are more competitive in price to boost traffic. Ryanair although traditionally has gone for secondary airports, due to primary airports weakening position with lower premium traffic, they have had to lower their prices to compete and try take routes from secondary airports which Ryanair is happy to facilitate if it does not impact their margin.

Buyers

The ease or movement between European states has facilitated millions of Europeans to travel around Europe due to low cost flights

Distribution: Travel agents traditional role or booking consumers flights was diminished as customers go straight to the airline via internet and remove the need for a middle man

Due to Ryanair’s guaranteed lowest fares, customers are already getting the cheapest flight they can so their only alternative is to go with a more expensive airline. It would take significant amounts of customers protesting and changing to more expensive airlines before Ryanair would be losing power to customers and provided they maintain the cheapest fares they are likely to suppress buyer power

Substitutes

Land transport is possible around mainland Europe and thanks to the channel tunnel, also the UK. It is relatively easy to get around anywhere by train and even by car. Although this substitute of land travel does get one there, it takes significantly longer and with Ryanair’s low fares, it will not work out much cheaper either

Customers may choose to switch to another low cost airline or even a premium if they found the value proposition being offered was worth the premium. Ryanair’s lowest fare guarantee means that other airlines will not be a true substitute and instead a more premium offering which many likely and current Ryanair Customers cannot afford or justify

Compliments

Hertz car rentals give customers a complete and easy transfer solution while at the same time allowing Ryanair to receive commission for the referral

International Call Cards are sold on all flights as well as scratch cards that all earn Ryanair commission and additional income.

Airport Transfers in the form of bus and rail tickets are offered for convince

Hotels once again are bookable through Ryanairs site so they can utilize their partnership discount to gain commission on bookings

Resources + Capabilities

Resources for a company are the raw materials (assets) that are used to create products or services and are the fuel to give companies their capabilities. In order to have capabilities that provide competitive advantage and out-performance in the industry the company must combine all its resources together to give it enhanced capabilities, organisational capabilities.

Tangible Resources

Physical Resources

Ryanair’s 294 Boeing 737-800’s, 28 countries and 168 destinations are all physical resources that are key to grow and expand and have taken it the last 20 years to build up to where it stands today.

Financial resources

Ryanair has a healthy balance sheet with 3,480m in Cash and 3,625m in debt (190m Net Debt) as well as its 5,485m in Airplane assets as of End FY2012. Its ability to reduce debt and increase though 2012 shows it has strong and healthy financial resources

Intangible Resources

Technology

Latest Boeing 737-800s: High fuel efficiency, less noise and carbon emissions allow for a cheaper fleet to run going to the future especially given the uncertainty around fuel prices. Internet online booking systems have allowed direct selling to customers and Ryanair has from an early stage been at the forefront of online bookings and systems. Online access and management of ancillary services such as car rental and hotels also add a lot of extra value leveraging technology without needing much additional staff or running costs

Reputation

Ryanair has quite a reputation both good and bad, Allegations of misleading advertisements are a regular issue given the numerous additional charges that may befall unsuspecting travelers if they have not correctly read the terms such as needing to print boarding passes or have luggage not over 10kgs. Although ruthless on adherence to their terms and conditions of additional charges, passengers do only ever tend to be caught out once and other then a rant will generally just learn from the mistake and just let it add to the infamous side of Ryanair’s reputation. Ryanair has built ups its punctuality reputation always doing everything in its power to get flights to their destinations on time. Despite the crafty terms and conditions, people do highly value his reputation for getting places on time especially given the poor time-keeping of the alternatives. People flying with Ryanair are generally fully aware of its ‘no frills’ policy and as a result know to adjust their expectations accordingly and just focus on getting from A to B.

Culture

Ryanair’s culture is all about Thrift, being direct, lean and no Nonsense. This culture allows all staff and parties involved to adjust try to help ensure the company prospers through a tight culture of minimal waste and maximum productivity

Human Resources

Skills/Know-how

Capacity for communication and collaboration across the organization facilitates quick and easy leaning for staff allowing expansion over more and more destinations while not diluting the offering. Ryanair’s experience and skill of rolling out its low cost model in new unknown territories greatly reduces risks from continuing expansion

Motivation

Ryanair , in true capitalist fashion allows staff to earn additional pay through commission on selling of ancillary services. In addition there are internal programs like the yearly calendar shoot and company parties that help create solidarity and motivation amongst staff

Cost strategy

Ryanair has focused on 6 main areas of cost-reduction Strategy to minimize operation cost

Single Plane Fleet where only once model of plane is used across the whole fleet to make it easier and quicker for cabin crews and pilots to be trained in and cover shifts. Currently Ryanair has a fleet of 294 737-800s and has recently completed an order with Boeing for another 175 737-800s worth over $15b

Subcontracting out services: If there is non-core services that someone can do cheaper and only distracts from the airline operation then use 3rd parties. These services can cover ticket desks to luggage handlers to even maintenance crews

Airport charges are cut using Secondary Airports as part of their budget scheme Ryanair opted to pick lower traffic airports that needed the business in return for much better rates and giving them a much stronger position to bargin as most of the bigger Airlines, due to their business class programs among others are required by customers to land in more primary central Airports

Using systems to automate and process large volumes of bookings and check-ins, Ryanair only needs bare minimum staff. The Ability for Customers to circumvent travel agents and go straight to Ryanair on their website to purchase tickets has cut out a large diseconomy that has benefitted both Ryanair and its customers.

Staff costs and maintained low by paying staff modestly but focusing on commission based supplementary pay to bump up their package through sale of ancillary services as well as imposing additional charges for over-sized, over-weight baggage.

Marketing costs are kept as low as possible ensuring spending is well targeted and efficient in attaining company goals. Ryanair’s website is heavily branded with logos and slogans and with the reputation it has developed in its busy markets, it does not need to Advertise as heavily on TV and newspapers although in Ireland and the UK Ryanair still does take regular radio and newspaper slots.

Sources of Cost advantage

Economies of scale

Ryanair plays a volume game where it spreads it’s costs over a large network or routes and destinations. As a result they can demand significant buying power and discount on their bulk orders. Ryanair who Just made an order for 175 new Boeing 737-800’s received the biggest discounts ever given thanks to the size of the order and good will from the past. When Ryanair can fill flights as much as possible with no wasted seats they are able to spread the costs over a bigger pool of paying customers and given the mostly fixed costs of a flight, maximizing occupancy is important.

Economies of learning

Ryanair has familiarity of 28 years in the field. It has achieved and executed as it had expanded out into each of the 28 countries utilizing their experience to ensure no costly setups or mistakes are made getting established. Having a one and only common Airplane model means organizational routines are second nature to all employees.

Production techniques

The moving of direct interaction with the airline online in their website, although not first invented by Ryanair, has seen significantly more traffic than any other airline website. The movement away from checking in bags to just bringing aboard had luggage has greatly speeded up boarding.

Product design

With only one plane model and one seating class apart from some priority boarding, the product is designed to be as simple and therefore efficient as possible, always following the path of least resistance to get the customer from A to B

Input Costs

By historically choosing secondary airports with a much lower traffic density Ryanair has managed to take advantage of much lower fees and these savings are passed to the customer. Their expansion out into eastern Europe has also allowed them to recruit cheaper, less demanding cabin crew

CAPACITY UTILIZATION

As every flight will have a large component of fixed cost, ensuring there are as much bums on seats as possible is critical to maximize yield and utilization

RESIDUAL EFFICIENCY

The thrifty lean culture promoted and by Michael O’Leary instills the culture within the organization in addition to other managers leading by example

Value Chain

Ryanair has exploited and expanded its value chain more than most, from receiving discounts on bulk orders from Boeing on its Jets, to all the additional services that can be booked and are almost forced on customers as they try book their flight. The key to the value chain is that all the ancillary services are offered through the booking experience of the flight , the flight always being the keep draw for all the customers logging on. By arranging commission sell through on cars with Hertz, customers are advised and prompted to use hertz if they wish hire a car, even receiving a slight discount vs going directly to hertz. This kind of extra selling has become a forte of Ryanair and as they can just keep adding products and services to their booking forms, the online technology delivers and pest users about the products and services not requiring any human interaction, and when volume is the name of the game, making small and simple additions to the bookings forms for these extra sell-through services can make a material addition to profitability on the referral commissions received. Customers wanting to book a trip away, when offered the option to book a hotel at a reasonable price while booking tickets, will more often than not take advantage of the convenience and assurance that Ryanair would not recommend a bad hotel. Thanks to the Obvious need for calling home when abroad Ryanair realized the obvious gap for selling international phone cards and although started as a commission agreement with a third party, it has not moved on to Ryanair’s own fully branded Phone cards. Ryanair also takes up the opportunity of people’s attention by selling their own scratch cards, raffle tickets and smokeless cigarettes. In an effort to squeeze every last drop of yield out of customers , Ryanair is constantly and continually coming up with new additional ancillary services and has even taken a step backwards from no division of seating classes to offer priority boarding that allows customers have reserve seats in the best places and board the plane first… for an additional cost naturally. The revenue profit sharing arrangement that Ryanair has entered into across Europe with hotels and car hire etc, also strengths its ties to those areas and helps to make it more difficult for other foreign players to come in and get established as Ryanair has become rooted

Success Factors

Ryanair’s overlapping and intertwining value chains have allowed it to maximize its opportunities, as it holds often first mover advantage. Ryanair’s clear corporate identity and branding make it one of the most recognizable and well known Airlines in Europe. Ryanair’s simple model that avoids complexity allows for much cleaner and efficient execution. This execution is noticeable with this volume of flights combined with its punctuality record. Ryanair’s decision to fly to cheaper airports and use cheaper, outsourced manpower has allowed it to grow at an unrivaled rate throughout Europe.

Key Success Factors of Ryanair

These are the important factors which are necessary in business

Following successful model of Southwest Airlines

Receiving bulk discounts from Boeing on their Fleet

Expansion and easy access from deregulation of European Union

Successful promotion and unbeaten price mantra

Michael O’Leary’s charisma and execution

Conclusion

Ryanair the other word for success- in providing lowest fares then others without imposing fuel surcharges on customers. But this company has to think about giving value to customers

We can conclude from the above analysis that Ryanair should develop its market globally. According to t