Analysing Two Firms British Airways Vs Ryanair

Published Date: 02 Nov 2017

Each time got its tools and invention, living in the 21st century internet is definitely one of the highlights of this century. With 7 billion people worldwide having access to the internet [1] it isn’t strange that businesses make use of such market opportunity and wide segments. E-commerce which initially started as an idea in 1979 and came to users by the early 1990’s and witnessed continuous booming until present away from a slow in 2000 [2] . Most of the industries gradually integrated the e-commerce either in its processing or serving its customers. Now the majority of industries are forming parts of the e-commerce, we are going to discuss the airline industry and how they use e-commerce and how some of them are recently completely dependent on e-commerce. Our focus will be on two of the successful examples in aviation industry; British Airways and Ryan Air. The first is one of the oldest and most famous carriers; the latter is famous for its cheap flights. We shall discuss, compare and contrast between firms, their profiles and business models. And how they meet their customer needs.

For various reasons, many changes took place in the airline industry to mention security and economical are the most significant. Those changes altered the market, embracing the low cost carriers as a solution and in the same time the threats and competition increased for the major carriers. Two examples will be discussed in this paper, British Airways representing the major carriers and Ryan Air representing the low cost carriers. According to the 2009 world airline report by the ATW (air transport world); British Airways having a revenue of approximately $12.1 Billion with a loss of $ 641millions, While Ryan Air is achieving a revenue of $4 Billions with a net profit of $411 Millions [3] . These figures propose many questions and raise various arguments. Has the economic situation made us a purely price sensitive community that favours lower prices, or the major businesses can’t reach the equation of matching the market price while covering their costs. We shall discuss how both companies operate, what are their competitive advantages, maybe the coming analysis help to find answers to the earlier figures.

Nothing better to start with than giving a brief history about both firms and clarifying their strategies. British Airways can trace its origins back to the birth of civil aviation, the pioneering days following World War I, On 25 August 1919, British airways launched the world's first daily international scheduled air service between London and Paris, by 1987 they went public then the development and growth went on till now making BA one of the world’s largest airlines. [4] While the new Ryan Air which was set up by the Ryan family in 1985, with a share capital of just £1, and a staff of 25 operating single route with daily flights from Waterford in the southeast of Ireland to London Gatwick. By time they gain more reputation and won people’s confidence also their low prices had its effect especially in hard economical times. The company kept growth and investment thanks to going public in 1997. By early 2000 Ryan Air launched Europe's largest booking website - www.ryanair.com. Within three months the site was taking over 50,000 bookings a week, and becomes the only source of the lowest airfares in Europe. In addition, ryanair.com allows passengers to avail of the lowest cost car hire, hotel accommodation, travel insurance and rail services. [5] 

British airways strategy is to become the world’s leading global premium airline4, while Ryan air strategy is to become Europe’s leading low-fares scheduled passenger airline. Both firms follow sets of actions to reach those strategies in terms of operating costs and techniques we will go through both firms and highlight the competitive advantage of each one, and their views about their customers in terms of segments and how to serve them and which experience they are giving to them.5

When reviewing RyanAir’s customer base, customer loyalty is not profoundly existent, yet it has higher growth rate. This is because RyanAir is the most radical no-frills airline in a market that has a lot of potential price sensitive customers. RyanAir is mainly focusing on customers who would use different methods of transportation than air travel, or even not go anywhere. University students, low-income couples and backpackers are prime examples. Such consumers require no ‘extra’ services; all they want is a cheap seat and reliable service.

British Airways on the other hand, offers a frill-loaded experience, or what BA calls ‘full flight experience’ [6] . British Airways charges more and in return the passenger will not have to worry about anything. Luggage, food and beverages, boarding expenses and pretty much everything is taken care of by efficient and friendly staff. Examples of consumer types British Airways would target are businessmen, frequent high-profile travellers and premium service seekers in general.

Serving both customer segments each company follows its own technique to offer the value to its customers while being profitably operating. British airways operate worldwide which means more cost for every location they exist in but in return it’s more market existence and wider customers. They got a giant fleet and access to most of the world airports which give them access to many routes which favour them than other competitors. BA makes less use of their fleet due to less frequent flight and the high charges for landing into major airports. On the flight service count to the operating costs broken down into the food and drinks and entertainment facilities. One more competitive advantage for British airways is there hugely reputation for their name they acquired throughout good history. To sum up these reasons are to clarify why BA is achieving losses, basically there operating costs are high and their market segment is decreasing due to economic recession so people starting to give away some luxury and go for necessity in the lowest price and this also shows why in the same industry a far smaller airline as Ryan air can achieve profit. [7] 

Ryan air got different techniques to meet their customer needs, basically there is a significant cut in operating costs due to only online existence though it got its tradeoffs but it has saved them massive amounts of money, the booking and checking processes are done online. One more item that saves the bill is the no frills system where everything offered on flight is for a certain charge, this is also applicable to the luggage allowance its very limited allowance and you have to pay for extras. They also make the most use of their fleets through daily flight and landing and departing into smaller airports count for cutting the cost hugely. Ryanair's core competencies are the variety of destinations and routes they serve within the continental Europe, the rapid amount of flight and sufficient capacity. RyanAir serve variety of destinations and routes which increase their market share and had become one of the major core competencies for them to sustain competitive advantages.6

In February 2000, British Airways announced their online business strategies. One of the technologies introduced is the e-Procurement system, which is an online application designed for businesses to use the internet to achieve the necessary goods and services, this system helped BA mainly to save cost and time. British Airways have succeeded to increase their online purchases in the UK from 25% to 80% in less than 2 years, which allowed them to save more than 175m sterling per year in their purchasing spend. The e-Procurement system also helped BA in 5 operational areas [8] . Fuel services, cabin services, maintenance and engineering and generally procurement. This system as it allows the company to have a B2C relationship; it also built a strong supplier relationship with them.

Another software British airways introduced in 1999, is Softek Enview which measures the availability, performance and responsiveness of applications from a user perspective. Softek Enview detects if there is a failure to access the BA website, a problem in accessing the Internet Service Provider (ISP) and the failure to access the website through a specific proxy, and then it suggests solutions for these problems [9] . This has benefit BA to understand and to easily measure the e-Working infrastructure performance which eventually helped them to improve the quality of services.

Finally, BA has announced the e-Venture, which includes the online travel agencies that benefit the costumers to save money on flights, upgrades and hotels. British Airways also planned to develop an online style portal provided by the online service provider Affinity Internet but the contact is still not signed yet. They also made a major expansion with Air Miles which is a frequent flyer program that allows costumers enrolled to accumulate frequent flyer kilometres corresponding to the distance flown, these points are then added and customers can get free travel class upgrades and priority booking.

On the other hand, as 90% of RyanAir customer’s booking their flights over the internet, have over 72 sites over the internet including all the airports that they have access to. RyanAir IT teams should be available 24/7 to manage any problems remotely and to monitor any problems that may occur which affect the schedules of the flights.

RyanAir is trying to balance between their business growth which grows 20% per year and its IT department because it is not growing at the same rate. Another issue the company wanted is to ease management, reduce costs and increase their profit margin. To solve these issues, the company focused on the hardware infrastructure and has signed a 5 years contract with EMC and Dell [10] . Dell was responsible to search for the best corporation that provides infrastructure systems (EMC) and work together to standardize the storage area network and server of RyanAir. The company used to have one server with huge spare disk capacity, so they wasn’t able to take one disk out and move it to another one. The EMC system built into it, have allowed them to allocate space, as well as having high availability platform of the servers.

Another deal was signed with GuestLogix for onboard sales technology, this will offer RyanAir handheld electronic devices to help the cabin crew with onboard sales transactions. This will enable more products that met customers needs, enhance onboard sales services and improve operations because as revenue increases the company will offer lower fares to the passengers.

Reviewing the British airways site, being ranked the 2,435 worldwide for the most visited sites according to alexa.com. [11] British Airways is a well-known d international flight service which offers a comprehensive international network of flights to and from well placed airports. Visitors to the website can book a variety of services such as hotels, flights, cars and more from one central online location. The British Airways website is packed with useful features such as an easy to follow navigation system, online search facility, online booking system, and offers excellent features such as airfares identification, and following contemporary trends they created mobile phones applications to ease their access. The clean looking home page has definitely been designed with the international market in mind offerin several languages, The British Airways website uses the main colours effectively and with a lot of white space and white as a background it succeeds in creating a clean cut look. titles are clearly marked, a site help is provided, The British Airways website which has been online since July 1998 It The website help feature provides all the information and step by step guidance required for using plugins, making use of the audio features which are especially helpful for people with reading disabilities, they reliable secured online payment which adds to their valuable site. [12] 

One of RyanAir’s main competitive strategies is to cut costs whenever possible. The single most important decision that RyanAir’s management has made to reduce costs was to move permanently to e-transaction system, by creating a comprehensive website that contains sections and links to everything a customer might possibly need to know, and limiting booking flights and paying any fees only through their website; RyanAir has saved millions of pounds in ‘un necessary’ staffing and managerial expenses.

The website (www.ryanair.com) is simple, mainly created in HTML; which ensures that almost everyone with a computer connected to the internet will not have a problem viewing and interacting with the various features it offers, being ranked in alexa most visited sites 1,195 some of the most important features:

Online Booking:

Obviously, the ability to search for a flight, choosing the departure and arrival airports with the date, and booking the seats all at the same website without the need to even make a call is the main feature of this website, and the backbone of RyanAir’s low-cost e-transaction philosophy.

Online Check-in:

Passengers can check-in online 15 days up to 4 hours prior to their scheduled flight departure, then reprint the online boarding pass to be shown in the airport.

3rd Party integration:

RyanAir integrates many services other than their own on their website, including but not limited to Hertz™ Car rental services, Booking.com hotel booking service, MAXROAM Vodafone free roaming services, and RyanAir’s Credit Card which grants its holder multiple bonuses including earning bonus flights.

Route Map:

A full route map that enables website visitors to create flight plans with simple clicks.

Free City Guides:

RyanAir’s website offers free city guides to all 161 destinations the airline can reach, which is very helpful for new visitors and backpackers.

FAQ: Frequently asked questions section, which completely replaces any kind of customer support in the website.

However, there are downsides to the website. Those mainly being that the prices stated do not include taxes and other fees, some inaccuracies in the airports’ locations (‘Barcelona’ airports are not in Barcelona), the €40 airport check-in fee and credit card fees per passenger per flight, not per transaction. There’s also no contact e-mail address in case a customer wanted to inquire about something that he/she couldn’t find in the FAQ section.

In conclusion, e-commerce facilitates the operations and transactions of the businesses. It reduces costs and offer lower prices for the passengers as well as improving the performance of the companies. As mentioned earlier RyanAir operations depends mainly via the internet through electronic commerce, while British Airways depends more on the offline commerce, this have resulted in loss for the company while RyanAir have is growing profitably. The cases of the two airline companies is an example to alert people to shift and pay attention for the e-Commerce development to reach wider markets and access more opportunities.