IIM

RAIPUR

ACS
ASSIGNMENT

Dogfight over Europe: Ryanair

Group Number : 3
Group Members Bir Bahadur Singh, 12PGP014 Rahul Khedkar, 12PGP022 Amit Singh Chauhan,12PGP060 Saif Uddin Shaik,12PGP092

Post World War I

Europe

Post World War II

Pooling arrangement
Air France Alitalia
Pool Capacities Divide their proceeds

Domestic Fares were set by government

1950 and Beyond

Highly regulated air market was criticized.
Charter airlines grew rapidly 1978 U.S deregulated domestic airlines. By 1992 European airlines also gets deregulated.

RYANAIR
Cathal and Declan Ryan Initiated Ryanair in 1985. 1986 started operation on London-Dublin route. BA and Aer Lingus reacted aggresively. Ryanair played price war. Losses kept on mounting. In 1991 on the verge of financial collapse.

By 1999 one of the most profitable airlines in the world.

Ryanair

How did Ryan air move from the blink of bankruptcy to become one of the most profitable airline in the world?

Ryanair Initial Positioning

Price
Leader Premium Competitive

Features

Original

Customized

Basic

Quality

Excellent

Average

Acceptable

Support

Comprehensive

Standard

Minimal

Reputation

Prestigious

Respected

Functional

Ryanair Launch Strategic framework

External Consistency Internal Consistency
Head-to-Head Competition Lack of knowledge of Industry Structure

Full amenities at low price

Dynamic Consistency

Unable to anticipate retaliation

NO SUSTAINABLE ADVANTAGE

Ryanair New Strategic framework

External Consistency
Internal Consistency Dynamic Consistency
Advantage of Deregulation Early Entry

Customer/Geographic Scape Smart destination Selection Standardised Fleet Productivity based pay Multi Revenue Sources Heavy emphasis on maintenance

Good job of anticipating future. Least overlapping route.

Ryanair Launch Strategic framework

Lower prices than competitors
50% below previous levels

Cost Reduction
No frills Higher utilization of aircrafts Fewer personnel

Other source of Revenue

Ancillary Revenue
Advertisement
Space behind seat-back trays Aircrafts exterior In-flight magazine

Yield management to reduce fares

Ryanair Strategic framework

Operation from Secondary Airports:
Torp, 65 miles from Oslo; Char-leroi, 37 miles from Brussels; Beauvais, 35 miles from Paris. low airport charges. Some airports paid in return. less congested airports also helped the company to reduce turnaround time and increase airtime

Point-to-point Network:
lower turnaround time No connecting flights, No flight transfers or luggage labelling

In-flight sales of Items : 5 -7 % of Ryanairs revenue

Ryanair Strategic framework

Zero Frills:
No free food or beverages.
Reduce per flight attendants from 5 to 2.

No frequent flyers miles/ loyalty programs or plush airport lounges Extra pay for food, drink No printed tickets and encouraged guests for online check-in No refund for any no-show of guests

Efficient Aircraft Utilization:

No Seat assignment Speed up boarding Stopped carrying cargo Turnaround time reduced from previous 45 minutes to 25 minutes 12 roundtrips a day Stansted-Dublin route

Ryanair Strategic framework

Simple Standardised Operations:
Harmonized and streamlined operations Single type of aircraft. Replaced 14 types of planes to single Boeing 737s Reduced costs of training , maintenance, inventories of spares and parts Standard Operating Procedures (SOPs) ensured uniformity of services Single class seating plan Avoided expensive air bridges

Leaner Distribution System:

Direct bookings accounted 40% Avoided complex task of integrating sales offices, travel agents, online booking system

Current Positioning
Price
Leader Premium Competitive

Features

Original

Customized

Basic

Quality

Excellent

Average

Acceptable

Support

Comprehensive

Standard

Minimal

Reputation

Prestigious

Respected

Functional

What are the most serious threats that Ryanair face today?

THREATS
Increase in competition due to Deregulation
131 carriers entered the european market from 1993 -1998
In 1996, Richard Branson purchased Eurobelgian airlines. In 1998, operated roughly 40 flights per day. Healthy Growth in revenues but profit remained a concern.

In 1995, Haji-Ioannoe founded easyjet. The company relied on third parties for most of the services. In 1999, easy jet operated on 29 European routes

In 1995, Franco Mancassola funded Debonair. Philosophy lowest fare with minimal restrictions and no compromise on comfort. In 1999, grounded its fleet and called for bankruptcy.

COMPARISON
Ryanair
Used secondary airport. Reduced commissions to travel agent Contracted ground work.

Virgin
40 Flights per day in Belgium 45% seats are purchased by Sabena Invested heavily to draw you Reservation through Call centres.

EasyJet
3rd parties managed all activities Operated from Luton Direct Selling Model Invested heavily on new route promotion.

Go
Low fares combined with Style Used BAs muscles.

Debonair
Lower fares with full comfort.

Operation

Marketing & Sales

No Advertising Yield Management

Extensive advertising and branding

38% tickets sold through own office. 58% Business travellers Decent Frills In flight entertainment system Frequent flyer program

Services

No Frills In flight sales Advertising in flight. Charter flights and car rentals

Minimum Frills

No Frills Culture Committee elected by staff.

Minimum Frills Seat Assignment High Quality Collaborators

Other

Chartered Flights

THREATS
Rise in Fuel Prices
Contributes 16% of total operating costs (Exhibit 2)

Terrorism & Security

9/11 Attack

No Brand Loyalty
In the absence of any relationship management program it will be difficult to retain customers.

Poor On-time performance

High average arrival delay(Exhibit 5)

Industry Criticism
Criticized in Media as Worlds least preferred air lines

THREATS
Increase in Airport charges
Secondary airport are also started raising their charges

Environmental Pressures
low-cost airlines are a rapidly growing source of greenhouse gas emissions, as well as noise.

Involvement in Price war

Dropped fare to 22 destinations to fight with Go

Currency movements
High proportion of Ryanairs costs are in US dollars, making it vulnerable to a strengthening of the dollar.

Substitute Transportation
No Switching Cost

How serious is the challenge posed by GO?

Go
In November 1997, British Airways(BA) unveiled Operation Blue Sky, a plan to launch a low-cost, no-frills subsidiary. Go Started operations in May 1998, with eight 737-300s. BA tapped Barbara Cassani, a long time U.S. general manager for BA, to head the new venture. Go received UK 25 million in startup funding from BA. BA and Go claimed that Go was on its own and separate from its parent.

Reaction of competitors to Gos entry

Haji-Ioannou, easyJet, claimed that they are copying us. They filed a case against Go, suit charged that BA supported Go indirectly by underwriting its airplanes leases and providing insurance, advertising and other services at a discount. easyJet claimed that Go will incur losses and BA intended Go to put other low-fare airlines out of business . Offered free tickets to people predicting Gos losses.

GOs Service and performance

Gos service is different from other low cost airlines: They gave seat assignments to passengers Gave food franchise to a upscale caterer Extensive advertising Tried to combine low fares with style and quality Performance: Incurred losses of UK20 million in 1st year Load factor was low Average arrival delay was low. 2001 was the only profitable year after the launch in 1998.

IS GO A THREAT FOR RYANAIR ?

Yes
Go has got a strong parent BA with deep pockets

No
Offerings of Go is not sustainable in highly competitive industry BA have experience of giving excellent service at high price and not of low cost service Since its launch Go is in losses High cost for Go in advertising/promotions/branding Go competes with Ryanair at only one route out of its 17 routes

Go's offering are "low fares with style and quality"

Competitors had to drop fares on launch of Go

Conclusion
Go is not a threat for Ryanair as it has got more experience of running a low cost low fare airline.

And also Gos offerings are not sustainable and it will be in losses for a long time posing a threat for its existence.

What should Michael OLeary do?

Ryan Air Strategies

Try to expand its existing network by acquiring some local carriers
Deregulation saw emergence of many new players. Out of the 131 new entrants only 57 survived. Ryanair can acquire some of the defunct and small players to strengthen their local presence in small pockets of Europe. Its presence in such small Hamlets of Europe might also give rise to increased air traffic in these regions

Ryan Air Strategies

Focus more on online booking:
Ryanair should encourage booking of tickets online they may achieve so by providing special discounts. This would help them to reduce staff and maintenance of physical reservation kiosks.
Moreover it would also reduce cost of information dissemination as they could do it through their websites.

Ryan Air Strategies

Novel Cost Cutting Measures:
They should come up with novel cost cutting measures and pass on the benefits to the consumer.

Some of these novel cost cutting measures can be: No Window Blinds No Reclining Seats Velcro Headsets
They can implement some of these techniques at a small level and if successful can scale them up

Ryan Air Strategies

Revenue Enhancement:
They can come up with different techniques to generate revenue onboard.
Paid Television, Internet or games for long distance flights. Charging for use of mobile phone on board.

Preferential Exits: In case a passenger has to catch a connecting flight or in a hurry he can pay extra so that when the plane lands he is given priority over other passengers.

Ryan Air Strategies

Improving Capacity Utilization: Over the years capacity
utilization for Ryanair has gone down as depicted in the chart.
1992 80% 1993 79% 1995 76% 1996 73% 1997 72% 1998 72% 1999 71%

Special Pricing for the remaining seats can be done. Offers such as kids fly for free can be introduced.