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Reviews and Events

 The deterioration of competition economic rationalisation.  Shrinking populations in the First World demographic time bombs.  White-collar off-shoring the migration of high-quality services to low-wage countries.  Re-globalisation globalisation works.  The IT revolution price consciousness is on the increase.  The pressure of continual optimisation of individual risk allocation. Combined, these trends act like a bulldozer since prices will continue to fall as everyone is condemned to consumer democracy of WalMartisation in which our consciousness intuitively tells us to nd low prices. But at what cost? While consumers prot from the mountain of low prices, at the same time the acceleration of faster, better, cheaper, means more low paid, unskilled jobs with poor career prospects for the majority of the labour force. Wal-Mart itself sees itself as distributor of goods for its customers and not a retailer. Accordingly, the parameters for success are the low distribution costs it achieved in cooperation with its biggest suppliers. Therefore, bridging distances efciently and effectively is the core of Wal-Marts business plan. From a travel industry perspective, it was Southwest who invented cheap ights in the USA over 30 years ago, thus inaugurating an

unprecedented increase in mobility that has set the standards across the world. Cheap ights have meant transporting passengers over long distances efciently and effectively: safety, speed, time gain and comfort. Bosshart notes that it was Yield Management that shaped this cheapness in the travel sector, as well as the internet which triggered the boom, enabling instant access to reservation systems and real-time pricing. Stelios Haji-Ioannou has taken Yield Management further with the Easy concept. For example, you can now book into an easyDorm but you will be charged extra if you want someone to clean your room. The same goes for easyCars, 86 per cent of consumers now clean their own car rather than pay a service charge for easyCar to do it for them. There is, however, one problem with Bossharts book. It clearly wasnt written against a background of rising oil prices and energy ination that is currently having an impact on middle class consumers. Anyway, that is another issue! Basically, the book is easy to read and provides insightfulness into the present day culture of everyday falling prices. I enjoyed reading it.

Ian Yeoman VisitScotland E-mail: Ian.Yeoman@visitscotland.com

Ryanair How a Small Irish Airline Conquered Europe By Siobhan Creation (Aurum Press Ltd, London; 272 pages; 7.99; 2005; ISBN 1-84513-083-9) Journal of Revenue and Pricing Management (2008) 7, 117118. doi:10.1057/palgrave.rpm.5160129

Mary, Mary quite contrary how does your monopoly grow, it doesnt

The above quote is the strap line from a Ryanair marketing campaign directed at the

then Irish Transport Minister Mary ORourke who had just rejected a proposal from Ryanair to build a second terminal at Dublin Airport. Siobhan Creations book starts with Tony Ryan and the creation of Guiness Peat Aviation

& 2008 Palgrave Macmillan Ltd, 1476-6930 $30.00 Vol. 7, 1 115118 Journal of Revenue and Pricing Management 117

Book Reviews

(GPA), which specialised in aircraft leasing. The book highlights the successful building of the business and the subsequent collapse that centred around a failed otation of the business on 18th June, 1992. The dramatic failure of the oat saw Tony Ryans personal wealth go from $300m to debts of $37m in a few hours. The growth of GPA had allowed Tony Ryan to set up his own airline to exploit the potential on the DublinLondon route. The rst Ryanair ight left Dublin on 23rd May, 1986 heading for Luton. Ryanair set a fare of d99, which was less than half the price of British Airways and Air Lingus. Michael OLeary was a teenage friend of Ryans sons who went on to study business at Dublins Trinity College. His view was that ybusiness students just wanted to go out and rape the world and that his time at Trinity was four years of meeting girls and drinking alcohol. After his studies OLeary embarked on a job with KPMG, helping wealthy clients with their tax affairs. He decided he was not cut out to be an accountant and went on to purchase Newsagents and build a property portfolio. Tony Ryan had employed KPMG years earlier to audit his farm. In 1988, OLeary became Ryans personal assistant. By 1988 Ryanair was losing money and had lost d7m in two years, at this point Ryan put OLeary into the airline as his nancial watchdog. This was followed by the inevitable move into the Chief Executives chair. OLeary is still in the same chair. On 5th November, 2007 he delivered a record half year after tax prots of h408m, up 24 per cent on the same period last year, where trafc grew by 20 per cent to 26.6m passengers in the six months to 30 September but yields fell by 1 per cent as revenues rose by 24 per cent to h1,554m. Siobhan Creations book moves into the OLeary era with speed, capturing the political, nancial and operational challenges that Ryanair has been through under his leadership. What it gives you is a picture that OLeary is in complete control of the business. He has adopted best practice from American low-cost carriers

such as South West Airlines while enhancing the business model to be one of no frills. From a revenue management and pricing perspective, the spectacular success of Ryanair in our area is built on a business model that is so robust that when Boeing stress tested it in 1998 as part of the due diligence process for the sale of 25 new planes they could not nd any threemonth period where Ryanair would not be protable. The stress test included demand drops, fuel price increases and exchange rate volatility. With the operational and cost base of the business robust, Ryanair have been able to engage in pure price competition throughout Europe, which has seen other low-cost carriers fall by the wayside. The strategy is the fare gets you on board and nothing else. The 25-min turnaround of aircraft and the low cost base of using airports that meet Ryanairs demanding terms and conditions have also fuelled the growth of this remarkable business. There is a lesson in this book (which is more of a story) to all of us who wish to be able to practise revenue management as the theories dictate. The more fat that is in the cost base and the operational functionality of the business, the less effective any revenue management programme will be on bottom line prots. As we all know, Ryanair have the ability to shock, disappoint, irritate and stir with the best of them, but at the end of the day the business booms and through Siobhan Creations book it is easy to see why. So, Michael, Michael, quite contrary how does your monopoly grow? With a steely application of best business practice that supports a price lead volume strategy where demand is matched to supply at a price that the business is willing to offer rather than a price the customer is willing to bear.

James Bain Head of Revenue Management, Cross Country Trains, Birmingham, UK E-mail: James.Bain@crosscountrytrains.co.uk


Journal of Revenue and Pricing Management Vol. 7, 1 115118 & 2008 Palgrave Macmillan Ltd, 1476-6930 $30.00