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The Rise of Ryanair in Europe

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In the early 90’s,  Ryanair was in the brink of bankruptcy  and it was then that the Ryan family made a last minute attempt to inject cash in order for it to make payments to Dublin Airport authority at the beginning of 1991. Removal of all frills from its service, dropping fares lower than any other airline known in Europe and massively cutting down costs lead to the rapid rise of profits due to customers flocking in because of the low fares. In addition to this, the company mostly operated on secondary airports to avoid congestion, delays and to obtain easy access to landing slots (Rivkin, 2000).  Ground operators worked hard to maintain a fast aircraft turnaround of 25 minutes which was motivated by a reward and a penalty if they failed to meet the targeted time. This helped the company maintain a record in Europe for on-time arrivals and departures. (Rivkin, 2000). Not only did implementation of some of these factors give Ryanair a competitive edge in the airline industry in Europe at the time, but they also made the company retain a sustainable competitive advantage over the years. As seen in exhibit 5(Rivkin, 2000), Ryanair maintained a high percentage of 82 and 80 portions of flights arriving early or 15 minutes late in Gatwick and Luton Airports respectively as compared to Aer Lingus’s percentage of 85 on arrival to Stansted Airport bearing in mind that by 1999, Aer Lingus was not considered a primary competitor of Ryanair as observed by most industry analysts. It later on slowly shifted its focus on full-cost travelers.

Easyjet, Virgin Express, Debonair and British Airline’s Go were some of the main low-cost airlines that competed with Ryanair. According to a study conducted to examine the London-Amsterdam and London-Berlin routes, it was concluded that low-cost carriers and full-cost carriers are markets that coexist on completely different levels (Barbot, 2005). In accordance to this, British Airlines, as a full-cost carrier, launched a low-cost secondary airline by the name of Go through Operation Blue Sky which began to operate in the month of May, 1998. Go’s vision was to offer low fares like its competitors but combine low fares with quality and style. Virgin express was formally known as Eurobelgian Airlines which was launched in 1992 and later on was purchased by Richard Branson in 1996 at a price of 60 million dollars due to its underdeveloped nature. Virgin express focused mainly on low fares and also put in charity efforts which included crusading for transportation of turtles which were imported illegally to wildlife sanctuary which led to good media coverage. Easyjet was formed by a 28 year old Greek-Cypriot by the name of Stelios Haji-Ioannou in 1995 whose intent was to chase a Greenfield startup contrary to Richard Branson. Easyjet invested greatly on marketing mostly when introducing a route for the first time, it focused mainly on on-time record and its low fares when advertising. It also remained dedicated   to subcontracting more than any of its rivals including Ryanair. As for Debonair it was founded by Franco Mancassola who had worked in the American Airline industry for 25 years. Debonair was founded towards the end of 1995 with the intention of taking advantage of airline liberalization in Europe (Rivkin, 2000).It was guided by the philosophy, “offering lower fares with very little restrictions but not compromising on comfort.” Debonair’s intent was to offer a level of customer service and comfort in sitting that can only be compared to full-cost airlines. Ryanair was able to remain a strong competitor in the airline industry after 1999 because of its good low cost strategy. It is impossible to duplicate a good low cost strategy in detail which explains why some carriers succeed and others do not. (Alamdari and Fagan, 2005).

Ryanair has managed to remain one of Europe’s leading low-cost airlines to date due to its key strong points like, high operating margins, strong brand name for low-fare airline, wide Ryanair network and proportionate saving in costs hence leading to being the greatest low price airline in Europe. Having the best current low cost strategy leads to bigger profit and possession of new aircraft models reduces the cost of maintenance and fuel (Ryanair, 2015). According to Yves Morieux, who is a consultant at the Paris office of the Boston Consulting Group, what guarantees success for Ryanair is in their thoughts on how to combine processes. He goes on to say that, business lies in how Ryanair’s stewards make trade-offs between service and speed, cleanliness and punctuality (The economist, 2006).

Since its formation in 1985, some of the challenges faced by Ryanair over the years include direct competition from other airlines. Competitors like Easyjet and British Airways have been some of Ryanair’s top competitors. A steady maintenance of low fares, offering customers the cheapest flights and holding the record for on-time arrival and departure time has enabled it retain its competitive edge as the leading low-cost airline in Europe. Indirect competition in the transport industry like the use of railway transport. A service that offers customers an equivalent value as the airline industry is the train service. However, a significant advantage Ryanair has over railway transport is journey time. Time taken to reach a destination by train is much longer than by plane (Eurail, 2014).

 Other factors that have posed challenges to Ryanair over the years are political factors such as restrictions and regulations formed by the European Union in the airline industry with regard to financial solvency, competition and licensing. For instance the regulation on number of flaying hours that are allowed in order to prevent a pilot from suffering fatigue compels Ryanair to hire more employees. In addition to this, in case of cancelled flights or delays, the EU demands that air passengers should be refunded. Also, the EU can decide to increase the fee paid on emissions. These regulations must be well thought-out and in order to avoid negative impacts on the business, Ryanair keeps adjusting its strategy (Ryanair, 2014). Economic factors like fluctuation of fuel prices have been a challenge to Ryanair. An increase in the price of fuel leads to an increase in the cost of operation hence low fares cannot be guaranteed. Terrorism is also a significant threat facing Ryanair and can have a negative impact on its performance and the performance of any other airline. For example the terrorist attack that occurred on the 11th of September 2001, Sabena and Swissair which were major airlines in Europe as well as several us based airlines went bankrupt (Morrell, 2011).  According to Morrell, in times of a disaster or a financial crisis an assessment of the airlines liquidity and their ability to access financing is of great importance.

As seen from statistical figures, Ryanair tops the list in terms of passengers at 57.7 million and operates in more than 140 airports which according to the budget in the airline industry is the highest. (Ryanair, 2014). Its core strategy on offering low fares which generates an increase in passenger traffic at the same time working hard in ensuring that cost containment is maintained has ensured the company will continue to retain its competitive edge in even years to come. Changes in political, economic and social factors have had impacts both positive and negative on the performance of Ryanair over the years but its objective which is firmly establishing itself as a leading low-fare passenger airline in Europe through continued improvements and a stretched out offering of its low-fare service has played a big role in ensuring survival of turbulent times that other airlines could not. Main competitors like Easyjet and British Airlines have acquired new airplanes and expanded their networks as a means to retain their competitive edge over the years. Regulation of fares to match top competitors, improvement of brand perception and striving to improve customer loyalty has also improved performance in a highly competitive industry.

 

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