Low Cost Strategy: Case Analysis of Ryanair Airline

Running head: LOW COST STRATEGY: CASE ANALYSIS OF RYANAIR AIRLINE

Low Cost Strategy: Case Analysis of Ryanair Airline Name: School: Instructor: Course:

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Low Cost Strategy: Case Analysis of Ryanair Airline

Company Description Ryanair Airline is one of the oldest airline companies and was started in 1985.The company was formed by three brothers namely; Declan, Catlan, Shane Ryan. The airline was founded with an aim of offering low-cost services to its passengers between Ireland and London. Tony Ryan who was their father, was the chairman of Guinness Peat Aviation Company, and through his position he leased them a fifteen seater turbo prop commuter plane to enable them start their operations. After Ryanair was formed, UK and Irish governments signed a new agreement that was to de-regulate air traffic between the two countries. The Irish government decided to give license to a second Irish operator on the route from Dublin-London and Ryanair was awarded the licence.Ryanair had managed to transport 5000 passengers and had a staff of 57 within the first year.Ryanair then purchased two more planes which were 24 seaters to enable them to meet operational requirements. WE ARE CASE STUDY EXPERTS! ORDER NOW! WWW.TOPMARKDISSERTATIONS.COM

The airline started capitalizing on the art of using cheap fares. Their fare was 20%cheaper than of its competitors and with time the company managed to replace their old aircraft with new ones which were purchased from Tarom, a Romanian air transport company. By 1986 services had been firmly established to London but by 1987 some licenses could not be attained and this affected expansion in some way and to handle this Ryanair obtained 85%stake in London

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Low Cost Strategy: Case Analysis of Ryanair Airline

European Airways which had its flights to Amsterdam from Brussels suspended in the same year. This really helped raise the stakes for Ryanair. Ryanair managed to expand and became the largest carrier on the London-Ireland route. It had managed to become the biggest low -cost airline in the late 1990s in Europe. However in 2002 a rival company, Easy Jet, came up and overtook it and scooped the top position it had maintained for years.Ryanair had to do something about this. With the help of their C.E.O Michael OLeary the company adopted some strategies to help bring it back to the top while still maintaining to use a low-cost strategy mechanism. This is seen even today (Miltenburg, 2005). WE ARE CASE STUDY EXPERTS! ORDER NOW! WWW.TOPMARKDISSERTATIONS.COM

Analysis of The Operations Strategy Of The Company Ryanair has used various operations strategies in the company which are grouped into two or basically revolve around two main issues. They are: Cost focus and publicity. Under cost focus Ryanair has introduced various methods of making sure that the best service is offered to customers at a very fair cost. The company has centered on passengers who are looking for functional and efficient services rather than luxury. Publicity

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Low Cost Strategy: Case Analysis of Ryanair Airline

Ryanair has a publicity program and through it the airline has managed to achieve its aim. This has been done through advertising and even the internet. WE ARE CASE STUDY EXPERTS! ORDER NOW! WWW.TOPMARKDISSERTATIONS.COM

Description of Operations Strategies Issues Low fares The low fares have created more demand for the passengers who are mostly business and leisure travelers and are conscious of their fare expenses and if not for the reduction of the fares they would have used other means of transport or would not have traveled at all. Ryanair sells a seat on a one way basis and this has helped get rid of all minimum stay requirements from all travel on their scheduled air services, regardless of the fare. The airlines competitors do not operate on a one way pricing policy. A good example of how the airline has managed to attract it customers through low fares is by holding fare promotions. In 2004 the airline was offering a million seats on certain routes for the price of 0.99 pounds and another one for 0.90 pounds offering 900,000seats and this was excluding government taxes and passenger service charges. This was a good initiative for the airline and it is due to strategies like these the company has managed to maintain its reputation (Reading, 2002). Customer care/Service

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Low Cost Strategy: Case Analysis of Ryanair Airline

Ryanair has good service for its customers in terms of loss of luggage few cases are reported and few cancellation cases are experienced in Europe. The Airline has also observed punctuality. The Association of European Airlines has really recommended them for this. Flights to Secondary Airports This has helped Ryanair Airline because through making flights to airports which were further away from the main cities, they have been able to increase their profits and beat their competitors. Secondary airports are less congested hence availability of on-time departures, more airport accessibility and less delays at the terminals. The fact that this airline has direct flights has helped ease the cases of connect flights for the passengers thus leading to the reduction of luggage transfer and other unnecessary costs. Solutions That Have Been Used To Maintain Low Cost Strategies Ryanair has managed to run the day to day operations under low cost by; centering on the customer service costs, aircraft equipment cost, costs incurred in airport handling and access and lastly the productivity of their personnel. WE ARE CASE STUDY EXPERTS! ORDER NOW! WWW.TOPMARKDISSERTATIONS.COM

Customer Service Costs The airline has developed its own internet booking and reservations centre and this has led to the elimination of commissions usually meant for travel agents. All of Ryainairs revenues

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Low Cost Strategy: Case Analysis of Ryanair Airline

have been generated through direct sales to their website and direct telephone reservations. The airline has also entered into agreements with contractors at certain airports concerning ticketing, handling of the aircrafts and other services and the terms of agreement are usually at competitive rates and involve third parties. The third parties provide these services at efficient costs. The management of Ryanair has managed to obtain competitive rates by negotiating multi-year contracts at certain prices that might be fixed or due to inflation in time. Aircraft Equipment Cost Ryanair management has been using Boeing737s-800s to maintain low costs. The flying of a simple fleet of planes has the advantage of simplifying the maintenance function of the planes. This also means that there is no need for stocking spares for different types of planes. Spares and other aircraft parts can be purchased in bulk and this has led to economies of scale. There is also reduced training of the cabin crew and pilots as they only operate as a single type of plane. Management also firmly believes that Boeing contracts are very favorable to the airline. The purchase of aircrafts from a single manufacturer helps limit costs and leads to greater flexibility in terms of the planning a schedule of crews and equipment. WE ARE CASE STUDY EXPERTS! ORDER NOW! WWW.TOPMARKDISSERTATIONS.COM

Airport Handling and Accessibility Ryanair plans to reduce on the airport charges by opting for gate options that are not expensive and also using boarding stairs outside instead of jet ways. They have also focused on

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Low Cost Strategy: Case Analysis of Ryanair Airline

airports that offer competitive terms in order to regulate airport access and service charges. This has led to them being able to negotiate with such airports for access to their facilities (Ryans, 2009). Personnel Productivity The company has managed to control its costs that have been incurred in labor by focusing on improving the productivity of its workforce. This is done by checking on the number of bookings made by passengers per employee. This shows if production has improved or not. Commissions have been made available for flight attendants who do on-board sales of products. The pilots are also paid depending on how many extra hours they have done that were past the limits that have been set by the airline. This acts as a motivation for them and is also a major boost for their morale hence there will obviously be a major increase in the productivity of the staff members. This will ultimately lead to major improvements on the company as a whole in terms of profit and other issues. The average pay per year of the company compares relatively well to that of other competitors. This acts as a source of encouragement for the employees of the airline because they have seen that good service is being done to them (L.Daft, 2009). WE ARE CASE STUDY EXPERTS! ORDER NOW! WWW.TOPMARKDISSERTATIONS.COM

Use of Internet

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Low Cost Strategy: Case Analysis of Ryanair Airline

The airline company has promoted its website through use of radio, television and newspapers which are all methods of advertising. This initiative has resulted in a major growth of internet bookings.

Recommendation Ryanair Airline Company has achieved a lot in these few years and if more is done this will go along way in maintaining its reputation. There should be use of more internet based programs to train people on how internet booking is done. This will help in improving the sales of the airline and also efficiency (Koontz & Weihrich, 2006). WE ARE CASE STUDY EXPERTS! ORDER NOW! WWW.TOPMARKDISSERTATIONS.COM

Summary Ryanair has really grown and since it began major changes have been experienced. This is notable from the advancement in technology, customer care, personnel productivity and its general performance. The airline has managed to cater for its customers in every aspect while maintaining a low cost-budget. This goes to show that with the right kind of planning, success can be achieved. When a company puts the needs of its employees and customers first then everything else falls into place. Ryanair has managed to create efficiency in their airline and this

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Low Cost Strategy: Case Analysis of Ryanair Airline

has been a major attraction to its customers and also workers. Hard work is the motivation for all the achievements ad this has also been a source of motivation for the competitors in the same industry (C.Hax, 2009). WE ARE CASE STUDY EXPERTS! ORDER NOW! WWW.TOPMARKDISSERTATIONS.COM

Competition in every field is necessary as it helps the management look for better ways to run their organizations and this in turn help create a good product for the customers and everyone else in general. Low-cost strategy can be achieved with the right methods and it helps a company make enough profit to sustain it in years to come. Ryanair airline has proven to the rest that with the skills of efficient employees and correct company tactics improvements can be done and the same goals can be achieved but through other less expensive means. A company should look for the best ways that are not expensive and use them in their company. These methods will help move the company to greater heights. All in all low cost strategy is a method that has proved to be efficient in many companies and should be tried by all.

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References C.Hax, A. (2009). The Delta Model;Reinventing your business strategy. Springer. Koontz, H., & Weihrich, H. (2006). Essentials of management. Tata McGraw-Hill. Daft, R. (2009). Organization theory and design. Cengage learning. Miltenburg, J. (2005). Manufacturing Strategy. Productivity Press. Reading, C. (2002). Strategic Business Planning. Kogan Page Publishers. Ryans, A. (2009). Beating low cost competition. John Wiley and sons.

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