Ryanair Case Analysis Vella, O\'Leary, and Kelly

Ryanair Case Analysis

Vella, O'Leary, and Kelly (PPS Publications, 2008)

Ryanair certainly has had an interesting history and represents an extraordinarily successful company. The company has pioneered the low cost leader strategy and crafted a niche for themselves in the European market in record time. Furthermore the company developed this niche to become the industry leader. Despite the company's success however, the industry is evolving and new challenges are constantly emerging. It is recommended that Ryanair maintain its position as well as possible during the economic downturn while simultaneously looking to increase its market share and expand through acquisition. In the long-term it is recommended that the company focus on improving their customer service levels as well as their employee relations position.

Company Overview

Ryanair was founded in 1985 by the Ryan family with a relatively low operating budget and just 25 employees. The company has grown from its humble roots consisting of a small airline flying solely from Waterford to London into one of Europe's most respected airlines. Ryanair is the largest low cost leader competitor in Europe's as well as the largest airlines in regards to total profits, number of flights, and number of passengers flown. At present, Ryanair has 32 bases and over eight hundred low fare routes across twenty six countries, connecting over a hundred and fifty destinations, and with over a thousand daily departures (Ryanair, 2012).

Michael O'Leary (pictured in the introductory photo), CEO of Ryanair, is credited for spearheading the first low cost leader airline in Europe; which has paid of royally. Michael O'Leary's career has earned him reputation as having an aggressive management style, operating with a flat organizational hierarchy, and being determined to lower costs in every piece of the operating model. As a result of the CEO's flamboyant style as well as the company's operating model, Ryanair has become one of Europe's most controversial companies. Although the organization is praised for its commitment to low fares, radical management, and its willingness to challenge the status quo, it has also been criticized for attacks on unions, hidden fees, lack of effective customer services, as well as a series of misleading marketing messages.

Ironically, O'Leary actually made the statement that it was time for a "good, deep, bloody recession" (Milmo, 2008); shortly after he was granted his wish although it is doubtful that he want the recession to take the extreme course that it did. What O'Leary meant by this statement is that being the low cost leader, in the event of a recession, Ryanair could actually use this to their advantage to increase their market share in the industry. However, this could also come as a cost. Even with increased market share, the company could still see revenues diminish because the total size of the market would fall given the reduction in consumers disposable incomes. Although Ryanair was in a prime position to weather the recession, during such a turbulent period they must take caution not too make any mistakes. This analysis will consider the internal and external environment associated with Ryanair's position at this time.

Competitive Position

SWOT

STRENGTHS

Low cost leader

Aggressive and innovative leadership

Low overhead and maintenance costs

Nearly 99% of customers book online

WEAKNESSES

Weak customer service

Issues with employment base

Regulatory issues

Waves of negative publicity

Aging aircraft fleet

OPPURTUNITIES

Gain market share through the recession

Stabilize revenue stream with increased market share

Acquisitions of weaker airlines

THREATS

Increasing fuel costs

Decreasing market size

Regulatory pressures

Negative publicity diminishing brand value

Recommendations

Recommendations for Ryanair can be made in both short-term and long-term time frames. In the short-term Ryanair must undoubtedly use their low cost leader strategy to the best of their advantage in the recession. Preliminary reports show that the number of passengers increased despite the onslaught of the recession by about thirteen percent (Ryanair, 2009). Despite this initial success the company must maintain it low cost leader strategy against the competitive landscape that is also likely to lower ticket prices to remain competitive and try to mitigate losses. Despite the level of competition being heightened during this period and the total market likely to shrink, Ryanair could continue to increase both sales and passengers by appealing to customers who are budget conscious.

Ryanair can also use the recession to their advantage by acquiring less competitive market players. Although the potential deal for Aer Lingus has been proposed for some time already, it may be blocked by regulatory forces (Rapid Press Release, 2007). However, other smaller players could also represent prime targets for acquisition with other the same concerns for competiveness in the industry. Furthermore, since the recession is likely to take a toll on most of the industry players, there will likely be a reduced amount of bidding on the companies that go under during the recessionary period.