Case study on low cost airlines (RYANAIR)
1. What are your first impressions regarding Ryanair?
2. How would you characterize its marketing strategy?
Ryanair (ISEQ: RYA, LSE: RYA, NASDAQ: RYAAY) is an Irish low cost airline, with headquarters at Dublin Airport and its largest operational bases at Dublin Airport and London Stansted Airport. Ryanair operates 182 aircraft on 729 routes across Europe and North Africa from its 31 bases. The airline has been characterised by rapid expansion, a result of the deregulation of the air industry in Europe in 1992 and the success of its low cost business model. Ryanair is the third largest airline in Europe in terms of passenger numbers and the world's largest in terms of international passenger numbers.
Financials and history and key points
Ryanair has grown since its establishment in 1985, from a small airline flying a short hop from Waterford to London, into one of Europe's largest carriers. After taking the rapidly growing airline public in 1997, the money raised was used to expand the airline into a pan-European carrier. Revenues have risen from €231 million in 1998, to some €843 million in 2003 and net profits have increased from €48 million to €239 million, over the same period. Half year profits for the period ended 31 October 2007, included ancillary revenue of €252 million. This activity was associated with the sale of car hire, hotels and travel insurance, as well as on board sales and excess baggage revenues. Ancillary revenue now accounts for just over 16% of total revenues.
Ryanair was founded in 1985 by Christy Ryan (after whom the company is named), Liam Lonergan (owner of an Irish tour operator named Club Travel) and noted Irish businessman, Tony Ryan, founder of Guinness Peat Aviation and father of Cathal Ryan and Declan. The airline began with a 15-seat Embraer Bandeirante turboprop aircraft, flying between Waterford and London Gatwick Airport with the aim of breaking the duopoly on London-Ireland flights at that time, held by British Airways and Aer Lingus. In 1986, the company added a second route – flying Dublin-London Luton, in direct competition to the Aer Lingus / BA duopoly for the first time. Under partial EU Deregulation, airlines could begin new international intra-EU services, as long as at least one of the two governments gave approval (the so-called "double-disapproval" regime). The Irish government at the time refused its approval, in order to protect Aer Lingus, but Britain, under Margaret Thatcher's pro-free-market Conservative government, approved the service. With two routes and two planes, the fledgling airline carried 82,000 passengers in one year. Passenger numbers continued to increase, but the airline generally ran at a loss and by 1991, was in need of restructuring. Michael O'Leary was charged with the task of making the airline profitable. Ryan encouraged him to visit the USA to study the 'low fares/no frills' model being used by Southwest Airlines. O'Leary quickly decided that the key to low fares was to implement quick turn-around times for aircraft, "no frills" and no business class, as well as operating a single model of aircraft. [pic]
Ryanair cabin with advertising on overhead lockers and safety cards on seatbacks
The airline launched its website in 2000, with online booking initially said to be a small and unimportant part of the software supporting the site. Increasingly the online booking contributed to the aim of cutting flight prices by selling direct to passengers and excluding the costs imposed by travel agents. Within a year the website was handling three-quarters of all bookings. Today it is only possible to book seats via the website or via the "Ryanair direct" call-centre. No other possibilities are officially offered. In 2002, Ryanair launched 26 new routes and established a hub in Frankfurt-Hahn Airport, its European...
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