What Are the Key Success Factors in the European Airline Industry?

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6. What are the key success factors in the European airline industry? ---When addressing this question we find it worthwhile to remind students that a KSF is what any firm in the industry must do to be successful. Based on this definition, the following KSF’s apply to the European airline industry: (1) A reputation for safety – This is a fundamental KSF for any segment of the airline industry. If a firm is not viewed as safe by potential passengers, they will not use the carrier. (2) Offering fares that are competitive and consistent with the quality of service offered. Many students may want to automatically list “Low Fares” as a KSF. This is true, to an extent. Many fliers do not just want low fares; they also prefer a certain level of service.

(3) Containment of controllable costs –as the uncontrollable costs increase, successful firms in this industry will work diligently to maintain or reduce controllable costs. This will enable them to increase profitability and/or keep costs attractive to customers. Two of the main ways to control costs are through high labor productivity and low turnover, and through the utilization of superior information systems.

(4) A company with a high labor turnover is not going to be as productive or profitable. The ability to find and retain quality employees can allow a company to reduce their costs and increase profitability. Information systems allow the airlines to be more efficient with the use of their resources. In order to be successful, a solid information system is a necessity. (5) Access to terminals at profitable airports – Airlines need to be able to fly to the destinations that customers want. The companies that are going to succeed in this industry are the ones that have the best “seats” in the house. Those airlines that have access to terminals in the airports that are visited the most will be the most successful. (6) Quick (and cheap) check-in and baggage handling – When customers need to fly, they want to do so with the airline that is going to be the least amount of trouble. 7. What are the key policies, practices, business principles, and procedures that underlie how Michael O’Leary and Ryanair’s management have implemented and executed the chosen strategy? (1) The fundamental business principle that Ryanair adhered to was to aggressively cut costs and/or maintain low costs throughout the organization. The company intended to offer the lowest fares on every route it flew and to make this possible they relentlessly drove costs out of virtually every aspect of the organization from the scheduling of flights to prohibiting employees from charging their personal cell phones at work to keep electricity costs low. They also committed to having no fuel surcharges on their flights. (2) The company’s dedication to its low cost strategy could be seen throughout the organization. For example, the company demanded a high level of productivity from its employees and compensated them in non-economic ways such as scheduling flights so the pilots would be home in the evening. Additionally, the company leveraged information technology to reduce booking and customer procurement costs. (3) From a revenue standpoint, the company counted on ancillary revenues to reduce the company’s reliance on passenger fares. The company maintained that customers were paying rock bottom prices for transportation from point A to point B. Anything else was an additional service and customers would be charged for these extras such as checking baggage, snacks, drinks, blankets, pillows, etc. The company also sought to leverage its brand name and website to offer rental car services, hotel bookings, and advertising. 8. What is your evaluation of Ryanair’s ethical climate and social responsibility strategy? How would you interpret the company’s relationship with, and actions toward its pilots? What about its legal actions against its competitors and the legal actions...
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