Case Abstract

Ryanair was the first budget airline in Europe, modelled after the successful U.S. low cost carrier, Southwest Airlines. Ryanair is one of the oldest and most successful low-cost airlines of Europe. This case study on Ryanair highlights its low fares business model, its business strategies and operations. The case further incorporates the history and business description of Ryanair, its’ operations and challenges as a budget airline. Features and benefits of the low cost business model are also discussed.

Table of Contents

    Introduction
  • RyanAir: The ‘Southwest’ of European Airlines in 2007
  • A year earlier…Ryanair, hedged fuel and a performance to envy
  • Exhibit 1: Summary Table of Results and Key Statistics
  • Exhibit 2: Ryanair Passenger Growth in Millions

  • History of Ryanair

  • Ryanair’s initial efforts as a low-cost carrier
  • 1990 – Restructuring at Ryanair
  • The growth of Ryanair

  • Analyzing the Low-cost Business Model

  • Ryanair Low Fares Strategy and Standardized Operational Model
  • Advantages of using secondary or airports located outside city
  • Lower Wage bills
  • Ryanair.com and Online booking of tickets
  • Paid-for extras – Sources of additional revenue
  • The easyJet challenge
  • Ryanair – Failed merger bid and other Controversies
  • Ryanair / Aer Lingus merger failure
  • Ryanair and EU
  • Some low-fare carriers around the World
  • Exhibit 3: List of Approved and prohibited mergers by the EU in the airline industry
  • Exhibit 4: Features and Benefits of the Low Fares business model
  • Exhibit 5: Comparative performance data of some major European LFA
  • Exhibit 6: Oil Prices Comparison, 1994 – 2007
  • Exhibit 7: Map of the European Union

  • Questions for discussion

Introduction – RyanAir: The ‘Southwest’ of European Airlines in 2007

Ryanair, Europe’s biggest low-fares airline (LFA ) reported its third quarter results for 2007 with net profits dropping 27 percent compared to a net profit of 48 million a year earlier. Ryanair cited poor market conditions, fuel costs (oil prices at $90 a barrel) and concerns on recession in the UK and many other European economies for its current performance and not so strong future profit expectations. With average winter fares dropping almost 5 percent its’ underlying net profit in the three months to end December fell to 35 million euros ($52 million). Other factors that contributed included doubling of airport charges combined with reduction of winter capacity at Stansted , significant cost increases at Dublin Airport combined with longer sector lengths and staff costs which increased by 18 pct to 67 million euros. Ryanair’s net profit figure excluded a one-off gain of 12.1 million euros ($17.99 million) arising from the disposal of 5 Boeing 737-800 aircraft…

History of Ryanair

Ryanair was set up in 1985 and is one of the oldest and most successful low-cost airlines of Europe. In fact, Ryanair was one of the first independent airlines in Ireland. In 2001, many believed that Ryanair was like the Wal-Mart and Southwest Airlines of Europe. Ryanair transformed the Irish air services market where other airlines like Avair failed to compete with the more powerful national carrier Aer Lingus.

Ryanair’s initial efforts as a low-cost carrier

Ryanair began by offering low-cost no-frills services between Ireland and London. Ryan brothers – Catlan, Declan and Shane Ryan were the founding shareholders of Ryanair. Ryanair was set up with a share capital of just £1, and a staff of 25. Tony Ryan, their father and the chairman of Guinness Peat Aviation (GPA), an aircraft leasing company lent Ryanair its first airplane, a fifteen-seater turbo prop commuter plane. Ryanair’s first cabin crew recruits had to be less than 5ft. 2ins. tall so as to be able to operate in the tiny cabin of the aircraft. …Download full-text of this case study to read more.

Case Updates/Snippets

  • Ryanair operates on more than 1,000 routes across Europe. Ryanair was founded in 1985 offering small flights from Ireland to England.
  • Low-cost model in US – Ryanair’s entry in the US market – In 2008, Ryanair announced plans to operate in the United States. The plan includes forming a sister company that would begin servicing within three years. However, the start date has been delayed. Low-cost airline model attempts in the U.S. include Skybus in 2007 (which shut down within 10 months of operation) and Spirit Airlines (which shifted to the low-cost model in 2007).
  • In recent years, fares have declined in the U.S. with budget carriers like Southwest Airlines and JetBlue Airways operating. However, the US airline industry has been struggling to match Europe where the cost of flying is very less.
  • In 2011, Ryanair’s total passenger traffic included Spain market traffic (32.2 million passengers) at about 20 per cent followed by Italy and the UK. Last year, Ryanair became the biggest passenger carrier in Spain.