Evaluate the areas in which Ryanair possesses resources and capabilities that enable Ryanair tocreate a sustained competitive advantage?2) What are the implications of these resources andcapabilities for Ryanair if it wanted to expand it globalfootprint?Evaluate the areas in which Ryanair possesses resources and capabilities that enable Ryanair tocreate a sustained competitive advantage?2) What are the implications of these resources andcapabilities for Ryanair if it wanted to expand it globalfootprint?

Ryanair: the low fares airline - 'always getting better'? Eleanor OHiggns Ryanair, the first and largest budget airline in Europe, has enjoyed remarkable growth and success, based on a rigorously applied low-cost business model, with robust operating and financial performance even during the financial recession. However, Ryanair's prevous indifference to repeated complaints about its poor standards of customer service was suddenly reversed in 2014 with the introduction of an 'Always Getting Better' plan. The case illustrates how to analyse and deploy internal resources and capabilities to add perceived value to customers, thereby delivering sustainable strategic advantage. It also explores the difficulties of developing and extending strategic capabilities in response to changing environmental and industry conditions. "People say the customer is always right, but you know what - they're not. Sometimes they are wrong and they need to be told so.' Michael 0'Leary, before 2014 'If I had known that being nice to customers was going to be so good for my business, I would have done it years' ago. Everyone loves a converted sinner. We have learned humility - and that we have to keep learning and listening to our customers.' Michael O'Leary, Norember 2014 In November 2014, CEO Michael O'Leary predicted a full year 2016 profit growth of 20 per cent. Ryanair shares had closed at a record high of 14.66. 2 Customer traffic for the summer was over 30 million, with an average load factor of 95 per cent and over 90 per cent punctuality. because they want to break our rules. Why can't I gat a In those 12 weeks, Ryanair had more customers than Air refund for my non-refundable ticket? Bugger off." So France in a full year; it became the first airline to carry proclaimed Michael 0'Leary in 2010. over 10 million international customers in a single The carrier had attracted complaints for its inflexible month. Cast discipline was evident, with fuel down five baggage policies and punitive charges, like hefty cancelper cent and other costs expected to decline by one per lation and change penalties, and charges for printing cent for the year. Profits, excluding exceptional items, at boarding passes. However, these customer-untriendly E1088m for the first half exceeded the previous year by practices had not appeared to daunt passengers who 37 per cent. continued to fly Ryanair for its low fares. However, in autumn 2013, a series of events made 'Always getting better' Ryanair sit up and listen. The airline was voted worst of the 100 biggest brands in the UK in customer relations This was almost a year after the airline had turned a new by readers of the consumer magazine Which? Its adverleaf in its attitude to customers. Previously, Ryanair had sarial treatment of customers culminated in a wave of comeyed 'The customer is usually wrong. The only time negative publicity after its refusal to allow a passenger to you hear from a customer is when they're complaining change his flight home to the UK when he learned his This case was prepared by Eleanor O'Higgins. It is intended as a basis for class discussion and not as an illustration of eood or bad practice. Not to be reproduced of quoted without permission. RYANAIR: THE LOW FARES AIBLINE - 'ALWAYS GETTING BETTER'? entire family had died in a house fire. Faced with height- " Improve the product, Changing its previous policy of ened competition from other carriers offering cheap fares concentrating on cheaper secondary airports, primary and recognising that some passengers were willing to pay aiports were added to the network. These included higher fares to competitors for a better customer experi- Brussels National, Athens, Amsterdam Schiphol, ence, Ryanair did an about-face, changing its historic Milan Malpensa, Lisbon, Cologne, Hamburg and service attitude. Perhaps the most convincing factor that Glasgow International, alongside statements of a change would be worth trying was pressure on fares improved flight times and irequencies on the most and profits. popular routas. Ryanair claimed to publish its sched- Thus, in January 2014, Ryanair rolled out its 'Always ules earlier than other airlines, meaning customers Getting Better' (AGB) three-year plan. Significantly, the could plan and book flights longer in advance. airline appointed its first Marketing Director, Kenny Jacobs. Heretofore, Ryanair had relied on newsworthy publicity stunts and provocative statements from Michael 0'Leary as marketing tools, on the assumption that no In March 2015, to celebrate its 30th anniversary, Ryanair. publicity is bad publicity. Examples of Mr O'Leary's uneiled the second phase of its AGB plan with an eightstatements were that dverweight people should pay extra point Customer Charter, emphasising its new image: and that passengers should have to pay a fee to use . Always Getting Better is the way we promise to do onboard toilets. Then, in January 2016, Ryanair hired its things. first PR head, Cristian Samoilovich, former manager of - We promise the lowest fares. European public policy for Uber to handle relations with European governments and institutions. The AGB programme consisted of repositioning - We promise to always prioritise safety. Fyanair as 'Low Fares. Made Simple'. It centred on experience. providing customers with more choice, an improved . We promise we will always be Europe's most reliable travel and digital experience, while maintaining budget airline. fares. The buy-in of Nichael O'Leary and the boand, and . We promise to be transparent and to make travel staff, alongside a relatively flat organisation structure and simple for you. open culture, faciltated a fast and effective execution of * We promise to innovate to make your travel exciting. The most dramatic change was Ryanair's attitude to Ryanair also announced a series of initiatives to be the plan. customers, assarting that 'it starts at the top: listen to rolled out over the second year of the AGB programme, customers'. Ryanair still maintained its cost focus to with a range of improved services, fae reductions and continue to offer relatively lower fares than competitors. exciting digital developments to be introduced over the Investment in capability was part of the changes, princi- coming year. These included: pally in digital and technology. The company asserted " New aircraft interiors, new seats with more leg room that it wanted to become the leader in the industry on ail and new cabin crew uniforms. things digital, and created Ryanair Labs with a team of - Lower airport check-in fees, missed departure fees over 150 working on a new digital platiorm. and a new flight cancellation opticn. Specifically the changes in the AGB consisted of: - Real-time airline fare comparisons on Ryanar.com. - Improve the flying experience. Allowing customers to * A new destination content service, featuring customer bring two bags on toard and allocating seats. P A personalised Ryanaircom website with up to 100 a Embrace digital. Launching a hew, simpler website, a new Ryanair app, a customer registration function versions of the homepage and personalised promocalled 'MyRyanair' so the airline could target and tional emails with customer-specitic tailored offers. personalise its offers, communications and digital - A 24-hour 'hold the fare' feature for 65 . platfom, improving the selling of ancillary products - Improved in-elight menus with more healthy meal choices and a hot breaklast pre-order service on key noutes. like car hire and reserved seats. - Broaden Ryanair's appeav. Segmenting products to meet the needs of different groups. 'Family Extra' was. a new product focused on families and 'Business Plus' system. was aimed at business customers. Groups and corpo- However, as of December 2015, Ryanair retained its rate service products were also launchedi, Skyfrax 2 star rating, the worst for budget airlines in Europe. It ranked 155 out of 160 companies on a corpo- of 1.97 in October 2008 , when global equity markets rate empathy index, which refers to 'being a company tumbled. The most dramatic share price rise had that relates in a human way to all its stakeholders, or occurred during the latter part of 2015 after stellar finanemotional intelligence on a corporate scale, 13 cial results, and expectations of even better to come. After its flotation in 1996, Fyanair's policy was not to pay dividends. It retained earnings to fund its business Overview of Ryanair operations, the acquisition of additional aircraft required Ryanair was founded in 1985 by the Ryan family to for new markets, expansion of existing services and provide scheduled passenger services between Ireland routine fleet replacements. However, thanks to a healthy and the UK, as an alternative to then state monopoly balance sheet, the no-dividend policy changed in June airline, Aer Lingus. Initially, Ryanair was a full service 2010 when Ryanair began to pay a series of special divicarrier, with two classes of seating, leasing three dends. It had also engaged in various share buybacks. different types of aircraft. Despite growth in passenger The company had thereby returned over e2.9bn to sharevolumes, by the end of 1990 , the company had disposed holders over eight years, five times the 560m originally of five chief executives and accumulated losses of IRE20 raised when Ryanair floated in 1997 and in two subsemillion. Its fight to survive in the early 1990 saw the quent secondary issues. airline transformed to become Europe's first low-fares, The autumn of 2015 also saw the end of Ryanair's no frills carrier, built on the model of Southwest Airlines, 29.8 per cent stake in Aer Lingus. The Aer Lingus saga the successful US operator. A new management team, began in 2007 when, in a surprise bid, Ryanair aoquired led by Michael O'Leary, was appointed. Ryanair floated a 25.2 per cent stake, a week after the flotation of the on the Dublin Stock Exchange in 1997 and is now Irish national camier. it subsequently increased its quoted on the Dublin and London Stock exchanges and interest to 29.8 per cent, at a total aggregate cost of on the NASDAQ-100. 407.2m. By July 2009, the irvestment had been After its makeover into a budget airline, Ryanair never written down to 79.7m. At the time of the initial bid, looked back, as it added new bases, routes and aircraft. Ryanair declared its intention to retain the Aer Lingus Despite the up-and-down cycles of the airline industry brand and "upgrade their dated long-haul product, and ower the decades, Ryanair continued its upward trajec- reduce their short-haul fares by 2.5 per cent per year for tory, among the world's most profitable airlines, leaving a minimum of 4 years ... one strong Irish airline group almost all others behind. At its 30th birthday, as of July 2015, Ryanair offered vigorously compete with the mega carriers in Europe." 1600-plus flights per day from 72 bases and 190 According to a Financial Times commentator, 'Ryanair's airports across Europe, with a fleet of 315 Boeing bid for Aer Lingus was a folie de grandeur.' Even Michael 737-800 aircraft and six additional leased aircraft to O'Leary admitted it was 'a stupid impestment. At the provide extra capacity for the summer. Year-on-year time, it was the right strategy to go for one combined traffic growth was 11 per cent from 81.7 million passen- airline but it has now proven to be a disaster. 15 Aer Lingus gers in 2014 to 90.6 in 2015, expected to be 105 rejected the Ryanair approach and two subsequent bids million by 2016. Load factor had increased from 33 per in 2008 and 2012, notwithstanding blocking of its bids cent to 88 per cent. from the EU and the UK Office of Fair Trade (OFT), and After two profit wamings in 2013-14, net profits had orders to divest its Aer Lingus stake. recovered in its 2015 results, increasing by 66 per cent After years of rejection from Aer Lingus shareholders from 523m to 857m. Average fares increased by just and jousting with Irish, European and UK competition one per cent from 46.40 to 47.05, whilst operating authorities, the matter was finally resolved in July 2015. revenue had increased by 12 per cent from 5036.7 to International Airlines Group (IAG), led by Willie Walsh, a @5654. Thus, much of the profit growth came from lower former CEO of Aer Lingus, made a suocessful bid to buy operating costs, especially a reduction of 11 per cent per Aer Lingus for 1.36bn, having gained EU approval atter passenger in fuel costs. (Ryanair's financial data can be some concessions to give up some London airport slots. viewed in the 'Investor relations' section of the Ryanair The lrish government had already agreed to sell its 25 per website). cent stake in Aer Lingus, and the Ryanair board then agreed to dispose of its stake too. Ryanair had fully Investor perspectives and the Aer Lingus saga Written down the value of its Aer Lingus stake. Proceeds, As of Decamber 2015, Ryanair shares were trading in the totalling 398m, were distributed to shareholders via a ' B ' 14.60 to 15.08 range, with a PVE ratio of 13.5 . The share programme at the end of 2015 , bringing the amiount. share price had risen steadily after plummeting to a low distributed to shareholders to over 3.3bn since 2010 . 624 Ryanair's strategy aircraft, each having 189 seats. In 2019, when the Ryanair designates itself as Europe's fawourite airline, as Boeing 737-800 is scheduled to go out of production, the world's largest international carrier by passengers. Ryanair will become the launch customer for the new Before its conwersion moment in 2013, Ryanair had Boeing 197-seat 737-MAX-200 aircraft, designed to 5tuck closely to the low-cost/low-fares model. it differed replace the Boeing 737-800, and will purchase up to in its application of the Southwest Airlines prototype 200 of such aircraft. It expects to have an operating fleet business model, and that of its main European rival comprising approximately 520 Boeing 737s by 2024 easylet, as these two were not so frill-cutting. One comprising a mix of Boeing 7378005 and Boeing observer described the difference between easyJet and 737-MAX-200 aircraft. In its 2015 annual report, Ryanair as - 'easyJet is classy cheap, rather than just Ryanair notes satisfaction with the pricing and conditions plain cheap:? of its aircraft purchases from Boeing, in its 2015 annual report, Ryanair indicated various. The purchase of aircraft from a single manufacturer key aspects of its strategy. enables Ryanair to limit the costs assoclated with personnel Fare and route policy training, maintenance and the acquisition and storage of Ryanair's key selling point has been low fares designed flexibility in the scheduling of crews and equipment. to stimulate demand, particularly from fare-conscious Airport costs leisure and business travellers. Ryanair sells seats on a one-way basis. When launching a new route, Ryanair's Up until 2013, Ryanair reduced airport charges by policy is to price the new route at its lowest fare so that awoiding congested main airports, choosing secondary it will be significantly lower than other carriers' lowest and regional destinations, eager to increase passenger fares, but still provide a satisfactory operating margin. throughput. Ryanair further reduces its airport charges Consistent with the budget model, Ryanair's routes are by opting. when practicable, for less expensive gate locapoint-to-point only. In 2015 fiscal year, Ryanair flew an tions and outdoor boarding stairs, rather than jetways. average route length of 776 miles (1250km) and average Secondary and regional airports are significantly Alight duration of 1.83 hours. Short-haul routes eliminate further from the centres of cities they serve than the the need to provide free in-fight meals and movies, main airports, 'from nowhere to nowhere' in the words of expocted on longer flights, while point-to-point flying Sir Stelios Haji-loannou, founder of easydet, Ryanair's aliows Ryanair to offer direct, non-stop routes and avoid biggest competitor. 8 For example, Ryanair uses Frankfurt. the costs of providing transfers for connecting passen- Hahn, 123km from Frankfurt, Torp, 100km from Oslo, gers, including baggage transfer and transit passenger and Charleroi, 60km from Brussels. In December 2003, assistance. the Advertising Standards Authority rebuked Ryanair, In response to an operating environment characterised upholding a complaint of misleading advertising for by high fuel prices, typically lower seasonal yields and attaching 'Lyon' to its advertisements for flights to St higher airport charges andior taxes, Ryanair has adopted Etienne, 62km from Lyon. a policy of grounding a portion of its fleet during the However, as part of its AGB programme, it added winter months. In the winters of fiscal 2014 and fiscal more primary airports to its route system. Ryanair 2015, Ryanair grounded approximately 70 aircraft and continued to denounce charges and conditions imposed 50 aircraft, respectively, but was planning to ground by most governments at airports in the form of air approximately only 40 aircraft during the winter 2015-16 passenger duties. An example is its dispute with Athens season, due to lower fuel costs and higher anticipated Airport (AIA) over allegedly high charges imposed for its demand. installations and services. Ryanair blamed pricing policy rather than the Greek economic crisis for a decline in Low operating costs continues to be at the heart of Greece within the next three years should AlA reduce Ryanair's strategy. There are various facets to the imple- taxes and fees from current 12 per passenger down to mentation of this low-cost comerstone. 5 and reduce to zero in other peripheral airports, an Aircraft tleet offer declined by the Greeks. Subsequently, the Greek Aircrath ileet govemment withdrew plans for the tax. Ryanair has always grown and developed its fleet to meet In September 2013, Ryanair made a ten-year growth. expansion of its routes and to acquire the most up-to- agreement with Manchester Airports Group, the new date fuel-efticient aircraft. In 2015, the principal fleet owners of London Stansted, in relation to an expansion was composed of 315 Boeing 737-800 'next generation' of capacity at Stansted in retum for significant airport RYANAIR, THE LOW FARES AIALINE - 'ALWAYS GETTING BETTER'? board approval to launch a transatlantic airline. Indeed, Ryanair, contributing 20 per cent. However, the 2015 the company had talked for years about starting transat- growth was also a product of buoyant demand. lantic services, offering one-way fares for as little as _10. The CAPA Centre for Aviation has divided European However, O'Leary admitted that the logistics were not airlines into five models: possible, as the plan was dependent on procuring longhaul, fuel-efficient, wide-bodied jets, which could take - Major network carriers. This model comprises the many years to obtain, as aircraft manufacturers had major legacy groups, such as Air France-KLM, IAG, backed up orders from existing long-haul carriers developing their routes. - Niche full-service camiers. These are airlines from In the past, Ryanair has grown organically, with one smaller countries, with less developed networks, and exception, its acquisition in 2003 of Buzz, a budget lower costs, such as Air Berlin. airline subsidiary of KLM, the Dutch flag carrier, with * Pan European LCOs. Exemplified by easyJet, Vueling. headquarters at Stansted, for a bargain 15m. Buzz's Norwegian, these airlines are not pure LCCs as they operations were quickly absorbed into those of Ryanair. Of course, Ryanair had been trying for eight years to - Uitra LCCs. Also pan-European, this group is led by acquire Aer Lingus until the matter was concluded when. Ryanair as following the pure low-cost model. Other it conceded in 2015. Nonetheless, it is open to acquisition opportunities. These can arise by sweeping up - Leisure LCCS. These airlines are smaller scale, operate competitors, although, in the past, Ryanair has been mainly out of one country, concentrating on leisure more inclined to eliminate competitors through open travel with longer distance routes to tourist destinacompetition rather than by acquiring them. tions. Transavia, Monarch and Jet2.com are examples. Satety and maintentance The differences between the features and cost base of Ryanair has always been conscious of sagety as L.Cs and legacy airlines have narrowed. Furthernore, ical factor, and that any safety--e of safety as a crit- the distinction belween the various business models for dents on Ryanair or other budget carrier coumful inci- short distances is increasingly irrelevant as traditional affect its tousiness. It pudget carrier could adversely flag carriers' short-haul operations now compete head to affect its business. It places resources into safety head with the LCCs' point-to-point services. training of its staff and maintenance of its equipment The operating margins of European LCCs, especially and a board-level safety committee constantly reviews uitra-LCCs, in 2014 compared favourably to those of safety issues. full-service carriers. Five of the top six and all of the top Ryanair carries out routine maintenance of its Boeing three by operating margin are LCCs. CAPA also points out fleet, but contracts out overhaul engine and component that for Europe's major network airlines, successful LOC services to third parties. The commonality of the fleet subsidiaries are rare and require a distinct culture. helps to keep down maintenance costs. Creating now lower cost platforms can cannibalise the mainline brand and present significant industrial relaRyanair's competitive space tions challenges in realising LCC cost savings. Ryanair Europe has a total of 168 carriers. Was the most profitable listed European arline in 2014 (LCCe) or budgetal of 108 carriers; low-cost carriers ranked by operating margin. The least profitable was Air capacity share. airlines make up 45 per cent of the Berlin. Wizz Air managed its unit cost down further while capacity share. The industry in Europe is fragmented, as raising its unit revenues. easyjet continued to take consolidation has slowed down, forcing each airline to advantage of its network of primary airports and its lead devise its own unique strategy. Airlines compete primarity ower other LCCs in terms of initiatives towards business in respect of fare ievels, frequency and dependability of travelers and customer service. However, some LCCs service, name recognition, passenger amenities (such as recorded falling margins in 2014, among them Vueling access to frequent flyer programs), and the availability and Pegasus, and two were even loss-making, Norwejian and convenience of other passenger services. The and Transavia. industry is highly susceptible to price discounting, because airlines incur very low marginal costs for providing service to passengers occupying otherwise Risks and challenges unsold seats. Although the company had been enjoying success in the short-haul eapactoripetion in 2015 was growth in 2014-15 period, it was conscious that it had to be four-haul capacity accelerating to 7.7 per cent in the equally vigilant about risks to sustain its exemplary fourth quarter. This growth was led by LCCs, especially record. Some of the challenges faced by Ryanair were 628 FYANAIR: THE LOW FARES AIRLINE - 'ALWAYS BETTING BETTER'? specific to itself and some were general to the aviation as customer acceptance, competitive reactions and industry or the budget sector. market and economic conditions couid derail the poten- Fuel costs tial benefits of its AGB strategy. Initial reactions to Given that fuel constitutes a key input cost, wide fluctu- Ryanair's 'business-lite' product from corporate traveilers ations in the price and availability of this commodity are stream-eptical, as they compared it unfavourably to maina concern, since these are subject to factors beyond especially as it does not include incentives such as Ryanair's control. In these volatile circumstances, loyalty programmes. Others saw Ryanair's combination of hedging is the only answer. Historically, Ryanair has aiports in its network and competitive pricing as potenentered into arrangements to provide for substantial tially attractive for small businesses, as fares were protection against fluctuations in fuel prices, generally pitched to be considerably cheaper than other carriers' through forward contracts covering periods of up to 18 business class flexi-fares, but more than its own standard months of anticipated jet fuel requirements. Because oil fares. prices could change suddenly downward, hedging could It was also a matter of balancing still attractive fares end up being costly if the price had been set before an with more costly service inputs. Historically, the suocess unexpected drop. As of fiscal 2015, Ryanair was hadged of Ryanair's business model depended on its ability to at prices below contemporary spot prices. On 20 January control costs to deliver lower fares than competitors while 2016, crude oil prices fell to levels 76 per cent below the still earning a profit. Operating in an increasingly previous year's peak, down to just over $27 a barrel from competitive marketplace, with a number of low-fare, \$115. Ryanair's declaration of 'no fuel surcharges ever' traditional and charter airlines competing throughout its. and its reliance on low fares limit its capacity to pass on route network, places some pressure on Ryanair's ability increased fuel costs, especially in the face of its pianned to raise fares significantly. expansion. Adapting to seasonality Risks associated with the euro Headquartered in ireland, Ryanar's repoting currency is Ryanair's growth has been largely dependent on the euro, With its extensive route system withirenency is increasing summer capacity, and decreasing winter countries, the compary and the value of itsozone capacity. The policy of seasonally grounding aircraft denominated assets would be adoerselue of its euro- presents some risks. While reducing variable operating breakup of the euro or the exit adversely affected by a costs, it does not avoid fixed costs such as aircraft from it. Operating inputs exit of one or more members ownership costs, and it decreases Ryanair's potential to currencies could beeome purchased abroad in non-euro earn ancillary revenues. Decreasing the number and currencies could become more expensive, further under- frequency of flights may also negatively affect Ryanair's mining profitability. With so much of Ryanair's business labour relations, including its ability to attract flight conducted in the UK, the collapse of the euro against personnel interested in year-round employment. sterling could be especially difficult. Moreover, as international prices for jet fuel are denominated in US dollars, Various legal proceedings Ryanair's fuel costs are also subject to exchange rate Ryanair has been in litigation with the EU for over a risks, exacerbated by a continuing fall in the value of the decade about alleged receipt of state aid at certain euro against the dollar, from a 2008 high of just under airports. Although an EU ruling in 2004 that it had $1.60 to $1.08 in 2015 . received iliegal state aid from publicly owned Charleroi Recent strategic initiatives - the jury is still out? Airport was subsequently overturned an appeal, the EU The actions taken as part of Ryanair's improved customer aid, purportedly subsidising Ryanair at as many as services and AGB campaign were intended to increase 20-plus publicly owned airports, such as Paris Beauvais, passenger traffic, load factor and yields. There are addi- Lubeck and Frankfurt Hahn in Germany. Competitors tional costs associated with the initiatives, such as launched other legal challenges against the company. primary airport fees and marketing expenses, simultane- Ryanair has won some of these cases and lost some ously reducing ancillary revenues previously earned from others, but many remain unresolved, as the losing party various penalty fees and charges. Although the revenues always appeals the decision to the EU General Court, a from allocated seating and premiums from its Business- process that takes some years. Plus passengers should offset the reduction in ancillary Frequently, Ryanair took the initiative on alleged revenues, there can be no assurance that this will occur. illegal aid to rivals. It filed a complaint with the EU Ryanair recognises that factors beyond its control, such Commission accusing Air France-KLM of attempting to 629 FYANAIR: THE LOW FARES AIRLINE - 'ALWAYS BETTING BETTER'? specific to itself and some were general to the aviation as customer acceptance, competitive reactions and industry or the budget sector. market and economic conditions couid derail the poten- Fuel costs tial benefits of its AGB strategy. Initial reactions to Given that fuel constitutes a key input cost, wide fluctu- Ryanair's 'business-lite' product from corporate traveilers ations in the price and availability of this commodity are stream-eptical, as they compared it unfavourably to maina concern, since these are subject to factors beyond especially as it does not include incentives such as Ryanair's control. In these volatile circumstances, loyalty programmes. Others saw Ryanair's combination of hedging is the only answer. Historically, Ryanair has aiports in its network and competitive pricing as potenentered into arrangements to provide for substantial tially attractive for small businesses, as fares were protection against fluctuations in fuel prices, generally pitched to be considerably cheaper than other carriers' through forward contracts covering periods of up to 18 business class flexi-fares, but more than its own standard months of anticipated jet fuel requirements. Because oil fares. prices could change suddenly downward, hedging could It was also a matter of balancing still attractive fares end up being costly if the price had been set before an with more costly service inputs. Historically, the suocess unexpected drop. As of fiscal 2015, Ryanair was hadged of Ryanair's business model depended on its ability to at prices below contemporary spot prices. On 20 January control costs to deliver lower fares than competitors while 2016, crude oil prices fell to levels 76 per cent below the still earning a profit. Operating in an increasingly previous year's peak, down to just over $27 a barrel from competitive marketplace, with a number of low-fare, \$115. Ryanair's declaration of 'no fuel surcharges ever' traditional and charter airlines competing throughout its. and its reliance on low fares limit its capacity to pass on route network, places some pressure on Ryanair's ability increased fuel costs, especially in the face of its pianned to raise fares significantly. expansion. Adapting to seasonality Risks associated with the euro Headquartered in ireland, Ryanar's repoting currency is Ryanair's growth has been largely dependent on the euro, With its extensive route system withirenency is increasing summer capacity, and decreasing winter countries, the compary and the value of itsozone capacity. The policy of seasonally grounding aircraft denominated assets would be adoerselue of its euro- presents some risks. While reducing variable operating breakup of the euro or the exit adversely affected by a costs, it does not avoid fixed costs such as aircraft from it. Operating inputs exit of one or more members ownership costs, and it decreases Ryanair's potential to currencies could beeome purchased abroad in non-euro earn ancillary revenues. Decreasing the number and currencies could become more expensive, further under- frequency of flights may also negatively affect Ryanair's mining profitability. With so much of Ryanair's business labour relations, including its ability to attract flight conducted in the UK, the collapse of the euro against personnel interested in year-round employment. sterling could be especially difficult. Moreover, as international prices for jet fuel are denominated in US dollars, Various legal proceedings Ryanair's fuel costs are also subject to exchange rate Ryanair has been in litigation with the EU for over a risks, exacerbated by a continuing fall in the value of the decade about alleged receipt of state aid at certain euro against the dollar, from a 2008 high of just under airports. Although an EU ruling in 2004 that it had $1.60 to $1.08 in 2015 . received iliegal state aid from publicly owned Charleroi Recent strategic initiatives - the jury is still out? Airport was subsequently overturned an appeal, the EU The actions taken as part of Ryanair's improved customer aid, purportedly subsidising Ryanair at as many as services and AGB campaign were intended to increase 20-plus publicly owned airports, such as Paris Beauvais, passenger traffic, load factor and yields. There are addi- Lubeck and Frankfurt Hahn in Germany. Competitors tional costs associated with the initiatives, such as launched other legal challenges against the company. primary airport fees and marketing expenses, simultane- Ryanair has won some of these cases and lost some ously reducing ancillary revenues previously earned from others, but many remain unresolved, as the losing party various penalty fees and charges. Although the revenues always appeals the decision to the EU General Court, a from allocated seating and premiums from its Business- process that takes some years. Plus passengers should offset the reduction in ancillary Frequently, Ryanair took the initiative on alleged revenues, there can be no assurance that this will occur. illegal aid to rivals. It filed a complaint with the EU Ryanair recognises that factors beyond its control, such Commission accusing Air France-KLM of attempting to 629 block competition after the French airline filed a case, Such disturbances can entail rescheduling passenalleging that Marseille was acting illegally by offering gers, and disputes about compensation, since, according discount airlines cut-price fees at its second, no-frills to EU law, passengers denied boarding or delayed for terminal. Ryanair also called on the Commission to inves- more than three hours are entitled to compensation from tigate allegations that Air France had received aimost the airline. Only circumstances outside the airlines' 1 bn in illegal state aid, benefiting unfairly from up to 50 control exempt it from such compensation, but Ryanair per cent discounted landing and passenger charges on claims that the extraordinary circumstances defence bas flights within France. Adverse rulings on these airport been very narrowly interpreted by the EU. Ryanair usually cases would not have major costs in fines, but they could resists paying compensation, mindful that large-scale curtail Ryanair's growth if it was prevented from making compensation payments are especially harmful to airlines advantageous deats with publicly-owned airports and was with low fares. Ryanair was appealing a court decision in confined to the fewer privately-owned airports across the UK that ruled that airlines could not enforce a Europe. It could also encourage more rivals to bring two-year limit in its terms and conditions on passengers actions against Ryanair. Three airport authorities were suing Ryanair over claiming flight delay compensation and claims could be alleged delays in paying airport charges. After it called made for up to six years. This could have implications for for an lrish presiding judge to withdraw on grounds of retrospective claims of f.610m accordirg to the law firm bias against Ryanair in previous proceedings, the judge representing claimants, but in Ryanair's view, the sum did withdraw, though not because he admitted Rye judge would be up to 5m. charges but to avoid delay in the case. He stocdyanair's In August 2012, Ryanair faced an investigation by the prerious comments that 'Ryanair told un stood by his Spanish Ministry of Public Works following emergency about the court and. that the airfipe aths to and landings of three Ryanair aircraft at Valencia Airport after made uncomfortable bedfellows'.10 Ryanair has vigorously opposed different continental diverted to Valencia when they were prevented from European governments' attempts to move its staff from landing at Madrid, due to an electrical storm. The Ryanair British or Irish employment contracts to more expentrom flights, with others, were put in a holding pattern, but only national ones on the basis that they were protectinensive the Ryanair flights had to instigate emergoncy procedures own flag carriers. Ryanair aceused the. Frenching their because they were running low on fuel. This incident ment of using these contracts to protect Airench govern- raised questions about Ryanair's fuel policy - to take on as it continues to fight a 69m satictionir France-KLM, the minimum possible to save money. However, Ryanair French court for breaking loca sanction imposed by a insisted that fuel levels never fell below the permitted abowe, in the Denmarh local labour laws. As shown minima during the Valencia incidents, and that all of the abandon its bases rather thane, Ryanair was ready to company's aircraft aperate with required fuel levels, If On another legal front, irregularities were to be found at Riyanair, it could face the Ryanair launched a legal, in the UK, Spain and ltaly, loss of its operating licence for three years, with additravel agent eDreams, wiaim against Google and online tional fines of up to e4.5m. Further, the following year, a misleading subdoms, which it accused of hosting a group of pilots, deemed to be the Ryanair Pilots Group. Ryanair tickets ain with Ryanair branding, selling raised safety concerns about the airline. However, Ryanair already syon at higher prices than its own. It had claimed that the group did not include Ryanair pilots, and responded by similar case in Germany. eDreams was a PR front for pilot unions of their competitor airlines. its webste, denying any wrongdoing, but it did change including KLM, Air France and Aer Lingus. Ryasite, though not sufficiently to fully satisfy Ryanair maintains various insurances: aviation thirdRyanair. Party liability, passenger liability, employer liability, Unforeseen events and passenger compensation_ directors and officers' liability, aircraft loss or damage, In the airline industry, there is always the possibility that and other business insurance, consistent with industry accidents and catastrophic evenays the possibility that standards. Ryanair believes its insurance coverage is natural or antastrophic events may occur, due to adequate, although not comprehensive. This insurance and or man-made causes. Among these are accidents does not cover claims for losses hcurred when, due to and safety-related incidents, terrorist highjackings, unforeseen events, airspace is closed and aircraft are outbreaks of contagious disease epidemics like swine flu, grounded, such as the closures associated with the ash weather and natural phenomena that interfere with flights, cloud. It is almost impossible to insure afainst what may such as the 2010 closure of a significant portion of the be unlimited liabilities. For instance, EU legjslation airspace over northem Europe caused by safety concerns provides for unlimited liability of an air carrier in the from ash cloud emissions of an icelandic volcano. event of death or injuries suffered by passengers. 630 management team, Ryanair was inextricably identified Sydney Finklestein identified thesa signs under five with him. He was credited with single-handedly trans- headings-ignoring change, the wrong vision, getting too forming European air transport. In 2001, O'Leary close, arrogant attitudes and old formulae. But having received the European Businessman of the Year Award demonstrated the extent that O'Leary meets the failure from Fortune magazine; in 2004, The Financial Times criteria, the columnist concluded: 'So, is it time for named him as one of 25 European business stars' who Ryanair to dump Mr O'Leary? Depends whether you have made a difference, describing him as personifying prefer the track record of one of the most successful 'the brash new Irish business elite' and possessing 'a businessmen in modern aviation, or the theories of a US head for numbers, a shrewd marketing brain and a ruth- academic from an Ivy League school.' Would Frofessor less competitive streak', 14 Present and former staff have lauded O'Leankstein's diagnosis be proven wrong after CEO ership style: 'Michael's genius is his ablity toary's lead- Michael O'Leary's comersion to customer service and and energise people... There is an incredible energy in that place. People work incredibly hard and get a lot out of it. They operate a very lean operation. . . It is without peer,' said Tim Jeans, a former sales and marketine 1. $1=EQ.8=$1.3 lat the tine ad witivgl director of Ryanair. 16 2. F. Gillete, 'Rysnair's oteary muls ore-euro tolets, standing parsen. gers': Aloortberg com., 2 Sedember 3010 an army uniform, he drove a tank to easyJet's headquar- 5 LEX, Fygnsir, Financiar Tomes, 3 June 2009, a 16 . ters at Luton Airport. When Ryanair opened its hub at 6 L Nocnan, OHLedy admits stabe in Mer Lingis was stueid dsasis:'. Milan Bergamo he flew there on a jet bearing the slogan 2 isish indomident, 6 March 2019 . 'Arrividerci Alitalia'. He has dressed as St Patrick and as 7. F, Guttrie, Sr Stelios beinighided as sits frome bokder rish takers'; the Pope to promote ticket offers. A self-confessed 'loud- B. S. Lyali No apoinges trom thes booss of a mo-lint ainne', Mew Koum. mouth' whose outspokenness has made him a figure of public debate, 'he is called everything from "arrogant pig" unions, politicians who impose airport tawes (calling Lo Carolan, 'Judge pulk as or hyarair cese without allering prenous former UK Prime Minister, Gordon Brown a 'twit' and a 1L. K. Dons, Yteary shows it is not yet fne end for budget air trane', about poor service, travel agents, reporters who expect Times suppiement, 20 March, p. 21. free seats, regulators and the EU Commission, and airsort 13, T. Powkey. Michael OLeary. 7m Irkah so youre bom with butshil on. owners like BAA, whom he once called 'overcharging 14. B. Groom, Leshers, of the noer Europe: buresess stars chart a cours: rapists'. ia An EU Commissioner, Philippe Busquin, tor the protes of the future, Finmear Tmes, 20 Apri 2004 denounced Michael O'Leary as 'irritating .... and insists 15. G, Bowly, 'How low can you ga? Financis Tmies Magazing, Ne 9,2] he is not the only Commissioner who is allergic to the 16 , lod mere mention of the name of Ryanair's arrogant chief,'ts it. 5, Lysa, 'Wo gpolages houm the bocs of a no-frils aither, The Mew towk An insh Twmes columnist suggested that 'maybe it's 18 row . time for Ryanair to jettison O'Leary', asserting that he 19 . S. Credon, Turtulent times for Ayanairs high-tier', hist rmass has become a caricature of himself. fulfilling all 15 warning signs of an executive about to fail, 20 Professor Times, 11 Auqust 2003