Ryanair Case The emergence of low-cost carriers (LCCs) in the early-to-mid 1990s opened air travel to customerswho otherwise might not have travelled by air or at all.By 2018,LCCs held 43% of the Europeantravel market, up from 9% in 2002.In the early days,it vas easy to distinguish the value proposition ofLCCs from that of full-service carriers:LCCs appealed to price-conscious customers and offered adifferent level of service compared to full-service airlines. However,over time,the low fares of LCCsbegan to attract the customers of legacy airlines. Full-service airlines responded with changes to theircost structures and either re-positioned themselves as LCCs,or they pursued a hybrid strategy ofmaintaining frills on the legacy carrier but setting up a low-cost subsidiary airline.In 2010,long-haul(transatlantic)LCCs had emerged, including Norwegian Air Shattle ASA and wOW Air hf.In 2018,there were 47 aircraft in Europe deployed on long-haul,low-cost routes.Due to the capital-intensivenature of the airline business,few firms earned a rate of return in excess of the cost of capital.Airlines'profitability was particularly sensitive to oil prices. Traditionally,the industry had many competitorsand new entrants,a high proportion of fixed costs,and high exit barriers.Lax capacity managementduring upswings in the economic cycle led to cost overhangs and aggressive prie competition to fillcapacity in the downswings. Revenue drivers in the industry included capacity,passenger yield,loadfactor, additional charges and fees, and cargo.Airlines were also increasingly turning to data analyticsto improve their service offerings.Ryanair Overview:Ryanair was founded in 1985 with a staff of 25 people. Ryan's initial idea was to use Dublin Airport asa hub to connect flights between the eastern United States and various locations in Europe,witheventual planned expansions to the Middle East.The business model was planned to combine lowoperating expenses with efficient operations and aggressive marketing.In May 1986,Ryanair initiatedthe first irline price war in Europe with a fare of f99 less than half of the lowest return fare of £209charged by the incumbents.Subsequently,Ryanair expanded its network,offering flights from Dublinto Liverpool,Manchester,Glasgow,Cardiff,Brussels,and Munich,as well as flights from LutonAirport to several Irish airports.In the early 1990s,Michael O'Leary (at that time,Ryan's personalassistant) visited Southwest Airlines and was able to observe its operating practices,the fastturnaround,and the zeal for utilization of aircraft.O'Leary returned with a clear business model inmind:lowest fares,highest frequency,lowest costs,and highest productivity relative to other airlines.When he eventually became chief operating officer(CEO) in 1994,O'Leary replaced the existing fleetwith a single fleet of Boeing 737s,simplified the fare structure,added new routes,and focused onsecondary airports to minimize airport charges and facilitate fast turnaround. Expansion of the route network into mainland Europe followed in the second half of the 1990s.Inaddition to growing its route network,Ryanair opened new bases in secondary airports throughoutEurope.Flying to secondary airports offered several advantages.By 2005,Ryanair had 15 bases throughout Europe.This number increased to 44 in 2010,75 by 2015,and 87 by 2018.For O'Leary,Ryanair had the most clearly defined customer service philosophy in theworld:"We guarantee to give you the lowest airfare. You get a safe flight. You get a normallyon-time flight. That's the package. We don't and won't give you anything more on top ofthat. Listen,we care for our customers in the most fundamental way possible: we don'tscrew them every time we fly them"Ryanair was relentless in lowering costs in each aspect of its operations. Ryanair consistently achievedlower costs per passenger when compared to rivals.The various elements of its activity system-nofrills,no assigned seating,direct bookings,point-to-point flights,emphasis on secondary airports,anduse of a single type of aircraft-enabled Ryanair to decrease costs through a combination of scaleeconomies,experience curv:effects,and low cost inputsRyanair formally launched its vebsite in March 2000 and offered customers discounts for bookingonline.It was one of the first companies to bring e-commerce to Ireland and was disruptive in wipingout the intermediaries.O'Leary saw huge potential in a website that would not only sell seats but alsoserve as a single source for customers'travel needs,including travel insurance,hotels,and car hire.Within three months,the website was tiking over 50,000 bookings a week and subsequently becameone of the most searched websites on the Internet.By 2013,Ryanair was Europe's most profitable airline,flying almost 80 million passengers per annumand beating every other airline on price on every route.Traffic was growing,new routes were beingserved,new bases opened,and new aircraft delivered. Ryanair was excelling across the board:it hadthe highest punctuality rate(93%),lost the fewest bags (less than 1 bag per every 3,000 passengerscarried),and received th:fewest complaints (less than 1 per 2,000 passengers).But others believed that Ryanair's business model was losing its sparkle. According to one survey,Ryanair was ranked the worst anong short-haul airlines.Customers were also tiring of thecumbersomeprocess of booking a flight on Ryanair.com-which could involve up to 17 clicks-and the multitude ofextra charges they faced, such as luggage,seat,and transaction fees.Recognizing it was losingcustomers willing to pay higher fares for marginally better service; Ryanair announced a strategicchange that would combine low fares with improved customer service.The strategic pivot thatunfolded arose when Ryanair management learned that 70 million passengers were flying point-to-point on short-haul routes,but not with Ryanair. exploit the 70-million passenger opportunity,Ryanair realied it needed to start treating customersbetter. The initial emphasis was on addressing frustrations that led customers to defect to higher-pricedcompetitors.In the initial phase of the"Always Getting Better"(AGB)program, Ryanair introduced araft of changes,including shifting to fully allocated seating;launching a much easier-to-navigatewebsite with a host of new features; introducing a 24-hour grace period to amend minor booking errors;allowing customers a second,snall carry-on bag for free;and reducing charges for boarding cards andbaggageThere were five pillars to the AGB program:fix the things the customers did not like; improve thetravel experience; improve the digital experience; develop the offer;and improve the marketing andbrand. This involved a shift on four levels:from passengers to customers,flights to travels,acquisitionto retention of customers,and from transactions to relationships.The purpose of the various changeswas to improve the likability of Ryanair as a functional service while also being different. The businesslogic underpinning these changes was that by improving customer experience,Ryanair would increasecustomer retention while also capturing new customers-notably business travelers and families andthereby improve shareholder returnsBetween 2013 and 2018,Ryanair successfully architected and delivered a strategic turnaroundenshrining its position as Europe's largest,cheapest,and most profitable airline. But in 2017,Ryanaircancelled up to 50 flights per day,inconveniencing over 400,000 customers. The cancellations had adisproportionate negative impact on the company's reputation and financial situation. For an airlinefamed for high operational efficiency,making a mess of a routine rostering task raised questions aboutkey vulnerabilities in its strategy.Ryanair's credibility and whether management was sufficientlyfocused were questioned. The sustainability of Ryanair business model and its growth were broughtinto sharp focus.As Ryanair announced its first-quarter results for FY 2019,it faced unprecedented challenges. Profitshad decreased by 20% compared to the same period the previous year.It was also facing further strikesand industrial action.In what some viewed as a signal of pessimism,O'Leary sold 2 million shares inJune 2018(at E16.49 each),leaving him with a 3.8% stake in the airline.As these events unfolded,thecompany faced worrying strategic questions;perhaps the greatest of all being how the company couldreach its target of flying 200 million passengers by 2024? EXAM QUESTIONS: "A low-cost carrier or low-cost airline (also known as a no-frills,discount or budget carrier orairline) is an airline that offers generally low fares in exchange for elininating many traditionalpassenger services."In recent years,the entry of low-cost carriers has totally transformed the airpassenger transport industry.Ryanair no.1 lowest fare has revolutionized the airline industry inEurope and has shown impressive growth.Yet,Ryanair faces chaIlenges to rethink its strategieswith a increased emphasis on more customer orientation approach to achieve its ambitiousgrowth targets by 2024.Please answer the folloving points to build up your Ryanair case study report. 1. Discuss the characteristics of European Airlines industry and its macro-environment. 2.Critically analyze Ryanair value-chain,its core competencies,and sources of competitive advantage. 3.What is Ryanair value discipline orientation? Do you think Ryanair busiless model is effective? 4.Discuss and evaluate Ryanair growth strategies. 5.Examine Ryanair shift from passengers to customers,flights to tavels,acquisition to retention ofcustomers,and from transactions to relationships6.Discuss and elaborate your recommendations for Ryanair future strategic direction and competitive positioning in a mature industry like the airline industry.