Ryanair Holdings PLC

The emergence of low-cost carriers (LCCs) in the early-to-mid 1990s opened air travel to customers who otherwise might not have travelled by air or at all. By 2018, LCCs held 43% of the European travel market, up from 9% in 2002. In the early days, it was easy to distinguish the value proposition of LCCs from that of full-service carriers: LCCs appealed to price-conscious customers and offered a different level of service compared to full-service airlines. However, over time, the low fares of LCCs began to attract the customers of legacy airlines. Full-service airlines responded with changes to their cost structures and either re-positioned themselves as LCCs, or they pursued a hybrid strategy of maintaining frills on the legacy carrier but setting up a low-cost subsidiary airline. In 2010, long-haul (transatlantic) LCCs had emerged, including Norwegian Air Shuttle ASA and WOW Air hf. In 2018, there were 47 aircraft in Europe deployed on long-haul, low-cost routes. Due to the capital-intensive nature 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 competitors and new entrants, a high proportion of fixed costs, and high exit barriers. Lax capacity management during upswings in the economic cycle led to cost overhangs and aggressive price competition to fill capacity in the downswings. Revenue drivers in the industry included capacity, passenger yield, load factor, additional charges and fees, and cargo. Airlines were also increasingly turning to data analytics to improve their service offerings. Ryanair was founded in 1985 with a staff of 25 people. Ryan's initial idea was to use Dublin Airport as a hub to connect flights between the eastern United States and various locations in Europe, with eventual planned expansions to the Middle East. The business model was planned to combine low operating expenses with efficient operations and aggressive marketing. In May 1986, Ryanair initiated the first airline price war in Europe with a fare of 99 less than half of the lowest return fare of 209 charged by the incumbents. Subsequently, Ryanair expanded its network, offering flights from Dublin to Liverpool, Manchester, Glasgow, Cardiff, Brussels, and Munich, as well as flights from Luton Airport to several Irish airports. In the early 1990s, Michael O'Leary (at that time, Ryan's personal assistant) visited Southwest Airlines and was able to observe its operating practices, the fast turnaround, and the zeal for utilization of aircraft. O'Leary returned with a clear business model in mind: 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 fleet with a single fleet of Boeing 737s, simplified the fare structure, added new routes, and focused on secondary 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. In addition to growing its route network, Ryanair opened new bases in secondary airports throughout Europe. 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 the world: "We guarantee to give you the lowest airfare. You get a safe flight. You get a normally on-time flight. That's the package. We don't and won't give you anything more on top of that. Listen, we care for our customers in the most fundamental way possible: we don't screw them every time we fly them". Ryanair was relentless in lowering costs in each aspect of its operations. Ryanair consistently achieved lower costs per passenger when compared to rivals. The various elements of its activity system - no frills, no assigned seating, direct bookings, point-to-point flights, emphasis on secondary airports, and use of a single type of aircraft - enabled Ryanair to decrease costs through a combination of scale economies, experience curve effects, and low cost inputs. Ryanair formally launched its website in March 2000 and offered customers discounts for booking online. It was one of the first companies to bring e-commerce to Ireland and was disruptive in wiping out the intermediaries. O'Leary saw huge potential in a website that would not only sell seats but also serve as a single source for customers' travel needs, including travel insurance, hotels, and car hire. Within three months, the website was taking over 50,000 bookings a week and subsequently became one of the most searched websites on the Internet. By 2013, Ryanair was Europe's most profitable airline, flying almost 80 million passengers per annum and beating every other airline on price on every route. Traffic was growing, new routes were being served, new bases opened, and new aircraft delivered. Ryanair was excelling across the board: it had the highest punctuality rate (93%), lost the fewest bags (less than 1 bag per every 3,000 passengers carried), and received the 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 among short-haul airlines. Customers were also tiring of the cumbersome process of booking a flight on Ryanair.com - which could involve up to 17 clicks - and the multitude of extra charges they faced, such as luggage, seat, and transaction fees. Recognizing it was losing customers willing to pay higher fares for marginally better service; Ryanair announced a strategic change that would combine low fares with improved customer service. The strategic pivot that unfolded arose when Ryanair management learned that 70 million passengers were flying point-to- point on short-haul routes, but not with Ryanair.

To exploit the 70-million passenger opportunity, Ryanair realized it needed to start treating customers better. The initial emphasis was on addressing frustrations that led customers to defect to higher-priced competitors. In the initial phase of the "Always Getting Better" (AGB) program, Ryanair introduced a raft of changes, including shifting to fully allocated seating; launching a much easier-to-navigate website with a host of new features; introducing a 24-hour grace period to amend minor booking errors; allowing customers a second, small carry-on bag for free; and reducing charges for boarding cards and baggage. There were five pillars to the AGB program: fix the things the customers did not like; improve the travel experience; improve the digital experience; develop the offer; and improve the marketing and brand. This involved a shift on four levels: from passengers to customers, flights to travels, acquisition to retention of customers, and from transactions to relationships. The purpose of the various changes was to improve the likability of Ryanair as a functional service while also being different. The business logic underpinning these changes was that by improving customer experience, Ryanair would increase customer retention while also capturing new customersnotably business travelers and families and thereby improve shareholder returns. Between 2013 and 2018, Ryanair successfully architected and delivered a strategic turnaround enshrining its position as Europe's largest, cheapest, and most profitable airline. But in 2017, Ryanair cancelled up to 50 flights per day, inconveniencing over 400,000 customers. The cancellations had a disproportionate negative impact on the company's reputation and financial situation. For an airline famed for high operational efficiency, making a mess of a routine rostering task raised questions about key vulnerabilities in its strategy. Ryanair's credibility and whether management was sufficiently focused were questioned. The sustainability of Ryanair business model and its growth were brought into sharp focus. As Ryanair announced its first-quarter results for FY 2019, it faced unprecedented challenges. Profits had decreased by 20% compared to the same period the previous year. It was also facing further strikes and industrial action. In what some viewed as a signal of pessimism, O'Leary sold 2 million shares in June 2018 (at 16.49 each), leaving him with a 3.8% stake in the airline. As these events unfolded, the company faced worrying strategic questions; perhaps the greatest of all being how the company could reach its target of flying 200 million passengers by 2024?

"A low-cost carrier or low-cost airline (also known as a no-frills, discount or budget carrier or airline) is an airline that offers generally low fares in exchange for eliminating many traditional passenger services." In recent years, the entry of low-cost carriers has totally transformed the air passenger transport industry. Ryanair no. 1 lowest fare has revolutionized the airline industry in Europe and has shown impressive growth. Yet, Ryanair faces challenges to rethink its strategies with an increased emphasis on more customer orientation approach to achieve its ambitious growth targets by 2024.

Please answer the following points to build up your Ryanair case study report. (with references) 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 business model is effective? 4. Discuss and evaluate Ryanair growth strategies. 5. Examine Ryanair shift from passengers to customers, flights to travels, acquisition to retention of customers, and from transactions to relationships 6. Discuss and elaborate your recommendations for Ryanair future strategic direction and competitive positioning in a mature industry like airlines industry.