RYANAIR: THE PASSIONATE COST CUTTER THAT IS BOTH LOVED AND HATED Ryanair is the leading low-cost airline in Europe. It has achieved a high market share by relentlessly holding costs and thereby offering the lowest prices on its routes. To attract new customers, it once offered flight for one penny to selected destinations. It sold almost half a million tickets with the promotion. While Michael OLeary, Ryanairs CEO, is known to be extremely cost conscious (he will not provide employees with pens; he recommends that they get them from hotels where they stay overnight), the primary reason for Ryanairs lowest cost is that it has the fastest turnaround in the industry (resembling a race car pit crew operation). OLeary is also constantly identifying new revenues streams such as charges for use of airport check-in facilities, charging for each piece of luggage, offering rental car at destination, charging to use the toilet on the plane, etc. To obtain free publicity, OLeary or his executives often make outrageous statements and roundly criticize their competitors to get Ryanairs name in the news. The firm uses multiple marketing gimmicks such as advertising that directly criticizes competitors on specific routes, excessively low fares and even some provocative advertising slogans. The firms core competence is the capability to maintain the lowest cost in the industry and to generate alternative revenue. Because of its very low fares, it passenger load grew at an annual rate of approximately 25 per cent until the economic crisis in 2008. The company even made profit in 2008, a very difficult year financially. All of this said, Ryanair receives a significant amount of criticism. In 2006, for example, it was voted as the least airline (despite its popularity evidenced in passenger number). It receives a large amount of criticism for it lack customer service, with the special focus on an unfriendly uncaring staff and hidden charges. Yet, OLeary believes that Ryanair may be one of the few airlines in Europe left standing after the latest severe economic recession. He is planning growth (although the airline announced some small reductions in service and staff in 2009|) and is negotiating with Boeing and Airbus to buy as many as 400 new aircrafts. The airline already is one of the largest in the world in terms of numbers of passengers served annually. With it decided strengths and also acknowledged weakness, the future of Ryanair will be interest.

QUESTIONS

A. Use the value chain analysis to identify and evaluate Ryanairs resources and capabilities.

B. Define outsourcing and discuss reasons for its possible use by Ryanair.