Ryanair

I spoke about the strengths that Ryan Air has, such as having acquired buzz. I said that since Ryan Air is expanding Eastwards at a steady pace this is a strength but a after some opinions from Maira Azzopardi and Nadine Grixti, I had come to realise that this is more of an opportunity. Maria Azzopardi also said that the fact that the website is available in more than 20 languages is also a strength.

Nadine Grixti went over to say that booking flights over the internet is a strength , however after a discussion with Maria Azzopardi and Elenia Desira regarding how this is the only way to book flight she decided that this was if fact a weakness. Maria Azzopardi and I continued to discuss that Ryan Air avoid paying congestion fees and it will also remain the first low-cost airlines these were identified as strengths. Nadine Grixti continued by saying since Ryan Air does not have an office in Malta, this saved costs and is a strength for Ryan Air.

I said that since passengers have to pay for an extra services even for using the restroom this is a weakness for Ryan Air and also the fact that profits decreased could also prove to be a weakness as Ryan Air may have to cut down on certain services or products to make up for this loss. Nadine Grixti and Elenia Desira argued that since passengers must pay for their luggage this is also a sign of weakness, Nadine Grixti came up with the idea that Ryan Air should provide a package which includes luggage along with flights.

Maria Azzopardi and Elenia Desira continued to say that this should not be obligatory since certain groups travel with only hand luggages. Maria Azzopardi said that since Ryan Air does not provide adequate Human Resources policies this may lead to an unmotivated workforce. Nadine Grixti said that the website is the only means of booking flights which is once again a weakness. I spoke about the fact that Ryan Air can expand into various other regions while still maintaining low costs, we all agreed that this was an opportunity.

Moreover we all discussed other opportunities such as the new fleet of airplanes and the steady expansion of Ryan Air into the East. Finally we discussed that since Ryan Air collects a lot of data from passengers, they may use this data to target customers even better. Nadine Grixti started discussing threats namely that if the oil price continues to rise and reach $150 per barrel this could lead to a situation where Ryan Air does not make any profits.

Another threat is the fact that other airlines may choose to enter low cost markets we all agreed on this. Maria Azzopardi came up with the idea that if other airlines acquire smaller one Ryan Air may face threats, we then discussed the effects that this may have on Ryan Air. Nadine Grixti spoke about the imminent threat that a change in CEO may have as it will take some getting used to for the whole organisation.

Elenia Desira and I said that the global recession and past factors such as September 11th and Islandic Volcano ash is also a threat and this is a threat since some people may be less willing to travel and perhaps even scared to travel. Moreover an increase in snow storms or volcano ash may cause airports to shut down and this may cancel certain flights. In conclusion we discussed all the factors contributing to SWOT analysis. The meeting went well and we managed to disused all that we had planned within the agenda. On most factors we were all in agreement whilst other took some.

We all discussed that the factors that influence the Ryanair’s demography are age, occupation, average income, lifestyles, religion, race, culture, birth rate and death rate. Moreover, we all agreed that such factors have various implications for Ryanair, for example: Maria Azzopardi said that people with adventurous personalities and lifestyles are more likely to travel than others. I continued to say that people who fear travelling with an airplane will definitely discard the idea of travelling around the world unless over land or by sea.

This will therefore, decrease the revenue of Ryanair. Charmaine Berry continued to say that the demography will have an influence on the workforce, meaning the people available to work, and also the wealth of the workforce. A discussion arose on why the workforce and the wealth of the workforce itself will influence demography. I came up with the idea that the workforce will influence the demography of Ryanair because the culture of such organisation will not be the same of that of the personnel.

This will ultimately influence the motivation and performance of employees. Elenia Desira stated that the occupation of customers will also affect the demography of Ryanair because business men or women will opt for a low-cost flights which will increase profits. However, the drawback is that the more the income the customers earn the more they will be able to afford more luxurious flights such as Airmalta and British Airways, and this will ultimately decrease the profits of Ryanair.

The discussion then shifted to product positioning. Maria Azzopardi began to say that product positioning is defined as how customers perceive the product or service Ryanair offers compared to other competitors. Elenia Desira continued by mentioning a marketing tool, the perceptual mapping, which identifies the perception of existing or potential customers on a specific product or service. Charmaine Berry stated that Ryanair would fall under a low price and budget standard airline and therefore.

It can therefore, be said that one of the main competitors is EasyJet because they are also perceived as having a low price and budget standard. I concluded on product positioning by stating that it is of great importance for Ryanair to make use of perceptual mapping because it would help the organisation to identify in which position Ryanair stands in customers’ mind compared to other competitive airlines. In conclusion, in this meeting demographic influences and product positioning were discussed. It was a very productive meeting as we managed to discuss the topics we had planned in the agenda.

Chief Executive Statement and company commitments showed that the priority of the company was to focus on customer’s needs and low price fares. Besides that the company stated they would improve their service and offer the best possible value for customer’s money. “We will continue to lower fares to maintain our traffic growth and high load factors. ” (Michael O’Leary, Chief Executive Ryanair, 2010) 1. Macro Environmental Analysis The following studies were based from online articles, Airline Post (2009-2010), Ryanair

Ryanair has been known for its cost saving in nearly every area. They offered customers the cheapest possible prices for flights but their vision of saving as much as possible has cost them their ethical reputation. Their cost strategy had been so important that they could have put their passenger’s safety at risk. In August 2009 according to allegations from Spanish aviation professionals and a Sunday Times report, Ryanair had been refuelling its aircraft with the minimum amount of fuel needed.

Another investigation had been made in September 2010 on the flight from Dublin to London when nine oxygen masks failed to deploy and the cabin crew had to bang on the cockpit to make them come out. Ryanair has been investigated by Air Accident Investigation Unit. Facts above confirm that the safety of customers has been less important to Ryanair than company profit. Ryanir’s reputation has not only been damaged because of their lack of responsibility regarding the safety of their customers, their fee charges have been another disappointment for customers.

Ryanair has promised to deliver the lowest price as stated on their website, “Ryanair will continuously offer the lowest available prices to all our passengers, on all routes on which we operate, regardless of which other airlines compete with us on those routes” (online, Ryanair, Passanger Charter, 2010) but passengers were angry when they found during their ticket booking process that luggage fees, check-in fees and charges for payment by debit/credit card were not included in the price of the ticket advertised.

The baggage fee has been one of the main issues for customers who travelled with Ryanair. In September 2009 the company increased their fees from ? 10 to ? 15 for check-in of a bag online, and ? 30 instead of ? 20 for check-in of a bag at the airport. A spokesperson of the company said “These baggage fees are all avoidable by all passengers who choose to travel with carry-on luggage only. Over 70 per cent of Ryanair passengers will be totally unaffected by these changes as they already travel with just one carry-on bag, which is free of charge” (online, Airline Post, 10th September, 2009)

This was another example of how the company did not think too much about their customer, especially families. It would be hard to imagine a family with children/teenagers going on holiday with carry-on luggage only to avoid the extra payment for baggage as stated in the statement above. The unethical face and ridiculous company rules with regards to baggage is clearly shown on a video (http://www. ihateryanair. org/ryanair-demonstration-on-how-to-publicly-humiliate-passengers/) on the website “I hate Ryanair” which has been in operation since October 2008 with a related Twitter feed, which stated

“Many people have been badly treated by Ryanair and shafted for hidden fees etc. We have too. This is why we decided to set up this website as means of expressing our general disgust” (online, I Hate Ryanair, About blog, 1st January, 2011) The video showed a group of young ladies unpacking as much of their luggage as possible and dressing themselves with as many layers of clothing from their luggage just so their bags would fit in the carry-on luggage “sizing” contraption.

This incident demonstrated how Ryanair publicly humiliates passengers and how much they mean to the company. Some customers have not been so lucky and they had to pay the fees for their oversized carry-on luggage. “I was flying on Ryanair last week and they made me pay an extra € 35 because the wheels of my carrier bag wouldn’t fit in that yellow form that your bag is supposed to fit in. ”(online, I hate Ryanair, Paula, 12th November, 2009) A charge of ? 1 for the use of on-board toilets has been explored and it could be the most outrageous fee by the company.

(Ryanair fees Appendix 1) In October 2009 Ryanair removed all of its airport check-in desks and customers had to check-in online on Ryanair’s website 15 days prior to their scheduled flight or at least 4 hours before the trip. According to a Ryanair spokesperson; “This new rule has been applied in an effort to improve passengers’ experience at the airport, thus reducing queues, and to continue to offer low prices on their tickets” (online, Airline Post, 29th September, 2009)

This statement was misleading, as by removing their check in desks from airport might of reduced queues but it added to the extra expense of travel fees for customers therefore increased company profit. (Year results Appendix 1) These actions saved the airline money and left customers to pay nearly all their expenses. The company continued to make their statements sound as if they cared for their customers. “For our customers, Ryanair is committed to fulfilling their needs in an honest and fair manner.

The Company is committed to generating sales through price, quality and the ability to fulfil commitment”. (online, Ryaniar, Investor Day, 29th September, 2009) The words “fair manner” as stated in the statement above was deceptive because otherwise they would not have charged more for their drinks as according to the survey by Nofly Ryanair charged as much as 50% more for a bottle of w ine, 35% more for a cup of coffee or tea and 30% more for its sandwiches than rival airlines (Bmi, Flybe, Monarch Airlines, Easyjet).

(online, Airline Post, 23th September, 2009) Passengers were not the only ones that had been treated badly by the company, their employees had also been victims of the company’s arrogance and carelessness. Transport Workers’ Federation has set up a website www. ryan-be-fair. org to offer the staff of the strong anti-union airline the freedom to discuss their work, conditions and any problems they may have. According to the federation they have received a lot of comments from cabin crews and pilots on how they have been treated by their employers.

Some of the comments from their website showed how much the company cared about their employees; “Ryanair does not care about its cabin crew and just takes the most they possibly can squeeze out of us. After a twelve hour day without a break, I don’t have the energy to be nice to passengers or check that my nail polish is still on. Come on Ryanair start valuing what we do because without us you could not fly”. (online, Ryan-be-fair, Cabin Crew, UK, 2010) “I really hope for Ryanair and all my cabin crew colleagues that everything will become good for us.

I really want to leave the company to go for a longhaul company which has better contracts and a safe system that includes insurance, pension, etc. Ryanair is abusing us the same way they abuse their passengers. I feel so guilty to be forced to be one of the executors that are ripping off the passengers’ money every day! Please help us! ” (online, Ryan-be-fair, employee, Germany,2010) Ryanair boss Michael O’Leray described the site as “generally just fiction” while the company’s director of personnel, Eddie Wilson, described it as “an irrelevance to Ryanair” and “nothing but an empty vessel making more noise”.

(online, management issues, 2005) The statement above showed the clear arrogance of Ryanair and their appreciation of their employees when the personal director described the comments and views of their employees as “irrelevant” to the company. In a survey according to Geneva-based Covalence which has released a ranking of 581 companies based on ethical issues like corporate social responsibility, environmental performance and information provided to customers Ryanair ranked as the 575th on the list (list of the best and worst Appendix 3) which was a severe blow to the company’s reputation. (online, Airline Post, 3rd February, 2010)

Instructor’s Manual 368 © Pearson Education Limited 2005 CASE TEACHING NOTES Ryanair – The Low-Fares Airline Eleanor O’Higgins 1.

Introduction Ryanair was the first budget airline in Europe, modelled after the successful US carrier, Southwest Airlines. The case offers students the opportunity to evaluate the strategy of Ryanair against the backdrop of the European airline industry and the burgeoning budget sector. Business students at all levels enjoy this case and relate to it, since air travel is an activity virtually everyone has experienced and we all have war stories to tell about the various airlines with which we have travelled.The Ryanair case has been used successfully with students from Ireland and other European countries, as well as with North American and Asian students. The case would suit all levels of business students, from a capstone undergraduate course on strategy, to post work experience MBA and executive education programme participants. It has been used effectively with all these types of groups. The case consists of: • a description of the challenges besetting Ryanair in 2004; • a history of Ryanair and its principal characters; • an outline of Ryanair’s robust performance in the period preceding the 2004 difficulties; Ryanair’s operations as a budget airline; • a description of Ryanair’s battleground, the European airline industry, as the competitive landscape continues to change; • a profile of Michael O’Leary, Ryanair’s ebullient CEO.

2. Position of the case The case is a comprehensive one and would be well placed towards the end of a course on strategic management. At this stage, students will have learned something of the economic, organisational and human context of strategy. The case concentrates on how to analyse industry environments, and internal resources/capabilities of companies and Instructor’s Manual 369 Pearson Education Limited 2005 their connection to the concept of sustainable competitive advantage. In sum, the Ryanair case illuminates how a strategy that is grounded in the best deployment of assets/resources/competences, and adding perceived value to customers, delivers sustainable strategic advantage. But the case also illustrates the difficulties and obstacles that stand in the way of achieving and retaining such advantage.Important strands in contemporary thinking about strategy are brought together – the ‘positioning’ approach of Michael Porter,1 and the ‘resource based’ view of Jay Barney.

It delineates the issues of balancing cost containment, pricing and customer expectations. Those participants with work experience can engage more with the internal management aspects of the case, e. g. leadership, culture, the human resources issues. Suggestions are also given in this Teaching Note for using more advanced analytical techniques, such as scenario analysis. The case can also be used for a continuous assessment assignment, either by group or individually, and for a case study examination. Previous versions have been used in these ways.

The case relates to all chapters of Exploring Corporate Strategy, but most specifically to Chapters 2, 3, 4, 5, 7, 10 and 11. 3. Learning objectives The overarching teaching objective is a comprehensive strategic analysis and evaluation of a business enterprise which includes: • an in-depth environmental analysis (Chapter 2); • an all-inclusive integrated understanding of the functioning of a company – its human and technical operations, leadership, customer relationships, financial structure, etc. (Chapters 3, 4 and 9); • the implications of the internal functioning to create viable strategic positioning (Chapters 3, 5, 7, 9 and 10); paradoxically, how the process of sustaining competitive advantage is a dynamic one, requiring constant adjustment, alongside external and internal monitoring (Chapter 11). 4. Teaching process The case breaks down into two inter-related parts that can be organised into two sessions. The first session (1? to 2 hours) could cover an environmental and European airline industry analysis, with implications for the budget sector and Ryanair in particular.

Armed with the industry analyses, students can do some preparation between Instructor’s Manual 370 © Pearson Education Limited 2005 essions, either individually, or in groups, to deal with an evaluation of Ryanair itself, the subject matter for the second session (approximately 2? hours). 5. Questions for discussion The crux of the case is to evaluate Ryanair’s strategy, having analysed the competitive arena in which Ryanair operates and its own particular mix of resources and operations. This entails an assessment of the sustainability of Ryanair’s strategy. The issues in the case can be broken down by addressing the following list of questions which follow a natural sequence that can generally be applied to the strategic evaluation of most companies.First class session: 1. Analyse the European airline industry, with implications for the budget sector, and especially Ryanair.

Second class session: 2. Evaluate Ryanair’s strengths and weaknesses. 3. Is Ryanair’s strategy sustainable? 4. Would you recommend any changes to Ryanair’s approach? 5. Evaluate the strategic leadership of Michael O’Leary. 6.

Case analysis 6. 1 Analysis of the European airline industry, emphasis on budget sector (Refer to Chapter 2 in Exploring Corporate Strategy. )The best way to approach this question is to go from the broadest unit of analysis to the narrowest: (a) analysis of the whole European airline industry, through to the budget sector, (b) mapping strategic groups in the budget sector, and (c) an examination of individual competitors, to ascertain whether there are any that pose a special threat to Ryanair. (a) Porter’s ‘Five Forces’ model This can be used to analyse industry structure as a good starting point, because it easily incorporates the external influences (PEST) and criteria for success that face airlines in Europe, as well as specifically those in the budget sector.Instructor’s Manual 371 © Pearson Education Limited 2005 (i) Competitive rivalry General: • Increasing rivalry, due to deregulation, more competitors on more routes creating overcapacity, growing power of buyers. • Rivalry, along with non-viable cost structures have ruined some national carriers, e. g.

Swissair, Sabena (Belgium) and others, e. g. Deutsche BA. • Consolidation and rationalisation • Airlines try to counter increasing rivalry by forming strategic alliances; • Mergers & acquisitions, e. g. Air France-KLM. • Attempts by airlines to increase customer loyalty through frequent flyer programmes, various perks to regular customers.

Mainstream airlines vying for premium business passengers by offering enhanced services, comfort, etc. • Economic downturn in US and overcapacity on North Atlantic routes forces carriers to concentrate rivalry and price-cutting on intra-European and especially North Atlantic routes.Budget: • Increasing number of rivals entering sector; as more rivals develop route systems budget airlines will find themselves competing head-to-head on the same routes. • Mainstream airlines trying to recapture customers from budget airlines by ultracheap fares on short-haul intra-European flights, e. . Aer Lingus in effect becoming a budget airline. • Cost is critical to enable carriers to compete with lowest fares.

• Potential trend among some competitors to add some ‘frills’ and flexibility, e. g. Virgin Express adds ‘comfort’, easyJet adds flexibility. • Some differentiation based on main airport locations, but more expensive for carriers • Capacity utilisation (load factor) especially critical in low margin industry ? increased rivalry. Instructor’s Manual 372 © Pearson Education Limited 2005 Ryanair perspective – intense and increasing competitive rivalry (ii) Threat of entryGeneral: • EU deregulation has removed barriers to entry for airlines based in Europe. • New entrants into different EU national markets can be other existing EU based airlines or newly established airlines taking advantage of deregulation. • Airlines from 10 new EU member states can now gain access.

Some already competing strongly, e. g. , from Hungary and Poland. • Newly established airlines or established airlines on new routes might have to be prepared to lose money for a period of time ? requires strong financial backing. Scarcity of landing slots, and reserved slots for national carriers, serves as barrier to entry at certain airports, e. g. British Airways slots at Heathrow, Air France at De Gaulle.

Budget: • Perceived customer demand attracting new entrants to budget sector. • Established airlines can enter budget from different market bases, e. g. mainstream airlines go ‘downmarket’ like Aer Lingus, or set up separate budget subsidiary, as Lufthansa has done with Germanwings. Or charter airlines can enter by moving into low fare scheduled services. Ryanair perspective – moderate threat of entry (iii) Power of suppliersGeneral: • Aircraft suppliers – oversupply of aircraft and fierce rivalry between Airbus and Boeing. • Stronger airlines, larger orders get better deals.

• Route cutbacks since 2001 by mainstream airlines have released almost-new second-hand aircraft on to the market, reducing aircraft suppliers’ power. Instructor’s Manual 373 © Pearson Education Limited 2005 • Fuel suppliers – depends on supply, and subject to fluctuations. Oil is a finite commodity. In 2004, oil prices rose sharply because of uncertainty about supplies from Nigeria, Russia and Iraq, three of the world’s top producers. Airports – range from primary to secondary; primary have greater power, but generally power of airports increasing as air traffic in Europe is increasing. • Airport services suppliers – bigger demand for such services thanks to deregulation, growth and outsourcing, but EU legislation ensures competition, reducing power of suppliers. Budget: • Aircraft suppliers – hegemony of Boeing in budget sector broken by Airbus giving Boeing less power.

• Larger orders get better deals like Ryanair deals. • Fuel – as in general case, but budget airlines have less capacity to pass on fuel cost rises to price-conscious passengers. Airports – smaller secondary airports want business from budget airlines, offering good deals – but subject to EU constraints – but demand on secondary airports increasing, e. g. popularity of Stansted – removal of intra-European duty free a bigger blow to revenue of smaller airports, used by budget carriers, without compensating extra-EU traffic; therefore, more likely to increase prices to airlines to compensate for loss of duty free revenue. • Airport service suppliers – as in general case, but budget airlines more likely to outsource. Ryanair perspective – low to medium power of suppliers (iv) Power of buyersGeneral: • 75 million new consumers from 10 new EU member states.

• Passengers have more choice and access to information via the Internet – although this can be confusing re special deals hedged with conditions and limited seats availability. Instructor’s Manual 374 © Pearson Education Limited 2005 • Distribution – power of travel agents decreasing vis-a-vis airlines; passengers can shop for flights on the Internet; also, trend to direct booking; travel agents try to win back business by offering ‘complete travel solutions’ to customers. Budget: • Budget airline fares appeal to price-conscious travellers. Increasing numbers of value-conscious business travellers use budget airlines – especially valued for flight frequencies on routes and punctuality.• Distribution – direct Internet booking very convenient for simple point-to-point travel typical of budget airlines, and cost effective for airlines; network bookings less suitable for ‘complete travel solutions’ offered by travel agents. • New competitors in budget segment increase buyer power and force down prices. Ryanair perspective – strong power of buyers (v) Threat of substitutes General: • Fast rail and cross water tunnels and bridges enable faster and more convenient land travel.

Price of rail substitute is important. • European mainland vacationers often use cars. Budget: • Rail and road more likely to be viable substitutes for the shorter journeys typical of budget airlines. • More difficult for rail prices to compete with low budget airline fares for priceconscious travellers’ business. Ryanair perspective – fairly low threat of substitutes (b) Competitive groupings within the budget sector Having identified the challenges facing the budget sector of the European airline industry, it would be helpful to examine whether the sector can be broken down into subgroups with similar competitive postures.This exercise could help to identify those Instructor’s Manual 375 © Pearson Education Limited 2005 rivals who are most threatening to Ryanair. A strategic group map is an effective technique for identifying the relative strategic positioning of competitors.

Chapter 3 of Exploring Corporate Strategy delineates how to draw and interpret strategic group maps. Firstly, students should identify the various key factors that discriminate among the competitors in the budget sector. These could include: xtent of route system, geographic markets served, average flight frequencies on routes served, extent of added frills, profitability, p/e ratios, ownership by another airline, use of strategic alliances, capital structure, capacity utilisation, etc. In addition to some information contained in the case, (especially Case Exhibits 1, 6, 7 and 8) the most up-to-date information on competitors can be obtained by students as part of the exercise of constructing the group maps, by visiting the websites of the various competitors.The most relevant rivals of interest are easyJet, Virgin Express, bmibaby, flybe, MyTravelLite, Germanwings, Aer Lingus. Students can develop a number of strategic group maps using all or some of the dimensions suggested above, and/or others they identify themselves, two at a time. By piecing together the different implications from the different maps, this will lead to a rich understanding of competition within the budget sector.

An example of a strategic map is given in Teaching Note Exhibit 1. The dimensions used are (i) extent of route system and (ii) customer service perceptions (see Exhibits 4 and 5 in the case).The proportions of the circles reflect the relativities in market share. Students could be asked to draw some conclusions from Exhibit 1. Several useful observations about Ryanair’s positioning can be elicited from studying the map. Firstly, Ryanair is obviously the largest in terms of market share, and has the most developed route system. It is definitively positioned as offering the most perceived basic of services.

Its nearest rival, easyJet, does not have the extensive route system of Ryanair, and is not perceived as quite as basic. The lower part of the map shows new, as yet small, entrants that fall into two types.One is following the basic model of Ryanair. The question is whether these new entrants can ever get to the critical mass to compete with Ryanair and beat Ryanair at its own game, if they encounter Ryanair head-to-head on the same routes. How can they outlast Ryanair in a price war? The other group in the lower part of the map is adding customer ‘frills’ and uses main airports, exemplified by flybe. The latter type may be trying to compete in what is perceived as an attractive gap between premium priced business class services and the most basic budget airlines, appealing to the price-conscious business traveller.The issue for the members of this cluster is their ability to organise the provision of added services and convenient airports without compromising the quintessential combination of cost effective operations typical of Ryanair.

So, instead of capturing a lucrative strategic space, they could find that they are losing out to the mainstream carriers at the Instructor’s Manual 376 © Pearson Education Limited 2005 top end and the budget carriers at the lower end. If this lucrative segment exists, the successful competitors will have to be able to provide for it at the lowest cost in the segment, i. . an effective ‘’ strategy. 3 Many previous incumbents of this niche (Debonair, Go, KLMuk/Buzz) have disappeared and Virgin Express is struggling. This suggests that in the budget airline sector, a best-cost producer strategy may not be viable. The map indicates that easyJet is definitely Ryanair’s closest competitor.

However, should Ryanair be worried about the likes of Aer Lingus, a mainstream airline that is capturing budget-conscious travellers and still making a profit?Is it possible that mainstream airlines like Aer Lingus can cross subsidise their budget operations from other longer-haul route profits? As indicated above, further maps can be constructed to complement the one in Teaching Note Exhibit 1, to provide a comprehensive picture of the competitive strategic space of Ryanair. (c) Evaluating selected individual competitors The next stage in industry analysis is the evaluation of those competitors that compete in the same arena as Ryanair. This evaluation helps to predict the actions of individual competitors and the impact of those actions on Ryanair.Again, the websites of the individual competitors detailed above should be sourced. Aer Lingus: • legacy rival of Ryanair, full service Irish national carrier, 100% government owned, but government hoping to sell off; subject of MBO bid in July 2004; • traditionally high cost, almost completely unionised; • reinvigorated after near bankruptcy in 2001/02; recovery thanks to cutting one-third of staff and severe cost-cutting plan; • styled as a no-frills low-fares airline on many European routes, although still uses seat assignments, primary airports; a direct competitor to Ryanair on some routes out of Dublin and out of the UK, London generically; • member of One World strategic alliance; • North Atlantic routes very important. Instructor’s Manual 377 © Pearson Education Limited 2005 easyJet: • most direct rival to Ryanair; inherited slots at Stansted from Go, rivals Ryanair on value-for-money image; • stabilising after aggressive growth spurt, including digesting Go; • better customer satisfaction and load factor than Ryanair, but poorer punctuality record; • shaky profit record ? less deep pockets than Ryanair for price war.Virgin Express: • generally loss-making, no clear strategy; • past best cost provider strategy (legroom, pampering, primary airports, etc.

) seems to be failing, because not taking in high yields ? high break-even load factor; • seeking expedient takeover by SN Brussels Airlines, as Richard Branson’s interest and attention directed elsewhere; • leases most of its aircraft, may be expensive, creating low operating margin; cannot take advantage of fluctuations in supply of aircraft? • diminished threat to Ryanair. 6. 2 Evaluate Ryanair’s strengths and weaknesses Refer especially to Chapters 3 and 5 in Exploring Corporate Strategy. ) (a) Strengths This question can be approached by listing Ryanair’s strengths in relation to competitors, and evaluating whether any of the strengths are sources of sustainable competitive advantage. To fulfil this criterion, they should (1) offer superior customer value, (2) be rare and (3) not be easily imitable by competitors. 4 • Ryanair first budget airline in Europe, market leader with first mover advantage. • Most developed route system with frequent departures on many routes and reasonable punctuality ? re-empting potential competitors on the same routes, unless they can offer better value than Ryanair through lower prices (which requires them to have lower costs or take the pain of losses – e.

g. withdrawal of Go from Dublin-Scottish routes in 2001) and /or extra services (but customers must consider these worth paying for). • Customers happy with value for money proposition of Ryanair. Instructor’s Manual 378 © Pearson Education Limited 2005 • Pursuing clear strategy, efficient and effective low cost operator (Case Exhibit 6); activities fit together to create low cost ? ifficult to undercut Ryanair on cost, and therefore on price (but see weaknesses for some cost vulnerabilities). Low and reducing break-even load factor, easily cleared, reduces financial risk. Similarly, average length of passenger haul is moving in the right direction, as is number of employees per aircraft ? reducing cost per Available Seat Mile (ASM) and Revenue Seat Mile (RSM) ? good operating profit up to fiscal 2004 ? healthy balance sheet and war chest. • Ryanair is creative and resourceful in constantly finding new sources of revenue – e.

g. outside plane sponsorship, on board entertainment and sales. Leadership – Michael O’Leary and management team are determined competitors. (See discussion on question 5 re strategic leadership issue, below. ) (b) Weaknesses In an inverse way, Ryanair’s weaknesses can be listed and assessed to see whether any of them create critical vulnerabilities that impair Ryanair’s positioning and viability. • Cost structure – aircraft utilisation in question with lower number of hours per day than easyJet; also, older aircraft entail higher fuel and maintenance costs; currency fluctuations make fuel costs unpredictable. • Overly cost conscious?Could be irritating to passengers.

Note that customers are very dissatisfied with Ryanair, other than value for money. This suggests that low fares are the only factor that attracts customers to Ryanair. Previously relatively high customer satisfaction rating of Buzz appears to have been obliterated rather than leveraged in the way Buzz has been subsumed into Ryanair. • Very vulnerable to financial market sentiment and high expectations, so profit warning was disastrous for share price. Also, majority free floating shares could result in over 50% ownership outside EU ? loss of airline licence. Staff issues – EU legislation regarding compulsory trade unions, alongside history of industrial relations problems; question marks over staff commitment and loyalty. • Outsourced services outside Ireland may mitigate against employee commitment and intense company knowledge necessary to create adequate customer service.

• Reputation – Ryanair has antagonised many constituencies (trade unions, competitors, Aer Rianta, some politicians, officials and journalists) whose support might have been useful in certain situations, e. g. the EU decision about Charleroi, the court decision on wheelchairs, etc. Instructor’s Manual 79 © Pearson Education Limited 2005 • Much antagonism against Ryanair is really directed against Michael O’Leary personally. Is his personal ‘in-your-face’ style a double-edged sword? (See discussion on question 5, below. ) 6. 3 Is Ryanair’s strategy sustainable? (Refer to Chapters 3, 5 and 7 in Exploring Corporate Strategy.

) On the ‘strategy clock’ (Chapter 5), Ryanair is firmly in the ‘no frills’ #1 position, highly dependent on charging low prices. The question is whether Ryanair’s formula enables the airline to continue in its leadership position of the budget sector of the European airline industry.It can be addressed by evaluating: • how the strategy meets customer expectations compared to competitors, and • how efficiently Ryanair is delivering the strategy in comparison with competitors. Combining these two evaluations against the background of the challenges in the analysis of the budget sector industry will give students some insights about how sustainable Ryanair’s strategy really is. 5 Teaching Note Exhibit 2(a) is a diagrammatic representation of how perceived customer value interacts with efficiency to produce sustainability. (a) Customer viewpoint Ryanair has succeeded in penetrating Irish, UK and mainland Europe markets. Surveys suggest low customer expectations of service, but the fact that Ryanair gets them to their destinations, sometimes for nothing other than taxes, appeals to customers.

• Previous recessions have demonstrated the robustness of the budget sector. Once people have traded down, or experienced very low fares, they are reluctant to pay higher ones again, even after economic conditions have improved. • Some of Ryanair’s cost cutting efforts might put off some passengers (e. g. roposal for carry-on luggage only, flight ‘consolidations’, which can be annoying and inconvenient, especially for business travellers). These adverse effects are less likely to occur with passengers who would not travel at all unless they could travel for the ‘price of a pair of jeans’ (to quote easyJet), or those who would endure these inconveniences for very low fares. This means that Ryanair will have to keep offering aggressively low fares to this segment.

• Competition in the budget sector is intensifying. In particular, easyJet is an aggressive competitor on many of the same routes as Ryanair.It may appeal to those customers who consider Ryanair’s product to be too basic, as may some new entrants who offer a less basic product, such as flybe. However, the question is Instructor’s Manual 380 © Pearson Education Limited 2005 whether the less basic service can be operated at low enough costs to charge low fares and still make a profit. Also, Ryanair seems better on punctuality than easyJet. (b) Producer/efficiency viewpoint • Ryanair has put all the pieces within its control in place to run a budget airline, as demonstrated by its low break-even load factor. However, certain cost advantages which Ryanair now enjoys could disappear: – Favourable treatment by airports and service suppliers.

Due to EU moves against anti-competitiveness, Ryanair will no longer be able to avail of discounts, grants, etc. , relative to competitors. As airports like Stansted, one of Ryanair’s mainstays, become more popular with budget and even mainstream airlines, Ryanair’s airport and associated charges are bound to go up. It is hardly realistic for Ryanair to pull out of a hub like Stansted or Dublin, as the airline had threatened to do if charges rise. – Staff costs.EU legislation curtailing working hours and making worker participation compulsory could simultaneously curtail worker flexibility and raise staff costs. Share options for staff could also lose their attraction relative to a wage rise, given the drop in the share price.

• While the above factors could eat into Ryanair’s profits, still other issues can prove differentially disadvantageous for Ryanair against some of its rivals, since its advantage is overwhelmingly dependent on low fares, in turn dependent on low costs. For instance, a rise in fuel charges would adversely affect Ryanair more than its competitors due to its older aircraft.The latter factor also increases maintenance costs and entails capital expenditure for refitting, etc. (c) Sustainability Ryanair is probably in Quadrant 2 of Exhibit 2 in terms of sustainability. While it gets a high vote on value for money, doubts over customer satisfaction as compared to other airlines suggest that it could not be placed in the high category on perceived customer value delivery. Although customers rate the components of the Ryanair experience poorly, the carrier comes out quite well in the proportion of passengers who would definitely or probably recommend the airline to a friend.Ryanair aims to offer customers a reliable short-haul air service at low fares and succeeds in this ambition.

Now the question is whether this ambition still serves the company well, as it might be vulnerable to attack from competitors which offer a more satisfactory experience. (The issue of strategic purposes in Chapter 5 can be applied regarding the issue of company vision and mission. ) Its current mission means that Ryanair must compete mainly on price to keep its price-sensitive customers and attract new ones. How equipped is Ryanair to do this?It depends on keeping down costs. On this front Ryanair knows no equal, and seems well protected in the short term. This is demonstrated in its low and declining break-even load factor, considerably lower than Instructor’s Manual 381 © Pearson Education Limited 2005 easyJet. However, section (b), above, suggests that Ryanair could have some difficulty holding down its costs in the longer term, and there may be some practical floor to this anyway.

However, maybe this is unlikely to affect it severely in the shorter term, with its commanding lead in the budget sector.Also, as predicted by Michael O’Leary himself, Ryanair will find itself in vicious price wars on a number of fronts, even if no one airline has the wherewithal to defeat the Irish carrier on its own. Price wars could badly affect profits. This could deplete Ryanair’s erstwhile robustness and have a further negative effect on its share price. Ryanair’s free seat giveaways are interesting. While they do fill empty seats, it is questionable as to whether they create long-term loyal customers, if the experience itself isn’t so great.However, free seats are a way of diverting passengers away from competitors who cannot afford to emulate the giveaway tactic.

This might deter potential entrants and drive out those competitors who decide to engage in war with Ryanair on the basis of price – unless those competitors have pockets as deep as Ryanair, or lower costs, or can add more service features without sacrificing cost. At the moment, there is no one around who can achieve any of these feats. So, while Ryanair might be sacrificing short-term revenue with the giveaway tactic, it is a way of ensuring its long-term supremacy.Another alternative for Ryanair is to attempt a move into the highest sustainable category (Teaching Note Exhibit 2(b)). It could shy away from competing so exclusively on price and try to add some more value to its customer offerings. However, it is constrained on the cost and logistics side from augmenting perks and services to customers. Ryanair would need to be careful that added services would not compromise its definitive positioning as a budget airline by raising its costs for value that is not perceived by customers.

There are definitely some moves that are out of the question, e. g. moving to larger central airports. The Which? survey offers some ideas of how Ryanair can improve the customer experience without incurring huge costs. These have to do with cabin crew, check-in staff, cleanliness and toilets. This might bring it closer to its role model, Southwest Airlines. The above is a suggested answer on the sustainability question.

Students themselves can develop more optimistic or pessimistic scenarios, e. g. who survives an early price war versus a later one (when more of Ryanair’s ivals might have had a chance to gain viability), etc. 6 Another way of provoking students to address the issue of sustainability is to ask students if they would buy shares in Ryanair. Why, or why not? If yes, how long and under what conditions would they hold on to them? 6. 4 Would you recommend any changes to Ryanair’s approach? (Refer especially to Chapters 3, 5, 7 and 10 of Exploring Corporate Strategy. ) Instructor’s Manual 382 © Pearson Education Limited 2005 Students can offer their own recommendations, but certain ones emerge from the analysis so far.

If Ryanair wants to play the role of ‘low-fares policeman’ in Europe, it has to assume superiority on the critical cost factors within its management’s control. So far, Ryanair has successfully pursued its cost leadership model. Certain moves have decreased costs and boosted revenue simultaneously, e. g. the www. Ryanair. com website.

Although touting its on-time performance record, it is unclear whether its punctuality performance is accurately perceived and appreciated in the marketplace. Additional sources of revenue should continue to be sought, again without compromising the low-cost model.Simultaneously, Ryanair has to continue aggressively to pre-empt competitors entering its routes. It has to anticipate its competitors’ growth patterns and destabilise them. Currently, the carrier has the deep pockets to wage a price war against any existing and potential airline competitors. The battle with Go on the Dublin-Scotland routes is relevant in this regard. Students can analyse this intriguing situation – the first all-out price war between two budget carriers in Europe on Ryanair’s own turf.

Was being established already on the route an advantage to Ryanair?Which of the two carriers had the resources and capabilities to win this war? What are the longer-term implications for Ryanair of winning or losing? What would students anticipate? What would they recommend from the Ryanair perspective? How many price wars on how many fronts can Ryanair afford to fight? Maybe one competitor alone cannot defeat Ryanair, but many simultaneous competitors might succeed. Scenario analysis would be useful here, drawing a series of strategic maps involving different combinations of erstwhile and potential competitors.Ryanair needs to understand its clientele, especially its new clientele, as it rolls out routes and opens up hubs in mainland Europe. What are its expectations, apart from the low-fares aspect? Is outsourcing services a limiting factor? How can this be addressed without compromising costs, especially in the high wage, less flexible work environments of mainland EU? Teaching Note Exhibit 2(b) describes a possible direction to enhance Ryanair’s sustainability. Ryanair has to seriously consider whether and how it should get involved in the 10 new EU member countries.On the one hand, these present an opportunity, since, by and large, airline markets have been highly regulated and fares very high, so there is probably pent-up demand for low fares; easyJet is already entering these markets. However, Ryanair is already suffering from overly rapid growth, so can it sustain yet more growth? Can it afford to stand by? Again, scenario analysis would be helpful here.

Ryanair could consider closing down some of its shakier routes and transfering the aircraft to the new member states. Another sensitive area is that of staff loyalty and relations.A high positive on this front could give Ryanair an unassailable competitive advantage as it opens up new routes, pre-empting its rivals as they struggle to become established – but this is not easily accomplished. Students might have some of their own suggestions here, especially those with work experience to draw on. Instructor’s Manual 383 © Pearson Education Limited 2005 Students should also be encouraged to entertain other possibilities, e. g. should Ryanair enter any strategic alliances or interlining arrangements?Southwest does not do this, and it does not seem to make logistic sense on a point-to-point route system.

But, are there any circumstances where it would make sense for Ryanair? Should Ryanair try to grow by means of acquisition, as it did with Buzz? By what criteria? Should Ryanair consider longer-range routes? Here again, scenario building could be a helpful tool in trying out different ranges of strategic moves, depending on an array of scenarios. 6. 5 Evaluate the strategic leadership of Michael O’Leary Is Michael O’Leary an asset or a liability to Ryanair? The case suggests that he is both.Students could debate the pros and cons of Michael O’Leary’s continued leadership of the company. The characteristics that have driven the company forward – his enthusiasm and energy, his strategic insight, his determination and mission orientation – can be carried too far. Is it all part of an integrated inseparable whole, so do you have to take the good with the bad? Is this where we may enter the realm of Sidney Finkelstein’s failure warning signs, when you have too much of a good thing? In fact, some schools of thought would value Michael O’Leary’s relentless energy and his thriving on adversity.It shows a lack of complacency – quite the opposite of what Finkelstein points out as a danger signal.

The capacity to irritate may bring about conflict and change. Also, in Michael O’Leary’s favour, as Ryanair’s largest single shareholder, he literally ‘puts his money where his mouth is’. Another way of looking at Michael O’Leary’s leadership is whether he was the right person for the job during the change era, but does the company now require more of a ‘manager’ than a ‘leader’ during a consolidation era? In other words, this is a ‘horses for courses’ approach to the evaluation of O’Leary’s leadership.One may ask whether and/or for how much longer Michael O’Leary wants to stay in the job. Will he get bored and retire to his cattle farm, currently his hobby? There is a suggestion that he would not be happy to preside over a static comfortable situation. Or, would he be headhunted by another airline or by another business altogether? Students might consider whether they would headhunt Michael O’Leary, and why or why not. Chapter 10 discusses types of leaders, i.

e. transformational versus transactional and types of leadership emphases and approaches.It is an interesting exercise to see how students would categorise Michael O’Leary. Perhaps what emerges is that he is difficult to categorise. What does this imply? Notes and Relevant Reading Material 1. It is likely that students will be familiar with Porter’s views on strategic positioning. These views are well summarised and illustrated in the following article: Porter, M.

E. ‘What is strategy? ’, Harvard Business Review. November–December, 1996, pp 61–78. The article also contains a relevant description of Southwest Airlines. Instructor’s Manual 384 © Pearson Education Limited 2005 . In the ‘resource based view of the firm’, Barney maintains that the achievement of a sustainable strategy is dependent on the unique internal capabilities and resources applied by an enterprise. The following reading delineates his approach: Barney, J.

B. ‘Looking inside for competitive advantage’, Academy of Management Executive, 9, 1995, pp 49–61. 3. A ‘best cost’ provider strategy is a synthesis of Porter’s cost leadership and differentiation strategies. It aims to have the lowest costs in a particular segment of the market where it is providing more than the basic product/service.Thus, it is able to supply superior value to customers when it adds attributes that customers want, but the best cost provider is able to produce these attributes at the keenest price.

IT has touched every aspect of commerce and turned those industries into gold mines. Travel & tourism industry is also one of those which IT has not spared. And how it has brought about transformation and revolution will be seen in the due course of the presentation. Let me first introduce you to the travel and tourism industry at large, and the focus is particularly on the Indian travel and tourism industry as a subset of the global tourism market.

India has been ranked 12th in Asia and 68th in the world as per the Travel and Tourism Competitiveness Report 2011 by the World Economic Forum (WEF). Tourism in India is the largest service industry, with a contribution of 6. 23% to the national GDP and 8. 78% of the total employment in India. The tourism industry in India generated foreign exchange of about US $ 136 billion in 2008 and that is expected to increase to US $ 275. 5 billion by 2018 at a 9. 4% annual growth rate. Maharashtra, Tamil Nadu, Delhi, Uttar Pradesh and Rajasthan are the top 5 states to receive inbound tourists.

A new growth sector in Indian tourism is Medical Tourism. Medical tourism is essentially foreign tourist cum patients coming to India and seeking medical treatment. It is currently growing at around 30% per annum. It generated $ 9 Billion in 2010. The reason behind such a rapid growth in medical tourism is the fact that India offers hi tech medical treatments at a very cheap price. Giving you an example, if a bypass surgery here costs around Rs. 2 lac, exactly the same procedure with the same instruments and materials will cost you 30000 dollars in the U. S. , i. e. Rs. 15 lac.

The tourism industry in India has also helped growth in other sectors as diverse as horticulture, handicrafts, agriculture and even construction. Coming to IT in tourism, when information technology is used in travel and tourism industry, it leads to the emergence of a whole new parameter called eTourism. eTourism reflects the digitisation of all processes and value chains in the tourism, travel, hospitality & catering industries. eTourism is the leading B2C application, i. e. business to customer application and it comprises of almost 40% of all B2C eCommerce. Gone are the days when you would wait for the customers to come to you.

In this era of fierce competition, you have to reach to the customers before someone else does. 60% of all tourists use internet to get information on destinations. So here we realize how essential information and communication technology is in today’s travel and tourism industry. eAirlines Till a few years ago, the basic sources of information in the tourism sector were pamphlets, brochures, directories, guide books, etc. produced and published by different countries. The last few decades witnessed the application of computer and communication technologies in the field of tourism.

Two distinct streams of information sources viz, (i) online and (ii) offline came into existence. Core results regarding ICT-related developments in the aviation industry: E-Ticketing: The elimination of traditional paper-based tickets is one of the core elements of the low-cost business model. Yet, e-ticketing is not limited to the so called “no-frills” airlines. The adoption of e-ticketing is increasingly pursued also by network carriers. The International Air Transport Association (IATA) intends to achieve a 100% penetration of e-ticketing among its members by the end of 2007.

Customer self-service: Another measure for cost reduction and the acceleration of passenger flows at airports is to introduce customer self-service check-in solutions. This may be done on the spot by self-service kiosks or in the form of web based check-ins, which may even allow users to check-in from home or their office. Bar-coded boarding passes offer a natural link with e-ticketing and self-service check-in. Most recently, it has become possible not only to print boarding passes at the passenger’s home, but also to place bar codes on the passenger’s cell phone, thus making paper documents obsolete.

RFID for luggage handling might replace classical baggage tags in the near future. It might simplify airline luggage management considerably, improve customer service in terms of reductions in mishandled luggage, and provide new security mechanisms. Computer Reservations System (CRS) A computer reservations system (or central reservation system) (CRS) is a computerized system used to store and retrieve information and conduct transactions related to air travel. Originally designed and operated by airlines, CRSes were later extended for the use of travel agencies.

Major CRS operations that book and sell tickets for multiple airlines are known as global distribution systems (GDS). Airlines have divested most of their direct holdings to dedicated GDS companies, who make their systems accessible to consumers through Internet gateways. Modern GDSes typically allow users to book hotel rooms and rental cars as well as airline tickets. They also provide access to railway reservations in some markets although these are not always integrated with the main system. Global Distribution Systems (GDS)

Major CRS operations that book and sell tickets for multiple airlines are known as global distribution systems (GDS). Modern GDSes typically allow users to book hotel rooms and rental cars as well as airline tickets. GDS distribute more than one CRS to users who are travel agents. GDS require massive investment because they are large computer system that link several airlines and travel principals into complex network of PCs, telecommunications and large mainframe system. Some leading GDS are Amadeus, Sabre, Galileo and WorldSpan are travel agents. eHospitality

Hotels use ICTs in order to improve their operations, manage their inventory and maximise their profitability. Their systems facilitate both in-house management and distribution through electronic media. ‘Property management systems (PMSs)’ coordinate front office, sales, planning and operational functions by administrating reservations and managing the hotel inventory. Moreover, PMSs integrate the “back” and “front” of the house management and improve general administration functions such as accounting and finance; marketing research and planning; forecasting and yield management; payroll and personnel; and purchasing.

Understandably, hotel chains gain more benefits from PMSs, as they can introduce a unified system for planning, budgeting and controlling and coordinating their properties centrally. Hotels also utilise ICTs and the Internet extensively for their distribution and marketing functions. Global presence is essential in order to enable both individual customers and the travel trade to access accurate information on availability and to provide easy, efficient, inexpensive and reliable ways of making and confirming reservations.

Although Central Reservation Offices (CROs) introduced central reservations in the 1970s, it was not until the expansion of airline CRSs and the recent ICT developments that forced hotels to develop hotel CRSs in order to expand their distribution, improve efficiency, facilitate control, empower yield management, reduce labour costs and enable rapid response time to both customers and management requests. Following the development of hotel CRSs by most chains, the issue of interconnectivity with other CRSs and the Internet emerged.

As a result, ‘switch companies,’ such as THISCO and WIZCOM, emerged to provide an interface between the various systems and enable a certain degree of transparency. This reduces both set-up and reservation costs, whilst facilitates reservations through several distribution channels. eTour Operators Leisure travellers often purchase “packages,” consisting of charter flights and accommodation, arranged by tour operators. Tour operators tend to pre-book these products and distribute them through brochures displayed in travel agencies.

Hence, until recently in northern European countries, where tour operators dominate the leisure market, airline and hotel CRSs were rarely utilised for leisure travel. In the early 1980s, tour operators realised the benefits of ICTs in organising, promoting, distributing and coordinating their packages. Thomson’s Open-line Programme (TOP) was the first real-time computer-based central reservation office in 1976. It introduced direct communication with travel agencies in 1982, and announced that reservations for Thomson Holidays would only be accepted through TOP in 1986. This move was the critical point for altering the communication rocesses between tour operators and travel agencies. Gradually, all major tour operators developed or acquired databases and established electronic links with travel agencies, aiming to reduce their information handling costs and increase the speed of information transfer and retrieval. This improved their productivity and capacity management whilst enhancing their services to agencies and consumers. Tour operators also utilised their CRSs for market intelligence, in order to adjust their supply to demand fluctuations, as well as to monitor the booking progress and productivity of travel agencies.

Tour operators have been reluctant to focus on ICTs through their strategic planning. Few realize the major transformation of the marketplace, while the majority regards ICTs exclusively as a facilitator of their current operations, and as a tool to reduce their costs. However, several tour operators in Germany, Scandinavia and the UK have moved towards electronic brochures and developed their online strategies. Successful operators report that up to 25% of their packages are booked directly by consumers online. This enables them to concentrate on niche markets. eTravel Agencies

ICTs are irreplaceable tools for travel agencies as they provide information and reservation facilities and support the intermediation between consumers and principals. Travel agencies operate various reservation systems, which mainly enable them to check availability and make reservations for tourism products. Until recently GDSs have been critical for business travel agencies to access information and make reservations on scheduled airlines, hotel chains, car rentals and a variety of ancillary services. However, until recently travel agencies have been reluctant to take full advantage of the ICTs, mainly due to:

• a limited strategic scope;
• deficient ICTs expertise and understanding;
• low profit margins which prevents investments;
• focus on human interaction with consumers.

There are effectively 5 major groups

1. Amadus IT group- vacation. com, opodo, travel tainmemt
2. Expedia group- expedia. com, hotels. com, anyway. com
3. Orbitz group- orbitz, cheaptickets, hotel club
4. Priceline group- priceline. com, booking. com, active hotels
5. Sabre group- travelocity. com, world choice travel

The innovative use of information technology for online booking, e-ticketing and internal communications coupled with relentless improvements in cost containment, operating efficiencies, route system expansion and scheduling enables Ryanair to achieve increased passenger traffic and report the best customer service performance in its peer group class.

Case study fact sheet

Turnover in last financial year: €1. 3 billion Primary customers: Business and Leisure Travelers Most significant geographic market: Europe Focus of case study: e-Ticketing

Key words: e-Ticketing, online booking, web check-in, low cost airline

Objectives

Ryanair has achieved annual increases in passenger traffic each year since 1995. Projections are for 35 million passengers in 2006, increasing to an estimated 42 million in 2007. Ryanair’s objective is to double passenger volumes and revenue by 2012. It currently (July 2006) operates a fleet of 107 Boeing 737-800’s and will buy 142 more of these aircraft over the next 6 years.

This study outlines the currently evolving e-business capabilities in place to address these growth areas and achieve the sought for doubling targets.

Online booking

Online booking via the internet commenced in earnest after the launch of the www. Ryanair. com website in 2000. Over 98% of the 27. 5 million passenger seats in 2005 were sold via the internet. This percentage figure is consistent year on year, and is expected to continue at this high level. The online booking system gives Ryanair the capability to introduce innovative practices to ensure that the individual customer has greater control over their fare costs.

E-ticketing Check`n`Go

Officially launched in 2006, Ryanair’s e-Ticketing Check’N’Go service enables passengers to check-in online within three days prior to the proposed flight and up to 4 hours before take-off. Using a pre-printed e-boarding card from their home or office computers, passengers can avoid the airport check-in desk and go directly to the security gates with a maximum of one piece of hand baggage. Encouraging passengers to travel with less checked-in luggage also means faster queues for those who check-in at the airport desk.

Internal communications

As Ryanair expanded across Europe, in addition to their well known customer facing web pages, Ryanair has implemented a web-based internal communications system used by flight crews, maintenance staff and ground staff. For instance, a record is kept of the various components in each aircraft and a tickler schedule for their maintenance and/or replacement. The intranet system has also saved on tangible costs, including paper and printing costs.

Dynamic packaging and other ancillary revenue sources

Ryanair drives more sales and increased revenue via the dynamic packaging of flights with discounted hotel rooms and bottom of the range car rentals. In addition after selecting their flights, all travelers are strongly encouraged via the online payment process to take out travel insurance. Another option provided via Ryanair’s homepage at present is to click through to another supplier’s web site such as activitybreaks. com to buy their products.

Conclusions and lessons learned

The adoption of e-ticketing and internal e-business systems has enabled this low cost carrier to keep operational running costs well in-check.

For the financial year ended March 31, 2005 their share accounted for 16% of total revenues, compared to 15% for the previous year. Ryanair is consistently the European leader in LCC. In addition, due to the minimal in-house administration costs, Ryanair’s low-cost-flights business marketing model includes frequent “give-away” flights as well: 23% of its tickets were given away in 2005, and half of all flights are slated to be “free” within the next 4 years.

Case stusy 2

E-ticketing at SN Brussels airlines, Belgium

This case study highlights the benefits of e-ticketing.

After IATA was commitment to discontinue the distribution and processing of paper tickets by December 2007. SN Brussels decided to focus on e-ticketing in order to cut operating costs and generate extra convenience to passengers. Apart from lower cost and increased operation efficiency, e- ticketing allowed the airline to strengthen its market position by a more intensive use of alliances and reduced dependency on intermediaries.

Background

• SN Brussels Airlines is a full-service Belgian airline company founded in 2002 by a group of Belgian investors who acquired some assets of the ankrupt Sabena airline.
• SN Brussels Airlines is the only full service airline that operates from Brussels and is the market leader at Brussels Airport.
• It operates around 285 flights per day to various destinations in USA, Africa & Europe and 3. 5 million passengers carried per year.
• It has around 2000 employees in Belgium & abroad.

Objectives

SN Brussels Airlines has developed an interesting business concept of offering fully serviced flights, as offered traditionally by the established airlines, with the lowest possible fare to compete with the low cost carriers. The airline aims to attract both the demanding business travelers with tight schedules but expecting value for money and economy travelers who are sensitive to prices This lead to high airline occupancy and the airline registered profit for 3 years despite unfavorable conditions.

ICT Investements

• Expands its ICT use due to customer expectations which gives travelers more convenience and control from the booking stage to the in-flight service. It invested in passenger technologies like e-ticketing, online check in services to reduce the cost. ICT developments like e-ticketing and own website/booking engine enable the airline to strengthen its brand awareness, get direct access to its customers and, consequently, reduce the dependency on Central Reservation Systems (CRS) and Global Distribution Systems (GDS).

E-business services

• SN Brussels’ internet site (www. flySN. com) is a major part of the company’s e-ticketing infrastructure it is user-friendly and allows for an easy search and compilation of travel offers.
• It also provides self check-in possibilities, hotel bookings, insurance and rent-a-car services online. E-tickets are also available through call centre on all routes in the network and through GDS used by travel agents.

Benefits

• Online booking, proved to be an efficient channel for the distribution of e-tickets. In May 2002 only 38% tickets were sold online whereas in September 2006, 63% of own sales were conducted via its own booking engine.
• The e-ticket uses a database to track the sale and use of tickets. All subsequent ticket transactions, including refunds, exchanges, check-in, void and settlement, involve this holding database this reduces chances of fraud and eliminates the problem of lost ticket. It also reduced the cost of documentations. SN Brussels Airlines’ e-ticketing solution allows for seamless link up with external partners by forming alliances and developing the so-called “interlining” system that allows passengers to have one ticket for a complete travel itinerary with different travel segments from several airlines. Passengers have then only one set of tickets for a multi-operator trip and benefit from having their luggage checked right through to their destination

Lesson learned

This case study illustrated the use of e-ticketing at SN Brussels Airlines.

The e-ticketing system did not only enable the airline to reduce operation costs and increase efficiency, but also helped to achieve strategic advantages which have further strengthened its market position. In particular, the applied e-ticketing technology facilitates the creation of alliances with other airlines. This, in turn, allows for a more efficient utilization of transportation capacities and access to a larger number of customers. Furthermore, e- ticketing combined with the development of direct online sales channels reduces the dependency on intermediaries and decreases the payments to CRS/GDS.

Future of E-tourism

• The Internet and mobile communication devices are three most significant ePlatforms that will help change the future of tourism.
• The Internet will allow more people to access high quality information quickly and with minimum inconvenience. It also gave the possibility to purchase travel products on-line. In addition, it generated great service expectations, as consumers anticipate to be served on a 24hours/365days basis and at their own convenience.
• Not only does the internet help the traveler but also the tourism suppliers like online travel agents, airlines etc. The trend towards the use of mobile communication devices is mostly determined by the commodification of mobile phones in the past few years, coupled with an increasing need to be able to obtain information while ‘on the move’. For example, business travelers can receive information on arrivals and departures as well as check-in through their mobile phone for a number of airlines.
• On-line Internet provision is not sufficiently developed for those areas conventional telephone can also be used, a traveler may call a call center to confirm their bookings or ask queries.

Importance of GDS and CRS in Travel & Tourism Industry

Computer reservations systems (CRS) have become critical instruments in the marketing and distribution of travel and tourism products and services. New systems have recently been developed in Western Europe, while the Asian and Pacific regions are in the process of establishing their own systems. A central reservation system represents a computerized system used for both storing and distribution of information. We could be talking about a hotel, a hotel chain, a resort or any other type of lodging facilities.

The CRS can also be used for checking up different details about flights or seat availability. People may tend to confuse CRS with GDS (Global Distribution System) because of their similar functionality. However, there is one important difference between these two applications. Central reservation systems are web applications exclusive for each company or hotel. On the other hand, a global distribution system is used by various travel agents for booking reasons, as they cannot access CRS. CRS contains important information such as hotel accommodations, activity bookings, flight schedules or even holiday packages.

There is almost no need for a travel agent as you could simply arrange your reservations over the Internet. Most hotels and travel agencies have their own websites for presenting their rates and offers. Websites can also be used together with various CRM software in order to strengthen the existent client relationships. Reservations are processed within a centralized location that is also responsible with availability management. Rates retrieval and reservations are made as efficiently as possible. Hotels will benefit from better yield management and will also reduce other costs as web bookings will not be done anymore through third parties.

Complete a PEST(EL) analysis as preparation for a scenario planning exercise next week.

Political

• Due to severe security measures, they had to cancel 279 flights and refunded 2. 7m€. A loss of 1. 9m€ in reduced bookings
• Aer Lingus was fundamentally opposed to a merger with Ryanair, even if it raises its price
• 12. 6 % of the shareholding controlled by Aer Lingus, whose members rejected the offer by a 97% majority vote
• Opposed to the BAA airport monopoly plans to build a 4bn gold plated Taj Mahal at Stansted

Social

• Europe’s leading budget airline August 2006, Air Transport World magazine- most profitable airline in the world
• 72% negative response from a poll of readers of the Financial Times for one of its initiatives
• In 2006, its employees count by more than 700, to 3. 500 people, comprising over 25 different nationalities
• In 2006, it was voted the world’s least favourite airline because of the unfriendly staff, delays and poor legroom
• The airline formerly refused to provide accommodation or meal vouchers when flights were cancelled or delayed, until it became illegal to do so in 2005

Environmental

• Deploying more efficient aircraft that use less fuel and produce less pollution
• Concerns about greenhouse gases from carbon emissions
• Replace its fleet of old aircraft with new, more environmentally-friendly aircraft, reducing the average age of its fleet to 2. 4 years
• New aircraft produced 50% less emissions, 45% less fuel burn and 45% lower noise emissions per sea

Economic

• Its average paid was 49612€, a higher figure than any other major European airline
• August 2006, Air Transport World magazine- most profitable airline in the world
• Cost-cutting/yield-enhancing measures for passenger check-in and luggage handling could save more than 1€ per passenger
• Web based check-in and priority boarding, save costs on check-in staff and airport facilities, as well as time
• By tailoring rosters, they maximised productivity and time off for crew members

Technological

• Web based check-in and priority boarding
• Fleet of over 100 new Boeing 737-800 aircraft and firm orders for a further 138 new aircraft to be delivered over the next six years
• Stronger passenger safety: body searched, banned from carrying liquids and gels in their carry-on luggage

Legal

• Complying with EU regulations which impose a ceiling on pilot flying hours to prevent dangerous fatigue
• In litigation with various airport over landing charges Accused it of misleading passengers on its website by exaggerating the prices of its competitors in making comparisons
• Following flight cancellations due to increase in security measures, they decided to file two legal cases against UK government
• In 2005, new legislation that offered compensation cost to passengers affected by delays, cancellations or denied boarding