Ryanair, a European pioneer of low-cost airline

Résumé du document

Ryanair was founded in 1985 by the Ryan family. At inception, the airline was a full-service conventional airline, with two classes of seating intended to provide scheduled passenger airline services between Ireland and the United Kingdom. However, over the years, the airline has changed fundamentally. Today, Ryanair is the leader of low-cost airlines in Europe and, according to a magazine, the most profitable airline in the World . In 2006, despite an increase of 74% in fuel costs, the company succeeded in generating a 12% increase in net profit. Air traffic had grew by 26% the same year, from 27.6 million passengers in 2005 to 34.8 million in 2006.

However, the airline was not satisfied with this position, and Ryanair set new goals for itself.

Extraits

[...] This can be calculated with the average daily hours of flight time per aircraft. The goal is to maximize it to make economies. But managing the fleet involves as well having the highest load factor as possible. Indeed, the load factor is the proportion of an airplane's seats that are sold and actually filled at departure. When a plane takes off, its functioning costs are fixed. Thus, the more passengers there are, the more costs are covered by revenues. The goal for a carrier is to reach a load factor of 100%. [...]

[...] It became a “no-frill service”, whereas earlier it was a full-service conventional airline. Then, its continued improvements to reduce operating costs leading to the sale of old planes, and the purchase of new, more environmentally friendly aircrafts from only one manufacturer instead of three different during Tony Ryan's era. Finally, one of Michael O'Leary's decisions was to expand airport network everywhere in Europe, instead of staying only in United Kingdom or in Ireland, and to establish frequent Point-to-Point Flights on Short-Haul Routes (instead of hub-and-spoke service realized by the former CEO) in order to reduce airport charges and allow more frequent and more efficient plane rotations. [...]

[...] Results weren't ensured, and the risks of failure and bankruptcy were at their maximum. This strategy constituted a huge upheaval in Ryanair's management habits on many points: First, O'Leary decided to offer the lowest fares possible to attract a large number of customers and make profits on the quantity of passengers transported, whereas earlier, prices were aligned to those of competitors. Then, to reduce operating costs and in order to reduce the price of the ticket, he reduced service on-board. [...]

[...] By providing the lowest fares and succeeding to make huge profits when competitors are struggling, Ryanair is surely the best low-cost airline of the market. Its ability to find ways to reduce costs in its business allows it to remain profitable while offering prices lower than its competitors. Cost cutting solutions such as point-to-point and short-haul routes, internet booking, secondary and regional airport using, incentives to reduce check-in luggage, and maximum utilization of the fleet and the personnel are the basis of Ryanair's competitiveness, because they permit it to provide low-fares to their customers. [...]

[...] They understood before the others, the needs of European travelers, and saw the opportunities related to this emerging market, which is a low-cost airlines market. Moreover, they succeeded in implementing their strategy well, by forming responses to this particular market and then improving the performance of the company. The result of this strategy is that in 2006, the Air Transport World Magazine announced that Ryanair was the most profitable airline in the world. To resume we can say that Michael O'Leary has performed very well as the CEO of Ryanair. [...]