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Ryanair

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Case Study – Dogfight over Europe: Ryanair
Business Landscape Item | Description | Impact | Government Intervention | Market Deregulation: * Free to set fares * European airlines to fly any route between EU countries * Any intra-country route between two European cities | Open for new competition | | European Union eliminated duty free sales on intra-EU flights | Has to pay duties |

Ryanair Challenges & Strategy Description | Cashflow problem, Funded by Ryan Family | Strategy | Low cost carriersCost side: * Cut loss-making routes * Eliminate in-flight amenities (such as: free coffee and snacks) * Renegotiate labor contract (e.g: flight attendants pay is a function of duty-free sales and the number of flights they flew, “Luv” – pay based on productivity) * Stop distribution of meal vouchers to travelers whose flights delayed by bad weather * Stop using “air bridges” that linked parked planes to airport terminals * Reduce travel agents commission from 9% to 7.5% * Serve at secondary airports * Use other parties to handle ground operations * Not allow check baggage throughRevenue side: * Ticket, in-flight sales, car rentals, charter sales * In-flight duty-free sales, beverage, and snacks * Lease space behind seat-back trays and headrest to advertisers, exterior of plane with a corporate logi, in-flight magazine published with full advertisement | Routes | * 150 flights per day, 13 locations in UK, 4 locations in Ireland, 16 locations in continental Europe * Originate / terminate at London Stansted and Dublin Airport (not treated as “hub”) * Served secondary airport (low landing fee, turnaround costs, on-time land and depart) * Point-to-point | Market Shares | * 30% Dublin – London * 50% Ireland – other British cities * 32% London – Pisa * 21% London – VeniceDeclining portion of Ryainair’s total customer base. Paid in Irish currency | Customers mix | Price sensitive customers: * Leisure travelers (70-75%) * Business travelers SMEs (25-30%) | Reservations | * 40% Ryanair’s call center in Dublin (160 full time agents), Teletech UK (per-call basis) for overflow call center, calls from France, Italy, Germany and Scandinavia * 60% travel agents (major computerized reservation systems) => customers know Ryainair from travel agents not from advertising * 70% online during weekends | # flights | * 737-200A (21) – 130 seats (manufactured in 1980 and 1983) * 737-800s (25) – 189 seats | Ground and in-flight operations | Ground operations: * Use less computerized * A boarding pass with no seat assignment * Not check baggage through * Use multi-year contracts with private companies or with authorities for check-in, baggage handling and aircraft servicing (except in Dublin airport) * Target: departing 25 minutes after reaching airport (reward and punishment for contractors) | Pricing and Marketing | * 50% below * 70% of its seat available for restricted and same / next day ticket (vs. 15% for comparable categories) * Fewer restriction (e.g. not have to remain at their destination over a Sat night) * Advertise: newspaper, radio, television, and word of mouth (but effective from travel agents) | Human Resources | * 1200 employees * Flight attendants and pilots – pay based on productivity (earn more than competitors, pilots: fixed salary (10% above) and a payment per sector flown (50% more sectors). Also receive employee stock options * Engineers and maintenance – pay based on tenure * Promotion: within company (14% promoted), allow job mobility * Not unionized * Young employees (under 30) * Informal and flexible management structure (not mission statement, minimum formal long-range planning, top management deals with week’s priorities) |

Competition Item | Virgin Express | Easyjet | BA’s Go | Debonair | Description | -Brussel-based airlines-owned by Richard Branson- originated or terminated at Brussel’s main airports | -greenfield startup-founded by Haji-IoannouBased in London Luton-use subcontractors more than its rivals (ground services, fleet maintenance, flight scheduling, daily personnel planning)-against KLM anticompetitive | -claimed to be separated companies from BA-received legal actions: (1) BA supported GO indirectly by underwriting its airplane leases and providing insurance, advertising and other services at a discount-copy of easyjet -employee union | - London Luton to Barcelona, Dusseldorf, and Munich- London to Copenhagen, Madrid, and Rome - Connecting Barcelona to Rome and Munich to Rome, Copenhagen, Barcelona and Dusseldorf | Airports served | Primary and secondary airports | Secondary airport for London Luton and primary airports for outside London | London Stansted to Rome and Milan | | # flights | 40 flights per day in Belgium, Britain, Denmark, France, Ireland, Italy, and Spain | 29 routes – operated within UK or London to Southern EuropeLondon Luton (60% of all flights)Add new bases: Geneva and Liverpool | | | Revenue streams | Charter flights – 35-40% | | | Business travelers: 58% | Aircrafts | 737-300737-40021 with average age of 5.5 | 737-300 (18) | 737-300 (8) (148 seats) | | In-flight services | No frills, but provide free drinks | No frills at allSell drinks and snacks, but no duty-free merchandise | * No-frills * Received a seat assignment * On-board food franchise to a upscale caterer * Winning coffee | Offer a seat comfort and passenger servicesFree drinks and snacksIn-flight entertainment system (installed at no cost in exchange for 60-80% of resulting revenue) | Reservations | * Own call centers in Brussels and Shannon, Ireland (80 operators offered service in 9 languages) * Not participate in multi-arline computerized reservation system * Online booking (10-15%) | * Direct selling * 40% from internet sales | | One-class, one-way fare with few restrictionsOwn reservation: 38% | Partnership | Sabena committed to buy a number of seats (Brussels to Heathrow, Gatwick, Rome and Barcelona) | | | | Challenges | Shortage of pilots impacted income | | | | Marketing | | | Low fares combined with style and quality | Low fares with minimal restrictions and no comprise on comfortOffer frequent flyer programs |

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