CASE STUDY

01lR.20 m the air line I

Ryanair: the low fares airline - future destinations?

Eleanor

O'Higgins

no frills cal IDe SUCCCS! ream. led t was appon Exchange i

Stock exch

The case focuses on rhe analysis of rhe airline indusrry environment. and the concept of sustainable efficient deployment sustainilble competitive of essets/resources/competencies. The case also illustrates

Ihe inlernal

resotJrces/capabililies

of Ryanair delivers

advantage. The case illustrates the difficulties

how a strategy that i5 grounded in the

whilst ildrJing perceived value 10 customers. and obstacles that stand

In

Hixed res, Ryonair dr on the ba: largest into now the SI US carrier five years. largest arr model Sou Rcleasi Michael ( Ryanair's doing rerr lowest co: pany repc (10.9 mil cast loss ( lalling 12 Profits gu' rather ths The ai Ireland. ) Prance. G were cut average 0 routes in the dernis These Iull-year . to a 18( was erad l..ingussh chilrge. I profits fel This was railed to July lOt) against r barrel fOI quarter during II from 50.

strategic advantage.

the way of

achieving and retainmg such advantage through changing circumstances.

There is only one thing in lire world worse Ihan being lalked abollt. and thai is no! being [(lIked abolli.
This is il quote Irom a novel by Oscar Wilde bUI it could be the mantra or budget airline Ryanair. Europe's largest carrier by passenger numbers and market capitalisation in 2009. The airline is often controversial. whether it was by annoying the Queen of Spain by using her picture without permission. or announcing plans to charge passengers to use toilets on us nights. or engaging in high-profile battles with the European Commission. Ryanair also made news with its achievements. winning international awards. like Best Managed Airline. or receiving a 2009 FT-ArctlorMirrnl 80ldness in Busint~s Award. This Award announcement said that Ryanair had 'changed the airline business outside North America - driving the way the industry operates through Its pricing. the desunauons it nics to and the passenger numbers it carries'.' Ryanair had been the budget airline pioneer in Europe.' rigorously Iollowing a low-cost strategy. It had enjoyed remarkable growth. and In the five years to 2009 was the most profitable world. according to o"1ir Transport magazine. airline in the Despite this apparent success. Ryanair faced issues. The most pressing. shared by all airlines. was an industry that was 'structurally Sick' and 'in intensive care'." with plunging demand in the global economic recession and uncertainty about oil prices. What strategy should Ryanair use to weather this storm? Would the crisis produce a long term change in industry structure? Could Ryanatr take advantage of the situation as it had in the past. by growing when others were cutting back) A predicament of its own making was Ryanalr's 29.8 per cent sharcholding in Acr l.ingus. the Irish national carrier. following an eboruve takeover attempt. Aer l.ingus' flagging share price had necessitated drastic write-downs. which had dragged Ryanair into its first ever losses in 2009.

Overview of Ryanair
In 2009. Ryanalr had 33 bases and over 850 routes across 2& countries. connecting) 4 7 destinations It operated a fleet of 199 new Boeing 737-800 aircraft with lirm orders for a further 112. It employed over 7000 people and was expected to carry approximately b7 million passengers In 2010. Ryanair was founded in 1985 by the Tony RYilll family to provide scheduled passenger services betwecn Ireland and the UK. a.~an alternative 10 the state monopoly airline. Acr Lingus. Iniually. Kyanair was a fuJlservlcc conventional airline. with two chlsses of scating. leasing three different types or aircraft. Despite growth In passenger volumes. by the end of 1990 the company had faced many problems. dispoSing or live chief executives. and accumulating tosses

an

This case was prepared by Eleanor OHiggins. Univl!rsity College Dublon. It is Intended as a baSIS for class diSCUSSion and not as illustralion ot good Dr bad practice. <D Eleanor 0 Higgins. 20t O. Not to be reproduced or quoted without permission.

HYANAIR THf. LOW FARES AIRLINE ofIRL20 million. Its fight to survive In the early 1990~ saw the airline transform itself to become Europe's first low fares. no frills carrier. built on the model of Southwest Airlines. the successful Texas-based operator. " new management team. led by Mkh,leI O'Leary. at first a reluctant recruit. was appointed. Ryanatr was floated on the Dublin Stock Exchange in I Y9 7 and is quoted on the Dublin and London Stock exchanges 'analr
in thl:

619

cent to 40 and were forecast to decline steeply by it further I 5 to 2(J per cent to about f 3 2 in fiscal 2() I O. (Ryanair's financial data (Ire gtven in Tables 1a and 1h. and operating data are given ill Table l c.) The airline contended that it could offer the lowest fares b~' cutting rusls to levels that rivals could not achieve. It was planning new aircraft.
bUI

and also

011

the l\ASDAO since 2(J[)2.

to recruit 1200 new employees to saYicc its the Humber of passengers per employee

Mixed fortunes
Mixed results

'crs

lay of

011

Ryanair designated itself as the 'World's Favourite Airline' the basts that In 200':1. lATA ranked it as the w orld's

was still expected to rise thanks to economies of scale from new routes and OJ decline in airport charges by directing trafllc toward airports offering bargain deals. Having been caught short in us fuel hedging for lO(}X/O~. Ryanair took advantage of the low uil price to hedge (J(] per cent o~ its Iuel costs during 2009/10. locking in a full year fuel cost saving of about t'4hO million. Ancillary revenues Ryanair provides various ancillary servict~s connected with its airlluc service. mcluding in-flight beverage. food ilnd merchandise salcs. It also distributes accommodation. trav!'! insurance and rar rentals throllgh iL-;wehsite. This enables Ryanair to increase silles. while redudng unit COs~. In 2009. Ryanair's websitc nll1ked 12th by number of visits for c-tailers in the [11\ (after EasyJel. which ranked II ch I. AnCillary scn:ict,~ <lccoullled for 20.) per cent of Ryanalr's total operating re\,cnut':S in 20()9. compan~1 to 18.0 per cenl in 20mL In filCt. ancillary revellUCS had dimbed hy 22 per CCllt. considerably faster than passcnger reVCllues al 5 per cent. I~enerating ~'I 0.20 I~r pasS('nger iind with hi\.:her margins. Other allcill<lry rc\'cnue initiatives were Introduced. such as onbtJilrd ilnd online gamblin~. and a trial in-tltght mobile phone service ill lOO'). A poll of Frnllllt'lai Tirm's n'adns had prodncerl it 7 1 per CClit negative rc.~p(lllse to the quc.~tioll. 'Should mobile phones he allowed on ilircraft!,' l!owevcr. ~1ichad ()'J.~i1l)' df'.dHred 'If you want a quiet flight. usc another airline. I{yauair is lIoisy. full and we arc always trying to sell ~'ou something.''' /\ot all ancilhtry service initiatives were succes.'iful. In 200:;. Ryanair plIlled nn infIj~ht entcrtalnment paying "8 to [l'n! Ryanair
it

largest international airline by passenger numbers. II was now the sixth largest airline in the world (when the large
n the

liS carriers' domestic traffic is included). Over the next live years. Ryanair intended to grow to become the second largest airline in the world. ranked only behind its role modd Southwcst Releasing Ryanair's 03 1009 resul~ in January 2010. Michat'l O'Lear~' obscrved. 'The ell\'ironmt'nl is. from K~'allair's rx~rsp<~ctive. great. because it is awful. We're dOlllg remarkahly wcll bccau:;t' lhis is the lime whcn the lowest cos! pfo<lucer willS."" For the quarter. th.~ COItlpany reponed a much smaller lIet loss than cxpccted of million (t9.'Jm or S 1'iml. instcad (If an earlier forecast los$ of .5 5 lIIillion. with beller thim expected yields.

;sucs.
IlStry

with and anair long take wing own

I

no. Y

Aer

rtiv!: had gged

fallin~ 12 pt.~rcent rath('f than the forecast 20 per ('ent. I'roliL'i guidance for the full year improved to t:275 million nltht'r than the lJri~inal C20() lIIillion fore,ast. The airline had cut lo~slllakilljo\ routes ill thl' CK ilnd Ireland. replacing them with mort' profitable OIl(~S ill Frant:c. Germany and Spain. Opcratill~ ,osl~ passcn~er per were cut hy 4 per ccnt. despite a 1 p<~r(,f'lIt increase in average. IIlght di~tance_ Ryallillr planned to open 14(J new rOlltes ill 201() and to Incrcase lIIarket share thanks to thr dembe of several carriers." These n~slllts and expectations for 20 I () followed Oil full-year 20()Y results (see Tahle 1). whell Rvallair plunged to a 1 RO million loss. as its 144 million opcralin~ profit wa5 l:radlcated by a Cl12 million write-down of its Aer Lingus shares and an a,ce!eralrd C'i 1.6 millioll deprcriatioll {harge. Exdllding Ihese exceptiOllil1 charges. underlYing profits fell 7K per cenl froOi t:1S0.1J million to f 10:; million. This wa~ dlW largcl~' to it sury,e in fllel prices as Ryanair failed to hedi:>,c when oil pri,es rose to $117 iI barrel in July 200M. Th(~n. howing to ~hnreholder prt"sslIre to cover agilillst rocketinj! prices. it locked in fud costs at S 124 a hand for RO per cent of its col)sufIlplioli during the third quarter JlIsl as Ilil pric('_,> crnslled 10 a low of S 33 a barrel during that period. Passenger numh(~rs rose l'i per ('("nl fmlll 'i0.1) million to SR.5 million. Average farcs fell H per

:ros.<; {'d a '!lers

r.;

was in

system when passcngl~rs had rt~btcd gaml's and en(er!aillllwlll cons()it'. charges for

was tht: Iirst airline to in!rotiucc

mily land line. onll! rent ,. by

dwt:k-in luggage. Virtually (III budgcl illrlil1l~ have folluwed Slli!. as they have with other Ryanair initiatives. II has continued to lind ways of charging passclI!I,ers for scrnces once conSidered intrinSIC Lo cHI airline Il,kel. Passcngers were chilrged extra for checking jn ilt the 1I1rport rathcr th'lII online (which also incurs it charge). althuugh those with hold luggage did not havc the option of dlcckin)( ill online. While avoiding pre-assigned seats. an extra ('hClrge procures 'priority hoan.lillr-:_Interestingly. Acr lingus and 13/\ have takell up a similar idea by ellablill~ passt:llgers to pre-book scats ()llliue for iIIl extra dlarge.

.!ms. sse:;

,1 ilS

620

RYANAIR

- THF lOW

FARES

AIRIINF

Table 1a Ryanair

consolidated

income

statement
Year end Year end Year end

Table

11

31 March 2009

rc ODD)

31 March 2008 (e 000) 7)75,692

1.8~!: 30

31 MMC1l200? (e DOD)
1,8}I.}91

Operating revenues Scheduled revenues AncillJry r~vr.nur.-; Total operating revenues - continuing operations

-----. 362..1.1..Q~

2,3['3,868

- 5?8,097
2 91.1 ~~~

Non-curr Propcrty, Inlangrbl. Mailable Oeriviltl\l' Total nor Current, Inventoro Other as Current Trade re Oerivallv Restrict!
Fina ncra

2713.82:2 [285.31.31 [175,9[,91

[791.3<"/1

b?3~1i.9~ 12?6.5801 [l/.:J,5U31 (6~).:l311

1/.2.01,6)

Operating expenses Siaff costs Deprecranon fouel and 011

Maintenance.

and repairs Marketing and distnbunon C05tS AIrcraft rent"I-; Houtc charges AIrport and hamHlnq char qes Other Total operating Operating expenses operations

materrals

1309,296) [756,1171 [1,25'},0621 [66,8111 117,7531 ('/8,2091 (786,5591

(4['3,38'11

0.39,11.01 (~,S49,334) 92,631

[56,709[ [17,1681 ('}2.6701 [2'i9.7ElIlI [396.3261 . [1<'19701 (2,176.742) 537,080

123)951 [58.1831
11'19.21.0)

17736131 ...!104,8~1 [!..15, 15~)

I. 7 I,'}I.S

Cash

an.

Total cuTotal as' Current Trade pi Accrued Current Current Derrvau: Total cu Non-cut

profit - continuing

Other income/(expenses) FinJnCe! income

l-mance exp(.ln~Je

'/5,522
[ 130,51.1,) 1.,441

For erqn exchange gJln/llo~~e~)

Gam on olsposal

Loss on irnparrrnent of avauabte-tor- sale fHlan(ial a~.~.r.t of property, plant and equipment

1222,537)

.-

83,957 [97,0881 15,6U61 191,5691 _'2,'5.~ ~.531 438,927 148,2191 390,708 2S.B[' 2,.62 1,51:l.012 1.574,935

62.983 11J2.8761 19061 91 . 120,7081

1.:>1.037

Total other incomellexpensesl [Lossl/profit before tax on ordInary acnvu.es to equity holders 01 parent

(273.1'~.1 1180,4871
11,31/.

Provrsio
Oerivali f)dP.rre Other CI Non-cu Total m Sharebtssuen . Share ~ Capital Rctalne Other I Shareh Total Ii
Sauro!.

Tax on ltossl/prot
(Lossl/profit

115,4371 435,6.0Q 28.70

')7 9'1

for the year - all attributable

(169,1.731 (11441 111 ['4)

1,1.78,1, 72 1,1,'/B,It'U

BaSIC earninqs per ord,nary share [Eur o ccntsl Olluted earnlng~ per crdinary sharc [Eur o centsl Number of ordmary snares [tn OOCsl Number of diluted shares lin OOOsl
SOIl((1'

1.~t.I.,45"

1.5S} 503

RYJnJ" Annll.)1 R~p0ft 7001

Some of Ryanuirs provoked controversy

talked

rcvenue-generaung ideas have - lind publiclty. One of the most

Investor perspectives Since its notation in 1996, Ryanair or paid dividends Ryanair planned lIess opcnllions, aircraft rcqllirl'd expansion of its

has never declared

about WiI$ us intention to charge passengers (1 to use the lavatory onhoard, hy installing a coin slol on iLo; aircraft. While il has not implemented this COltc<!pt (it

may contravene security rules). thf' idf';) gencratcd llluch publicity. Another idea mooted by I{Y<Ill<lir W<lS a '[allilx' for overweight passengers. In an online poll of over 30,000 respondents, the fat tax id!':a was approved by one in three. Howevcr. the airline later anllounced tllill it would not Impl(:ment the surcharge because it could 1I0t collect it withoUl disrupting it$ 25'miullte turnarounds and online check-ill process. The salllc onlinc poll, supposedly to generate ideas for additional revenue, also gainc~d 2; per cent approva[ for a t:) It!vy to llSt! onboard with Michael {)'Leary'~ face OIl it. toilet papcr

on its shares. For the foreseeable future, to retain any earnings to fund the husi including the acquisition of additional for its planned entry into m:w markels, existillg st!rvin~, and for ruutille n!placc

buyba, cilusln
RY1

lIlenLo;of its current lIeet. The llo.Ji\'idend poli(y, cOlllhintd with il~ healthy cash position, has causcd the company to seek alternative ways of improving the liquidity and marketahility of its stock, through a series of s~wn: buybarks of the equivalent of about 1.1 pcr cent of the issued share capital hdwet!11 2006 and .lO()9. When a deal 10 p)ace illl aircraft order with l.3oeill~ foundcn .. Rvanair 't.I, announced that it would prohahly suhstitute the c<lpilal it would have spellt
to undertake a mixture

and pi marke in the term 1 PE rat aPE r budge

of share

HYANAIR

- THE lOW

!-AR[S

AIRL INE

621

Table lb Ryanair
----_

consolidated

balance

sheet

end :h 2007 1001

."/91

--

--.-

---

::1.0_,,-8J~
,580) ,5031 ,3311 046) 795) 183) 2401 6131 8591

Non-current assets Property, plant and equipment Inlanglble aSSl'15 Avaita!J',e-for,salr finanCial assets Derivative linanciill instruments, Total non-current assets

__

J 1 March 2009
3,644.824 1.6.81. 1 93,150 59,970 3,84'-.785

31 March

2008

3,582.126 1.6.81.1 311.462

3.940,.79 1,9'17 169,580 1.~8S 34,178 10.228 29:>.431 406.274 1,I.'/(),R49 /,38'/.127 6.]77,5!>1

Current assets lnventcnes Other assets Current lax Trade rcce.vabtes l)erovilt,ve financ.at instr urnoots Restrocted cash ~man(lal assets: cash > 3 rnonthr, Cash and (dsh cquivatcots Total current Total assets Current liabilities I rade pilyables Accrued expenses and other liabilities Current maturities ol debt Current tax Derivauvr- fmanci,ll in!.lrumenl~. Total current Non-current I-'ruviSlons liabilities liabilities assets

2.075 91.053 1.1,791 129.962 291,601 403,401 1,583.191. 2,543,077 6,387,862

!SDI
745

}83 l761 106) 91

132,671 905.715 202,941

129.789 919,3/.9 366.801 141,711 1,!>5'!. 150 l.4,810 7~J,685 148,088 99,930 1.899,694 2,768.207 9,.65 615.815

1.25
137.439 1.379.191

~~I
37 3'n

Oerovilllve flnanr.lillln~trurncnis

Deferred rex Other creditors Non-curr cnt rnaturinc of ncbt Total non-current liabilities

QQ
20

71.964 51.,07/. 155,521. 106,549 2.195.499 7,583,610 9.35/ 617.426 493 1,777.727 20,061 2.425,061 equity 6,387,861

n
)7

J3

Shareholders' equity Issued share capital Share premium account Capita! rcdernpnon reserve Retamed earninqs Other reserves Shareholders' Total liabilities
SOlirce'

:J'lB
2,000.422 ( 123.8861 VJ02.194 6,327.551

rred
ure, usimal

equity and shareholders'

Rva"~lr Annu"I, R~p~" 2009

ets.
ICC-

ncd
Illy llld

buybacks and special dividends to shareholders causing a 7, C; per cent rise ill its share price,

after 2012.,

Ryanair's operations
Michael O'leary said; The

uywd to air Ital Irc

Ryanair shares reached a high of (:6, 30 in Aprll 2007 and plummeted to l,Y7 in October 200R. as global equity markets reeled, III early LOIO. the shares were trading in the t:~.30 to t: l,bO range. with an expected medium term target of 4.20, based Oil expected earnings and a PF. ratio of 1 ~, In mid-1009, its rival p.asyJd shares had il PE ratio of 2Y, Ryanair had often underperformcJ other blld~I:1 airlinc 11<:I:rsn its PI-:ratio. o

Any fool can sell low air fares and lose money.

dillicult hit is to sell the lowest airfares and make profits, If YOII don't make profits. you Ci:I!I'1 lower your air fares or reward your people or invest in new aircraft or take
011 (he

rcally bi!o( airlines l.ufrJlansa, .,"

like BA (British

Airways)

ami

622
Table

RYANAIH - rHI: LOW FARES AIRliNE

1c Ryanair

selected

operatinq

data
2009 2008 0065 200? 0,070

-.---

Average y;cld per revenue passenger m'le I'RPM'IIt:1 Av~rilYC yield per available seat tnlle!> I"ASM'IICI Average fuel covt per US 'lallo" III CO!;t per ASM ICASMIICI Br euk-even load factor Operaunq margin Totill break-even load ractor'" Average booked piI%p.nger tare It:l AnCillary revenue per bool(ed passenger ((:1

o 06U
0050 2351 0.056 9R"Io 5% 79% 400/ 10.21

---2006 -_. - --_

0.070 U 058 1.C.79 0,O~2 7:i%

claimed R productiv EC regula

to prcven

O.O~G
1,(,71. 0,051 '/9% 20% 6'1''1, 4:1.70 .---

o OJ'/
1.8:16 0.054

ratio of

l)

no/,
21%

Passengt

27%
6!>%

Ryanair

66'k
44.10 8.!>2

-------

9.58

Other data:
2009 Revenue pas<;cnger~ booked Revenue passengN mllc~, Available seat miles Booked passenger toad factor Averagc length of passenger haul lrmtesl Sectors flown Number of airports served Average daily flight hour utilisation lbours} Fmployees at period end Employees per a.r cra!t Booked passengN5 pcr employee 58,!:l6!:l.663 39.202 m 2008 !:lO,931 ,723 31.,457 m l.l.31.2 m A7% 662 33lJ,S98 200? 42,5C9.112 70.943 rn 32,043 rn R2% 621 2"12.889 12:3 977 4.462

--_
H2J
'145 ,--

for passe priority ~ passeng Iacillues ;

--2006 ---

passcnge
luggage, Ryanair of passel
two year

/,7.102

81%

65/,
380,91!> 143 959 6.616

1/.-,
9,R7 5,970

36
8.852

36
8,603

3/,
9,527

.. _--

31.."l6B.813 20.342 m 24.282 m 83% 585 227,316 III 960 3.1.53 35 10,069

200Y, it enabling f50mill passer 10 an check on Ill: willn carov ourp

A

'. Total bre~kev"n IO,111 t,J<lor'~ ("Icul~ted on the b,lr,,~ C)! IUlal costs and revenues. ",clud'~9 Ihe CO"t~and revenues trom all anc,llary 5ery.r.es. S~"rm; Ryan~" flr.nu"l Report 20C9

Certainly, Ryanair has stuck closely to the low-cost/ I0 w fares model. Ever dccreasuig costs is its theme. as it constantly adapts its model to the European arena and changing conditions. In thts respect. Ryanair dtflers in its application of the Southwest Airlines budget airline prototype. and its main European rival. casylet, as the latter two are not ,IS frlll-cutttng. One observer described the ditTerencc between easy]ct and Ryanalr as: 'easYJet. you IIndcrstand is classy cheap, mther than just plilin cheap."'"
The Ryanair fleet

However,

in December

2009 a plan to purchase

21)0 [ets

from Boeing was cancelled when negotiations over price collapsed: 'Eventuallv you lose interest dealing with a bunch of idiots who can't make a decision', declared Michael O'Leary when the deal fell through." Notwithstanding strict adherence to Boeing 717 planes, in an attempt to extract ever greater discounts from IkJc:ing. Ry,malr invited Airhus, the European aircraft lIlanufacturer, to enler into preliminary bidding for a multimilliondollar ord{~r for 200-plus short-haul aircraft. Howe\,er. Airhus rebutTed the Ryanalr Invitation, dedarinl!, this Silks cam paign would he too expensive and timeconsuming.
St;,f! costs and productivity

natur

to 100 I be hrou they we as they more ef expcn~i\ baggag( t:ven eh the con passtnl! aircraft

Ryanair

conlin ned Its Ilt!Ct commonality

policy.

using

noein~ 7 ~7 planes to keep starr training and aircran !nain tenance costs as low as possible, with ,Ill expected f1~d of over 300 hy 2012. O\'er Ihe years. it has purchascd newer. more environmentally rric~ndly aircraft. reducitlg the i1verage age of Its aircraft to 2.4 },ear.;, the youngest IIct,t in Europe. The newer aircraft produce 50 per celtt less emissions, 4 '; pt~rcent less fuel burn and 4:; per cent lower noise emissions per SCilt. Winglet modification providet.l bl~tter performance and a 2. per cellt reduction in fuel consumption, a silvin!?, which the company belic\'cd could improved. Despite larger seat capacity. new aircraft do not require more crew. In 2009, in aircraft buying mode, Ryanair sl)u~ht to repeat its 2()l)2 coup when it placed aircraft order.; at the bottom of the market.

Ryanair"s

20()9 cll1plo~'ec counl of 63h9 people. compris

Airport

in!/,uver 25 different nationalities. had almost douhled over the prcvious three years. This wa~ accounted for almost cntlrely by flight and cahin crew to service (~xpansion. Ryanalr'~ 2009 Annual Report claimed Ihat It~ allcr<lge:pay. induding commissions to cabin crew for Oil-board s..l('s, was +:4 S. 3 3 3, hi!o:her than almust all olher maj(lr F.uropean airlincs. Most of the compallY's pilots conc1udL'd negotiations ..... RYilllalr to 1I100'e them to n~w roster patterns with llh substantial pay increases of up to I O,O(lO pt'r caplain. Clbin c.:n~walso negotiated with the: compallY. earning a new fiv(~y~ar pay agrcement them significant pay increaSCs.

Consist. were p' avoidill n~giona put. Us the cit~ lIowhcl loann() It USt~s I 100 kl from BI

be even further

RYANAIR

- THE LOW

r snr s

AIRLlN[

623

J06

070 058 479 052

'5% '2%

clauned Ryanair. B~'tailoring rosters, the carrier maximised producuvlty and lime off for crew members, couiplyrng with Ell regulations which impost' it ceiling OIl pilot flying hours to prevent dangerous fatigue. Its passenger-per-employee ratio of 9195 was the highest in the industry. Passenger service costs Ryanair pioneered coxt-cuttlng/yk-ld-enhanclng measures for passenger check-In and luggage handling. One was priority boarding and web-based check-in. Over half of lis passengers USt~this, thus saving on check-in starr, airport facilities and nrne. Charging for check-in bags encouraged passengers to travel with fewer hags or even zero check-in luggagr, thus savtng 011 costs and enhancing speed. Before Ryanair began to charge for checked-in hag~, RO per cent of passengers were travelling with checked-in luggage: two years later this had fallen to :Hl per cent. FWIII October 2009, it adopted a 100 per cent web check-in policy, enabling a reduction in starr numbers, calculated to save (;50 million per year. Ryanarr claims that: passengers love web check-in, Never again will they have to arrive I~arly at an airport to waste time in a useless check-in queue. As more passengers travcl with carry011 Illggilge onl~'. they arc clp.lighted to discov~r thaI they will lu:ver again wast~ valuahle timt' al arrival bagKaf,e cawuseb either. These measures allow Ryanair to save our passellKers vuluable Lime, as well as lots of mOlley_'

Authority rebuked Hyanair, and upheld a misleading advertising complaint agalnst it for attaching 'Lyon to its advertisements for fhghts to St Etienne. A passenger had turned up at Lyon Airport, only to discover that her flight was leaving from St Etienne, 75 kilometres away. Ryanair connnued to protest at charges and conditions at some airports, especially Stansted and Dublin, two of its main hulls. II opposed vehemently the British AIrport Authority (BAA) 1 monopoly plans 10 build II '(4bn ~old plated Ta] Mahal at Stansted which we believ could hI' buill for f lbn'. The airline was: deeply concerned by continued uuderstaffing or and

,S%
1.23 145

)06
S8,S1] 342 rn 282 m 83% !l85 27,316 111 9.60 3,453 35 1U,069
'(VICE'S.

security at Stansted which led to repeated passenger

flight delays ... management of Stansted security is inept, and RAA has again proven that I[ Is mcapable of providing adequate or appropriate. sec-urity services at Stansted, This shambles again hlghllghts that BA:\ is an inefficient, incompetent airport monopoly.:" When BAA appealed ito;hreak-up, petition Commission ordcred by the UK C(.)!Il

in 2009, Ryanair S(~cured the righl to

intervene in lhe appeal in support of tht: ulmmissioll. In July 2009, Michael O'Leury mude a high-profile announcemr.nt that Ryanair would cut winter capacily al Stansled hy 4U per cent, because of Stansted's n:)t!rlion of Ryanair's demand for cuts in airport charges and the UK g()vernment'~ plan [0 raise departure Juty from (I (lto I:11 ~r passenger. In protest at risiug charges at Duhlin Airport from January 201 () and a I 0 per passenger tourist tax In Irr.land. Ryanair was also intending to n~llI(,!' liS Dublin lrallle by 2() per ccnt. Howcver. both BAA and some ohservers d!'rided Ryanair's threats l<l cui traffic by 40 per cenl at Stansted. 'Michael O'Leary's ability to spin a talc has reached a new level this week. Along with the gullibilily of pilrl'i of thl' In(..'(lia in accepting il. Hook, line and sinker.'''' This was hased on the contention that the airline should have compared its projected winter t:ajlill'il~' or 24 aircral't at Stanstt'.tl. 1101 with it~summer capadty of 10. but with it:; previolls winter c:apac.ity of 2H. Thus, lhe redllction be only 14 per cent. not 4() per ccnl. Marketing strategy FollOWing tht: inlrooucllon would

10 jets price mm:h ic.har.1 lanes, xing, turer, dollar \irbus

cam-

A natural

Hext step announced

by Ryanalr was a mm'e

to 100 per cent carry-on luggage. Additional hags would be brought by piissengers 10 tlw hoarding gale, wlwn: they would be placed In lhl' hold, and returnecl to them as they deplane on arrl\Oill. These cl1iclencic~ would allow lllOre p.Oid(~nt ilirport temlinals to he devdoped without cxpensivt: check-in desks, baggage halls, or computerised baggage systems. 'and enahle Hyanair to make lIying ('ven cheaper, ea~ier and much more fun again', claimed the company." The f~aslbility of the proposals to require pasS(:ngcrs 10 carry hold baggage aircraft wa~ yet to be tested. through security to the

npris:! over Ilmosl nsiou. epay, sales, ;)pcan ations ; with plain. ~menl eases,

Airport charges and route policy Consistcnt wilh the budget uirline model. Ryanuir's routes Were rminl-to-point only. It reduced airport charges hy avoiding congested main airports, choosing secondary ancl regionnl destinations, eager to increase passenger throughput. l)suall~' these airp()rL~ are significantly further from the cit~o t:entr(:$ the~' serve thall the main airports, 'from nowhere to nowhere' in the words of Sir Stelios lIajiIoannou, founder of easyJel. Ryanair's higgest competitor.'" It IlSl.~ frankfurt Iiaim. 123 kilometres from Frankfurt: Torp, 100 kilOllletres from Oslo: and Charleroi. flO kilometres from Brussels. In December 2()()~, t1w Advcrtising Standilrcl~

ofns intem('t-ba~ed

reservations

and Ilckding sen.'icc, enabling passengers to make reservations ancl purchase tickets directly through the wehsitl'. Ryanair's relianr.(~ on travel agents has heen elil!lim1t(~d, It has promoted its website heaVily through n(~wspaper, radio and television adwrtisillK. As <Iresult, internet bookings account for 9Y ~r cent of all reservations.

: BAA

is o ..... L'l1 b}' Spanish n

{,()I!IPillly

Fl'rwvial.

624

RYANAIR

- THE

LOW FARES

AIRLINE

Ryanair minimises its marketing and advertising costs. relying on free publicity. by Its own admission. 'through controversial and topical advertising, press conferences and publicity stunts'. Other marketing activities include distribution cooperative of advertising and promotional advertising campaigns with material and other travel-

was fundamentally

opposed

to a merger

with

Ryanair.

In ,

even if it raised its price. then Aer Ungus Chief Executive Dermot Mannion stated: J cannot conceive of the circumstances where the Aer Ungus management and Ryanair would be able to work harmoniously together ... this is simply a reflection of the fact that these organisations have been competing head 10 head, without fear or favour. for 20 years. It would be like merging Manchester United and Livcrpool football clubs."?"! In fact. the hid was opposed by a loose alliance representing almost 47 per cent of Aer Lingus shares. This included the Irish government. which still retained a 25.4 per cent holding. two investment funds operated on behalf of Acr I.ingus pilots accounting for about 4 per cent of shares. and Irish telecom tycoon Denis O'Brien. who bought 2.1 per cent of shares deliberately to complicate Ryanair's move. A critical) 2.6 per cent of the shareholding was controlled by the Aer Lingus employee share ownership trust (ESOT), which had the right to appoint two directors. and has a stake in future profits. Its members offer by a 97 per cent majority vote. Having abandoned rejected the Ryanair

Dermot
an 'axe bust in Ryanai in adv olfcnsh over th Belgiar

related entities, and local tourist boards.

As referred to earlier. one of Ryanairs publicity stunts was Its unauthorised use of a photograph of Spanish Queen Sofia after she took a 13 flight from Santander in Northcrn Spain to London. When tt tncurred the Queen's displeasure, Ryanair apologised and promised to donate 5000 to a charity of her choice. In another instance of controversy over using pictures of the rich and famous, in 2008 Ryanair was forced to pay a fine of 60.000 to President Sarkozy of France and his Italian bride Carla Bruni for using their images with the slogan. 'with Ryanair. all my family can come to my wedding'.

to cont Risks
In addi Ryanai itself al Sharp, Thert!( conditi credit r ness pc raise fa

So, what about Aer Lingus?

According to a commentator in the Financial Times 'Ryanair's bid for Aer Lingus was a folic de grandeur'." Even Michael O'Leary admitted 'it was a stupid investment. At the time, it was the right strategy [0 go for one combined airline but it has now proven to be a disaster. ... During

this bid due to the shareholder

opposition and a blocking decision by the European Commission on competition grounds. Ryanair renewed its bid in December 2008. with a premium of approximately price. It proposed to keep Acr maintaining the Aer Lmgus short-haul associated an offer of 1.40 per share. 25 per cent over the closing Lingus as a separate company brand. to double Acr Lingus'

recess volume
Growtf Growtl craft 31 pace w result. and rec routes. In its ( lncrea: pressur
to

2007. in a shock bid. Ryanalr had acquired a

25.2 per cent stake in Acr Lingus. only a week after the ilotation of the national carrier. It subsequently increased its interest to 29.8 per cent. at a total aggregate cost of C407.2 million. By July 2009. the investment had been written down to 79.7 million. At the time of the initial bid Ryanair declared its intention brand and: up-grade their dated long-haul product. and reduce their short-haul fares by 2.S per cent per year for a minimum of 4 years ... one strong Irish airline group will be rewarding for consumers and will enable both to vigorously compete with the mega carriers in Europe ... there are significant opportunities. by combining the purchasing power of Ryanair and Aer Lingus. to substantially reduce its operating cosl~. increase efficiencies. and pa~ these SClving~on in the form of lower far~ to Aer Lingus consumers."" It had been an achievement for the irish government finally to retain the Aer Lingus

neet from 33 to 66 aircraft and to create lOOD new jobs over a five-year period. It claimed

that if the offer was accepted. the Irish government would receive over el80 million and the SOT members and other employees who owned ] 8 per cent of Aer Lingus would receive over C137 million in cash. However, in January 2009. when the offer was rejected by Aer Lingus management and by the ESOT and other parties. Ryanair decided to withdraw it. Aer Lmgus' fortunes continued to detcnorate. announcIng losses for 2008 and projecting even worse for 2009. In July of that year its shares were trading at Ie.~s than CO.50. In April. its CEO Dermot Mannion resigned after controversy oller a potential secret pi.ly-off deal in the event of a hostile takeover. While Ryanair did not have a scat on the board. it continued to denigrate Aer Lingus. forecasting 'a bleak future as a lossmaking. subscale. regional airline, which has a high cost ba~ and declining traffic numbers. Meanwhile. the two airlines continued 10 compete ously. especially Within the Irish market. have a longstanding
m

cove

Indust'
In the negotir

freeze f
250 pc Rya and al exampJ banne( conduc practie. elected was pr

to have noated Acr I..ingus after several false starts over a number of years. Aer Lingus and its board firmly rejected the Ryanair approach. stating that it had aCl.Cdin '(I hostile. anticompeUtive manner designed to ciiminal.C a rival at a derisory price'. A combined Ryaoair-I\er Ltngus operation would account for 80 per cent of all flights between Ireland and other European countries. Affirming that his company

vigor-

(BAI.P,
1

Manchester

United and [jvcrpool

legendary

r1valry in English football.

In JI had bl:

RYAI\AIR

- T HI' lOW

r ARCS

AIRllNF

625

Ryanair. ~X.I!CUlive

In [uly 2009.

Aer Lingus appointed

.. CEO

10

replace

: the Aer
:10 work ertion of 'mpeling years. [t ,iverp<x)1

[)crrnol Mannion. This was Christoph Mueller. known a~ all 'axe mail'. former CF.O of Sabcna Airlines brIore it went bust in 2001. Mr Mueller had already crossed swords with Ryanair when it compared its fares to those of Sabeua in adveruscrncnts that were alleged to he misleading, orrt~lIsive and defamatory. When Ryauair lost it court case over the matter, and was ordered to publish an apology in Belgian newspapers and on its website. it used the apology to continue lis puhliclty about its relatively lower fares,

would have to pay t:l :;.000 for re-training if they left the airline. or if the company

on new aircraft were forced to

negotiate with unions during the following tive years. Some Ryanair managers were judged to have given false evidence in court. ~il~anwhlle. Rynnair was rontesnng the claims of some pilots for vlctimisalion under the new contracts.

By

2009. only 11 of the (J4 pilots who had lodged the claim remained with the company and still had claims. Ryanair was ordered to pay 'well in excess' of f.l million in legal costs after a court refused the airline iI(:ct:s.~ to the name .. and addresses of pilots who posted critical comments 'S about the company on a site hosted by the British and Irish pilots' unions. Michael O'Leary claimed anonymous pilots were USing a website to intimidate and harass foreign-based pilots to dissuade them from working for the company. Nonetheless. Ryanatr appeared to have no problems recruiting crew. mcludmg pilots. to meet its needs. Input costs Fuel Perhaps the greatest concern is fuel prices. let fuel prices arc subject to Wide fluctuations. increases in demand and disruptions in supply-factors which Ryanair Gill neither predict nor control. In such unpredictable circumstances. even hedgill!( is a risk. Th(~ situation is compounded hy exchaflf,e rate uncertainties. although a decline of the !:S qollar ag,lInst the I'uro and sterling worked ill Hyanair's favour, a<; fuel prices arc denomlnau.-d ill dollars. Conver.;cly, a weak cum agaiffst the dollar works against Ryanair. Ryanair's dedaratioll (If 'no fu~1 surcharges f'ver' and its relianCt.~on low farf':; limit it<;capacity to pass fuel costs. Airport charges and government taxes Ryallair IS especially sensitive to airport..~which raise chilrgcs. like Stansted and Dublin. Indirectly. it is also vulnerable to extra taxes and charges. such as the C I 0 tourist
talC
011

present. neluded per cent for Aer res, and 2.1 per nove, A ntrolled (ESOT). :.I has a {yanair ~h()lder ropean

Risks and challenges III addition to the fallout from us foray into Aer Liugus.
Ryanair faced various challenges in 2009. SOflW spccifc to itself and some general to the aviation industry. 5harp econormc downturn The recession of 100Hf()9 created unfavourable economic conditions such CIS high unemployment rates and restricted credit markets. with reduced spending by leisure and business passengers alike. This constrained Ryanair's
Oil

scope to

mise fares. putting downward pressure recession could restrict lh~ company's volume jl!rowth. Growth iJnd redUCIng yields

yields. Continued planned pas~enger

wed it~
share. dosing mpan}' ,ingus' : 1000 laimed would rs and Lingus ler. ill Ungus vanair lounc2009. ; than I after event ~at on I~ting irline. :rs.JtJ .igor

Growth plan~ by Ryanalr cllwlled Investmcnt in new air craft and roulcs. If growth in passenger traffic did not k~ep pare with its pl;mned lIect expansion. overcapacity could resull. Related pressnres were additional marketing cost:; and reduCl'd yields frolll lower f,lres to promote additional rollt~S. esp!~('ially to airports new to the Ryanair system. In it~ drive for f,wwth. increased competition. Ryanilir putting was likely to encounter evcn more downward

increased

pressure on yields. as ilirlines strugjo\led to fill vacant scats to cover fixed (:osfs. Industrial relations
[II

the light of the rec<.~,>i()nand financial losses. 1{}'iHlalr tll'gotiated with illl employee grollP~ and secured a pay frce'lC for 2008/09 ilnd 2009/10. It also plannL'tllo 2')0 people redundant at Dublin Airport. make

imposed by the Irish govemment. Passenger compensation On 17 l'cbruary 200'), a new Ell regulation

..

cam(' into

Hyanair cam~ ullder lire for refusinK to re.cognise L1niOIl~ and alkgl'dly providing poor workill~ conditions (for cxample. to n~ucc the company's cleclricit}' hill. swff an~ balln('d from ('harp.iJl~ their own mobile phont'5 at work). It ('onducts collectivc hargalning with employces on p<ly.work practices aud condilions of employment thrOllgh illlemal (+ctcd Employee Representation Cmnmitt..ecs. However. then: W<'\s pressure from the British Airline Pilob As.'>or.iation (BALP t\) to enlist Ryanair pilots hased in Britain. [n july 2006. the Irish High COUll ruled that Ityanair had bullied pilots 10 acc<!p! new contructs. Whefl~ pilots

~fT(~ct. w\'lding for standardised and immediate assistance p for air pas.<>engersat Eli airport..<;for delays. cancellatiofls and dellie(1 hOilrding. It was expected that cos!s would amount anllually. Passengers
to

ttw ('ompcnS(!tioll

a st.'Ctorwid(' bill of CWO million must he offered

affeclc:'.d hy r.ancdlatlons

nclary

a refund or rerouling and free care and assistance while wailing for their rerollh~d flight specifically. meab. refreshments. amI hotel accommodation wh~re all overnight stay is flL'Cessary, Fillancial compensation is payable. unless the <.tirline cau prove unavoidahlf' exceptional

626

RYANAIR

- THE LOW FARES

AIRLINE

circumstances. like political instability. weather conditions. security and safety risks. or strikes. For Ryanair. the typical compensation cost would fall into the 2 SO category, based on the average distance of its flights. Passengers subject to tong delays would also be entitled to similar assistance. However. four years after its introduction the new regulation was largely ignored and had no material impact on Ryanair. despite the emergence of online 'advisors' to help passengers make claims when their flights have been cancelled or delayed. Environmental concerns

the Commission to investigate allegations that Air France had received almost 1 billion in illegal state aid. benefiting unfairly from up 10 SO per cent discounted landing and passenger charges on flights within France. Adverse rulings on these airport cases could curtail Ryanalrs growth, if it was prevented from striking advantageous deals with publicly owned airports and was confined to the rewer privately owned airports across Europe.

. they hat agenda'.' Custo get to ... to , .. a flight! charg So. why airline u a hywoi advertisi respond,

front. Ryanair was being sued by BAA for its refusal to pay increased landing charges at Stansted. In
other legal cases Ryanair has been accused of misleading price differentials passengers on its website by exaggerating with its competitors," Customer services and perceptions In 2003. Ryanair includes doctrines published a Passenger Charier. which and

On another

Aviation fuel has been exempt from carbon taxes, but the EU has established an Emissions Trading Scheme to encompass the aviation industry commencing in 2012. Ryanair was predicted to be the fourth most adversely affected airline in the world with a shortfall of 2.8 tonnes in

on low fares. customer

redress

CO2 allowances.

equivalent

to 40 million in extra costs.

This is despite its young fleet of fuel-efficient. minimal pollution aircraft. Ryanair has contended that any environmental taxation scheme should be to the benefit or more efficient carriers. Airlines with low load factors that generate high fuel consumption and emissions per passenger. and those offering connecting rather than point-to-point flights. should be penalised. Sundry legal actions Ryanair has been in litigation with the EU about alleged receipt of state aid at certain airport s, An F.Uruling in 2004 held that Ryanair had received illegal state aid from publicly owned Charleroi Airport. Its Brussels base. Ryanair was ordered to repay 4 million. The Belgian authorities were claiming back a further 2. 3 million in the Irish courts for Its reimbursement to Ryanair of start-up costs at Charleroi. On appeal. the original EU decision was overturned In December 2008. Ryanair was refunded Its

punctuality. Its annual report offers figures claiming superiority over competitors with respect to punctuality, completed nights and fewest bags lost per 1000 passengers. However. its Skytrax 2 star rating is among the worst for budget airlines. In Europe, only bmibaby and WiT..talr achieve as low a rating. There have been suggestions that Ryanair's 'obsessive focus on the bottom line may have dented its public Image. In an infamous incident. il charged a disabled man (18 (2S) to use a wheelchair ." 1 In response to protests over the charge, Ryanair imposed a 50-cent wheelchair levy on every passenger ticket. Campaigners for the disabled accused Ryanair of profiteering. declaring that the levy should be no more than 3 cents. It was the only major airline in Europe to impose such charges. There was growing attention ally being imposed by Ryanatr to extra charges continuon passengers, many on

custorne four len. record. I any thin;

Finanr.ia

Ryanair

auves.

even wh

Other ri As listed and ava depends and on and the respect I insuran

Ryanai
Globallj on top contribi carriers SA. Ai (SAS) I from 101 legacy deficits. Som sion of. as pass trade d over 3 Ryanai

4 million and the Belgian authorities withdrew their claim.

Nonetheless, the EU launched further investigations into allegations of illegal aid. subsidising Ryanalr at publicly owned airports. such as Lubeck and Frankfurt Hahn in Germany. and Shannon in Ireland, Other legal challenges were launched against Ryanair by competitors. On another fronl Ryanair was vigorously opposing french government attempts to protect Air France-KI.M by forcing easylet and Ryanair to move their French-based stafT from British employment contracts to more expensive French ones, Often. Ryanair look the initiative on alleged illegal aid For example. it filed a complaint with the EU Commission accusing Air Francc--KLM of attempting to
10 rivals.

unavoidable services, such as check-in. In some instances. these extra charges make Ryanair more expensive than SA."H Examples were a family of four travelling to Ibiza from l.ondon with three bags for a two-week holiday costing ('1157 with Ryanair compared to (913 with BA and 634 with easyJcl. A single passenger travelling to Venice from London for a week at Christmas with one bag would pay a total 139 on Ryanair compared to (89 on BA and t: 121 on CilSY)Cl. Ryanair features on many consumer complaint interactive wcbsues. and some blogs have been established specifically to disparage the airline. In a blog entitled '20 reasons never to Oy Ryanair'. extra charges for booking fees. baggage overweight and low weight limits. premium rate helplines. and the fact that 'you are always being flogged stuff' wcre cnumeratedz?" When the Irish Times put Ryanair customers' gripes to its head of communications, Stephen McNamara, his response was to dismiSS them as '''subjective and inaccurate rubbish" and even implied

block competition after the French airline filed a case alleging that Marseille was acting illegally by offering Ryanair discount airlines cut-price fees at il.. second. no-frills terminal. That complaint came a month aftcr Ryanair called on

anothe
compai of the wheth(

RYANI\IR

TH[

LOW FARES

AIRLINE

627

r France

!nefiting

{hey had been made lip to further some antr-Ryanair agenda'.?" Among the complaints were: Customers want to be treated like a human bemg. to get to their desired destination (not 50/60 rnlles away) ... 10 be allowed to bnng luggage without persecution ... a complete and utter lack of communication when flights run late ... I'm sick of that miserable booking charge/service charge/adrrun charge system. So. why are so many people willing to put up with an alrline that. In the words of riw F.corwmht, 'has become a byword advertising responded customers for appalling customer service, misleading claims and jeering rudeness' ?'" Ryanair has to such comments. declaring that, In effect, vote with their feet by choosing Ryanair for its

ling and
! rulings

than Ryanair at capturing the traffic trading down from network carriers. Other budget carriers, of diverse size and gro wth urnbitions. trajectories and regional emphases varied in dlflerent levels of services to passengers and usc of main versus secondary airports. The comparison with the (jS budget airline market in Tahir 2 indicates that penetration in Europe Is less than In the (jS, which suggests scope for growth in the sector in Europe. II also raises the question as to whether the extent of dominance enjoyed hy Southwest offers a model for Hyaualr to assert itself further. Another possible development trajectory fur Ryanalr was to follow up on its announcement in lO()7 to offer t~ () transatlantic I IIlghL~, an Idea which had not taken flight and appeared to have been shelved as of 20()1).

nWlh. if als with

!t:

fewer

BAA for ISled.ln - .Ieading -rentlals

which 'SS and alming tuuhty, t'ngers. ': worst Wii2alr esllons Ie Itlay Jent. it hair ... ' nposed tickct. )f proethan mposc ntinuny on anccs, ~ than ) Ihi7.a " costA and /cnlee would A and interlished ,J '20 oking mium being fS pilI tions. ~m as Iplicd

four tenets of customer service - low lares. a good Oil-time record. few canccllanons and few lost bags. 'If you want anything more go away'. warns Michael OLeary."" The /-,ill(lrIciu/ 1'imrs aerospace correspondent observed that Ryallair still offered relative villue compared [0 rail alternativcs. at least on a journey from LOlldon to Scotland, even when Ryanair extras an~ factored in. Other risks and chattengcs A51i~ted in its own report, Ryanairf<U.:ed other risks prices and availability of Of'W aircraft. threats of terrorist attacks, liepcndcnc:e on key per.;onncl (espt'cially Mir.hael O'Leary) alld on external service providers and its inleme! website and the continued acceptance of hudget carriers Wilh respect to safety. Tied in with the latter arc potential rises in insurance costs.

Leading Ryanair into the future

'It L~good to have someone like Michael O'Leary around. lIe sc.art~speople to death.' This praise ofHyanalr's cr.o c.ame from II(lJU~ other than his fellow lrishrmlll. Willie Walsh, <1:.0 of BA.I>Vh has been descrihed as 'at lurns. arrogant and He nuie. then channing. affilhlt: and hum()rou~, has terrorised rivals and regulator.; for more than a decade. And so fHr. they ha\'e waited ill vain for him to trip up or his enthusiasm to wane.' ... '" In filc.t, Michael O'Leary has been pronoullcing his intention to depart from the airlinl" 'in Iwo years' time'. lie has declared that he would sever all Imks with the airline, refuslnA to 'move uJ)stairs' as chainnan .. Myou don't need a doddery oldie hangitlR around proclaimed. 'nil Ol.eary ~tay~ in hudget hotcl~. always the plal:c", he lIics Ryanair.

Ryanair's competitive space

Globally.
011

the airline

industry

lost $11 hillion in 200CJ. airlines

startling fellow P;lssellger.; hy taking their boarding passes at the gatc and by hoarding the plane last whert' he invariably gets a middle seat. He does not sit in an executive lounge. has no BlackBerry and (lo('$ lIot usc email. In 2U09. Michael O'Leary held 4.()6 per cent ofRyanalr's ~harc capital. having sold 5 million share~ at ~~3.75, Although O'Leary conSistently praised his management team. R~'<mair was inextricably Idenrilied wilh him. He was credit~d wilh single-hamkdly transforming European air transport. In 2UO 1. O'Leary received the European Businessman of the Year Award from i-'orlUnl' magaZine: in 1004. tht' Finallcial T1mc1i named him as one of 2') European 'business star.;' who have made a difference. The newspaper described him as personifying 'the brash new Irish business elite' and pos-scssing 'a head for number~. a shrewd markt'ling ami a ruthless c(lnlp!'titive streak'. '" Pre..scnt and former staff have praised O'Leary's ship style. 'Mlchael's brain leaderand

top of $H.:; billion in 200H, with European

contributing $1 billion of that loss. Of the large European carriers. only Lufthallsa was expecting to make a profit. P,A. Air France -KLM and Scandinavian Air Sys[rms (SAS) experienced scv(!re losses. due to dcdllling trank from long-haul business class pas~lI~ers. The wocs of these legacy carriers were compounded hy huge pension fund delkits. Some industry ana Iysts considered the economic reces sion of 200'J c.ould olfer an oplXlrtunity for budget f.lrricr.;. a~ passengers who continued to tra~'el were expected 10 trade down. By mid-2009. budget airlincs accoullied ror ovcr ~:; per c.~nt of scheduled intraEurop<:an traffic Ryanair was the clt'ar market share leader. with easyJ~1 another dominant force (Table 2). The two were often compared an(l c:ontra~ted, since hoth operated mainly (lut

genius is his ahility to motivate

or

the UK and served the sallie markets. One issue was wlu:ther easy!et's usc of prilllary ilirlX)rL~ would he helter

rrlergisc pc(}pl~. There is an incredible enerAY in that place. People work Incredihly hard and get a lot out of it. They operate a very lea II operation. It is without peer' said Tim

628

RYANAIR - THE LOW FARES AIRLINE

Table 2 Budget

airlines

sundry

data - Europe
.
,.

_._.-

and US (2008/091
US ----Airports' 26 126 '14 Airline market position
.

European market Airfine AlgIe Azur Air Berlin B('I1~ Air Brnlbaby Or ussels Airline!:> Ch(kalr~
easv.Jet

position Rating'
..

Pax lrnl' 1.46 28.6 0.1,6 3.8'J

_- ... _-

__ ._-_

Air Iran
Allegiant Air Amencan Irons Air lATA I Frontier Airlines CoJC't Airlines Horizon Airlines IAlaska Aid lsland Air Hawaii Jet Blue Airways MIdwest Airlme Inc. Shuttle Ameroca Corp. Southwest Airlines Spirit Airlines Sun County Al(llne~ USA 3000 Alrhnes Vlrglll America

-_
21..6 39

Pax (mIl

So, how with Mic Ryanair? to Ryaru answer t, surprise I

RrICII~n(p~
,'The FT A

I,

a I,
,~pplcm K. Uo~c, 2S M"rel P. Clark, 1 F"bru~ n K. Done,

5.1.
6 J 446 7.5 7.6 3.5 1.9 3.9 1.5 2.1 9.1 57,7 3.6 3.8 0.5 5.5

:1
3

17. 62
40 liD 65 "0 51 JU 21 27 33 85 140

10 I 1.5

65
0.5

3
3 3 3 3

f-lyBe Germanwlngs Jet? corn Mendlilna Monilrch Airlines Myair.com! Nlki Airline Norwegian Ry~nillr Sky!:urcpe' Slerllng~ Svengellyg transavia.com TUIHy Vuellng Alrllne~, Wlndlet Will Air
I

20,S
30 3'J 101.9 5.5 13

T'fTl"S. /1
Fmanctal

:1
3

08 7..5

"'K. OOIlt!. next yea "'llyanaJr

2
3

.... J_ Guthr
FmanOJI

30 39
15 88 '/'J 45

P Clark, 2009. p.

, Ryana,(
Ibid. ,. S. LyJll.
U

ros
5.9 2.7

:3
3
5l\)tls~ics

YOlk

lily.

26
58

5.9

- Ryanair ., B. Groo
n

LFX, Ry;

SOllrr.~r.: F.~rop(,<l" Low F'Ht'S Airh:les AssoCialion IELFMI. Company reports

f.rA, OUr4:.1U of Iransportanor'
~:Jr

I SOtJl(.~~

'Skylr;u

raIn,\! Irorn 1 10 J - nut a.l arrunes rated.

'Numb!:r of airports served. Soo;rccs European I ow Fare s A"h',e~ Assoclallon , 'I'('s(' alfhn('s have ceaf,ed opp.rahans. Tolal passengers (pax! Eurap('an budget airlines
Ryanilrr ilS

IELFAAI. Co'npany
.

r eports

2239

01 TOIJI -

269\

Total pax US budget airtines Soulllw('sl <IS ;(; 01 roMI - ~~~ K~y Populatlon Data Population US 1m) 307 Key Papulalion Ratio~

186,4

Key Population Data PCpul~!lon EU 27 Iml 500 Key Population Ratios Budg('t r JllO to Lu /,'1 populallon ().t.)

Budget rallO 10 US populal,on 0 6t

Jeans, a former sales and marketing director or Ryanalr, currently CEO of a :;malllow cost rival. MyTravdl.ite, "TO O'Leary's puhlicity se:l'king antics arc ICHcndary, Thesc included his 'declaration of war'
Oil

regulators anti the Ell Commission, and ain)ort owners like BAt\, whom he once called 'overcharging rilpists', "'" An EIJ C()mmi$siolU~r, Plulippe Busquin, delloullced ~1ichacl (rI.t'ary as 'irritating. , . and insists he is not Ihe only
of lhe
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when,

\,'earill~ an arm}' uniform, he drove a lank to casyjet's headquarters at I.ulon Airport. In another stunt, when Ryanair opened iLo;hub at Milan Hergamo he flew there ahoard a jet hearing the slogan 'Arrivtderci !\litalia'. He has "Iso dressed lip as St Patrick and as the Pope to promote ticket offers, O'I.(:ary's OIlL~pok(:llness has made him a Ii~ure of puhlic debate 'HI' is callt.:d e\'crythillg from "arrogant pig" to "messiah" ',"'" IIis avowed enemies include trade unions, politicians who impose airport LaX(:S (he called UK Prime Miuistcr (;ordon Brown a 'twit' and iI 'Scottish miscr""'''), cm'ironmentalisL~, hlogg~rs who remt about poor service, travel agents, reporters who expect fwe seats,

COllllllissi()lIer who is i1l1eq~ic to the mere mention name of Ryan air's arrogant chil'f'.x

An Irish Timl',~ columniSt. John McManus, slIggrsled that 'maybe it's lime for Ryanair tojeUison O'[.t:ar)", asserting that O'l.eary hilS become it caricature of hilllscif. Pcrh'lps the last words should go to Michael O'Leary himself: 'We could make iI mis(ake alld I could get hung', he said, lIe
r~itcratcd a point he had often made before:

It is okay doing (he cheeky chappie, running (If[)und Europe, thumbing your nose. but I am nOlllcrb Kelleher (lhe legendary founder of the origin,,1 hudget airline, Southwest Airlincs), lie was a genius and I am nol."'''

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So, how do these comments {and the Aer I.ingus hid) fit with Michael O'Leary's declaration to pan company with Ryall,lirt Would he Wilily go. and if :;0. what would happen to Ryanair and its ambltions? 1\0 one really knows the answer to these questions. hut it is O'Leary's surprise his admirers and detractors alike.
WfINf'flCes:

,..,.I . Noonan, 'O-leClry .admits s:.:tkc 111 Acr 11n9U~ was ~tupld c11~tlc.rf'r Ir'S/llndepellcJlnl. 6 M<lllh 7009. n Statement Irom Ryan,lIr s h~1I yeady resuU,. prcsertanoo. 6 Novt'mbe: 2U06 'Acr LlnSu, rcr~(t~ fly.na" 8us"'c~s Week online, 3 Novp.mber 2006 ~ Ryanalr I ull Year Ref.ulls 200Y .. flya nair pit"" r('leaf.~. 79 May 700Y ... O. "'i(mo, }Iyana;r - the worl(fs

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"Tht' rT ArcclorMllidl Uoldnp~~ rn fI"~IIll'SS Awards. FlnJnUdl ,upple'T1en1. 20 M.)Cc~, 2009. ~ 2~. .f{ ucnc. Airline IndUSfry In Inr~nSlve (~,r('. FIn""'~(1.71 TlmlJ~. 25 MJrc;11 20UY, p 17

r,m~s

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GUd,did". 26 Octobe 2UOl: R Wall(\ anc S. SWinford. 'Ry.,n.J1r mort' ~~I){~ns.ivc than llights'. SUliday r,m~". 9 Augu~t ;>UOy

3,5
101,9

.. p, C1dfk. 'Upbcal Ryanall r IdPf. ou: Ihe f,lo'rn . F,nJn(lai ',mes. , Icbr "ary 200Y. p 70 K U.:>nt:, 'RYlJna'!" see~. npportU:\lhl''S In rlya~"j:dl,;rrP55". FUliln(l.J1 T,mn. 26 July 200? p, l!l r'n~(I(lalllm~~. 9 Scptl'rn!>rr 2006. p It. .. K Done and T. Brallhwallr, 'Ryan~1( 10 allow Il'l0bi(e phone l1~xl year'. Finan< ,,,I limes. :1t Augu,.t 2006, p. 1 Ryanalr AnnUA! Report. 2001. ~ J GuUlIle. (alb

... Moncy C~"lral' Times Olll'n~ 'WI:lLG TWfOnty r easons never to fly Ryan<Jlr', 70 Mar{h 7009 ... C. Pope. 'Proccwalch n.),(y. Insh TUlles, Ii. AU9u~1 700<;, p 11
.... Lyall, "No 3;:ologl('s

1, U'Jl the bo~~ or " (')0 'n~{s. air lint', A" '")v.,,, Frn,J"u~1

.~ Ibid, .._ K Uonp. 'O'L~ary .,haws It If. not yel Ihr end for b"d.e: >rnanc<.)[ T'm~s. ;> AuguSI lOOn. p .. 11 . 'The ~ r Acelod ... 1,ltal f3o~dnc"~ '" OUSIl1~~" Awards', l,me~ ~upplc",enl. 2U ~ilr:~ 20'JY. II 71.

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'5" Stcllo~ bek'''9hled af, ~Ults prov., boldel ',mes. 30 J"ly 2009.1'. 16 rmiJnClai

Iisk la~el ';,

... U. O~lby. 11"'1qOlll9 lor gOOd. O'leary t~lIf. Ryanair'. S"nd.?y T,m(,s . 70 NovelllhN 2eOS, N'W5. p. 3 8 (iroom. 'lci)dl".'"s 0: Ihl' new Eu(opp !jfJ~,"e~.s $taf!i c~art a

P Clark, 'O'Leary "' ;)!lack 011 Uoelng', 2009, p. 1. Ryal),)lr Annual Repo,t 20U9 h Ibid
p

Tlmc~, 19 Oc(embe!

(ourse for Ih! profll~ ollhe rllt.f(C'. rlllanc...li rimes. 2u April 200/ . ... G, I:!owl~y. 'How low can you go" r,niJr.cral lurll'~ M;)gazlne. No, 9. 21 .Junt 2003. tbld .
.. h

5 Lyall. 'No apologies IrClT' Ihe bO$~ 01 a nOhllls York Times. 1 August?OO9 flhe Saturday Prolilel . Ryanalr 7087 h~1I yearly rt'suitf.

nlrl,"C,

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.... Lyall, .... Ibid

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Irem Ihe bo>s 0' ~ nofrllls

dlrllne'
,l Ilftj('$,

- A Groom, 'Hot ;11' Irom Ryani.llr'. FIIMII(1vi Time,. 23 July 7.()09. p. 16. "I FX. flyunalr. Flnan<l~i l,me~.] June 200<1. p. 16.

C,.~;.to~. 'TurlJul4"nt tln1~~. for Ry.1na,r"!, h'gh.fLl(~~".I"Sh 31 January 2l04. ..... Bowley, Hew low (.)n you g:lT

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