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| Words: 2482 | Submitted: 02-Jan-2012
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Ryanair was set up in 1985 by Tony Ryan to operate low-cost flights from Waterford and Dublin in the Republic of Ireland to London. In its initial few years of operation, it struggled financially. Michael O'Leary, now Chief Executive of the company, was Ryan's financial controller at this time, and persuaded Ryan to let him try and redress the situation.
O'Leary developed a strategy heavily influenced by Southwest Airlines in the US, the world's first low-cost carrier, and not only stemmed Ryanair's losses, but turned it into a huge success: its forecast profit after tax for the year to March 31 2006 is 303m, a 13% increase on 2005 (Davy 2005: 3). Its operations have also expanded massively in geographical coverage: in the current financial year, Ryanair operated 288 routes across 21 countries using 12 European bases, and plans to more than double its fleet in the next 7 years.
Ryanair's objective is to firmly establish itself as Europe's leading low-fares scheduled passenger airline through continued improvements and expanded offerings of its low-fares service. Its strategy to achieve this is:
- Low fares
- Industry-leading customer service
- Frequent flights on short-haul routes
- Low operating costs, addressing aircraft and equipment, personnel productivity, customer service costs and airport access fees
- Taking advantage of the internet and
- Commitment to safety and quality maintenance
The company operates a policy of offering the lowest fares available from any carrier. If a competitor tries to undercut it, it will match their prices. This may seem to be an anomaly given the company's commitment to customer service, but the two strategic elements are complementary. Ryanair's policy of using small regional airports for its operations helps keep costs lower but also means less traffic congestion for passengers travelling to the airports and less chance of delays. Frequent, short-haul flights mean that the airline does not need to provide services which would be expected by passengers on a longer flight, such as meals.
Cutting costs to a minimum wherever possible is key to the success of the Ryanair operation. The airline is notorious for its ban on staff charging mobile phones on the premises (Clark 2005b) and also charges crews for uniforms, highly unusual for the industry (Creaton 2005: 239).The internet enables prices to be kept low through removing the cost of agents. Telephone bookings can also be made, but count for only around 4% of bookings, compared with 96% made over the internet.
In its early days, some older planes had various technical problems and O'Leary has said that if there had been a major incident, it would have closed down the airline (Creaton 2005:57). Safety and quality are vital to operations because, in the case of a low-cost operator, suspicions are more likely ...
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