Ryanair's Bid for Aer Lingus

This assignment examines Michael O’Leary’s perspective on Ryanair’s bid for Aer Lingus. It focuses on O’Leary’s argument that a merger was unnecessary due to Aer Lingus’ losses and Ryanair’s strong market position. The analysis delves into the strategic implications of this stance, considering the potential benefits and drawbacks for both companies within the competitive airline industry.

Running Head: Marketing 1
Case of Ryanair

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Contents
Ryanair - The Low Fares Airline: Whither now..............................................................................3
Ans1. Ryanair success.....................................................................................................................3
Ans2. Sustainable strategy...............................................................................................................4
Porter Five forces.........................................................................................................................4
Analysis of the competitors..........................................................................................................5
Ans3. Recommendations for change...............................................................................................6
Ans4. Strategic Sense......................................................................................................................7
References........................................................................................................................................8

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Ryanair - The Low Fares Airline: Whither now
This report focuses on the analysis of the business strategy of the famous airlines
Ryanair. Report analyzes the given case of Ryanair and provides answers of the given case. First
of all, it is important to understand about the business operations of the airlines in the operating
market. Ryanair is known as one of the cost effective and famous airlines company operating in
the Europe. Aim of the business of airline to achieve competitive advantage in the market in
terms of affordable cost and prices. The company has adopted various cots leadership strategies
to meet the needs and requirements of the customers in the market. In this way, company has an
effective slogan i.e. you get what you pay for. By this effective message, company is able to
focus on the strategic consideration and provide low cost services to the customers. By the
effective strategic practices, the company is now able to gain strong position in the airline
industry over its competitors. The report provides answers of the given questions in the case
(Muller, 2011).
Ans1. Ryanair success
The success of the Ryanair depends upon some factors which are different from other
airlines. It is noted that the company has ‘no-frill concept’ that is helpful for the company to
reduce the prices of goods and services. The objective of this concept is to improve the
efficiency of any product or service. Along with this, by using ‘no-frill concept’, aim of the
company is to provide cheaper products and services to the end customers to gain competitive
advantage in the market. Ryanair is using this concept due to some reasons i.e. saving money to
hold the inventory, providing training to the pilots and maintaining the business in the industry,
buying new airplanes and selling the old ones etc (Witcher & Chau, 2010). That is the reason,
Ryanair is known as one of the youngest aircraft fleet in the world. Along with this, this concept
is also used by the company to save the money on airport. At the airports, customers have to pay
airport fees while buying the tickets and the bigger airports want higher amount from the
customers. In such case, Ryanair imposes low airport fee by reducing the ticket prices for the
customers and makes the offers more attractive for them (Hoskisson, Hitt & Ireland, 2008).
Further, Ryanair has only point-to-point flights for some routes. It means the company is
avoiding big routes flights for the comfort of the customers. along with this, company is focused

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on the luggage management and minimize the risk of missed connection flights of the
passengers. Apart from this, Ryanair has effective cost model which is the key factor of the
success. The cost model for the company is provided by its CEO Michael O’Leary. By adopting
the cost model, the company is now biggest low-cost airline of Europe and third biggest airline
company in the world. Before starting the work of O’Leary as CEO, Ryanair was not so much
developed and provided the flights between England and Ireland. After the joining him as the
CEO, he adapted a low cost model for the company to rescue Ryanair. In summary, the credit of
the success of Ryanair goes to Michael O’Leary who effectively adopted the low-cost model for
the company. By using that model, Ryanair is now the biggest airline company in Europe and is
able to transport more and more passengers every year (Palepu, Healy, Geek & Bernard, 2007).
Ans2. Sustainable strategy
To understand the strategy of the Ryanair, it is important to analyze the position of the
company in the market. For this manner, market analysis tools can be used in the company. By
the five forces model, the sustainability of the airline can be analyzed for the long term basis.
Porter Five forces
Threats of new entrants-
In the factor of new entrants, the threats are relatively low as companies need huge
amount of capital to start the business. Along with this, there is high level of entry barriers for
the new companies such as access to distribution channels, economies of scale etc. So, for the
new companies, it is quite difficult to enter in the airline industry.
Threats of the substitutes-
There is the strong presence of the substitute transportation services in the market for
Ryanair such as coach transport, railway networks, car firms and sea transports. But all the
transportation services are costly and it is not possible for every person to afford the cost of
transportation. Along with this, it can be said that flights are the main reason of the competitive
advantage for Ryanair. So, in this case, threat of the substitute for Ryanair is relatively low in the
airline industry (Roosa, 2010).
Bargaining power of suppliers-

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In case of bargaining power of suppliers, it is well known that Boeing is the key supplier
of Ryanair. The company is the biggest buyer of Boeing with 737 models and the fastest growing
airline of the industry. It can be observed that the bargaining power of the suppliers is growing
continuously. Along with this, the switching cost of the suppliers is relatively high due to the
presence of many airlines in the industry (Milmo, 2011).
Bargaining power of buyers-
In this case, it can be seen that there is high bargaining power among the buyers or end
users of the airline services. The reason is that there are many low cost airlines available in the
market. The bargaining power of the customers has increased as most of the airlines are
providing the services at the lower rates because of the presence of strong position in the market.
Competitive rivalry-
At last, this factor is also observed as the low in the airline industry. The reason of low
competitive rivalry is that there are massive economies of scale in the country that impact on the
entry of new companies in the industry. It is well known that Ryanair is the newest and largest
airline in the industry so; company has strong competitive advantage with its cost leadership
plans.
Analysis of the competitors
The sustainability of company can be analyzed by understanding the position of the
competitors in the market. The competition with other airlines in the industry is very unique and
needs a little bit bravery. The competitors are trying to provide low cost services to give tough
competition to Ryanair in the market but in terms of services, Ryanair has superiority as
compared to other airlines. The company has low cost model along with the high seat density,
high load factor, and efficiency to attend the passengers. Competitors are trying to copy this low
cost model but they are not able to manage the expenses with lower cost services. There is one
more problem for the company i.e. competitors are trying to offer the affordable services in the
long routes flights and Ryanair is still operating short route flights. In this manner, competitors
will be able to target large customer base who want to travel on long route. To attract large
customer base, company should start long route flights with the same services (Hitt, Ireland &
Hoskisson, 2010).

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Ans3. Recommendations for change
Ryanair is doing well in its operating model. To stay competitive in the market, it is
important for the company to change its strategies and models time to time. To achieve high
level of competitive advantage, there are some recommendations for Ryanair that must be
adopted by the company. Recommendations for Ryanair are given below:
Change in the low cost model-
The company is focused on the ‘no-frill concept’ to reduce the additional cost in the
business so that tickets at the lowest price can be offered to the customers which is possible. This
is an innovative and very good idea as passengers will travel with lots of comfort and friendly
mood. This function was doing well when Ryanair was the single operator of this plan but now
there are many companies adopting this strategy and now it is very difficult for the company to
retain its customers in the competitive market (Azar & Brock, 2010). So, there is the need for the
company to change the existing cost model so that more and more customers can be targeted.
Further, company is dealing with the secondary airports like Frankfurt-Hahn which a good idea
for saving the money but passengers is facing problems to reach the destination. Passengers have
to waste their lots of time and money to reach on those secondary airports. So, Ryanair should
think about changing the deals of the secondary airports in the big cities as it is very expensive
for the passengers (Szymanski, 2011).
Introduction of long route flights-
Further, if the company wants to enter the market of long route flights, then the company
has to quit its ‘no-frill’ concept. The reason is that if the passenger travel for 6 hours and longer,
then it is important for the airline to offer free snacks and soft drinks to them. Along with this, it
is necessary to provide more space to the travelers as compared to short route flights. So the
company has to decrease number of seats in the airplanes that will lead to the higher cost of a
customer per kilometers. Some entertainment should also be installed in the planes as in the long
route flights; it is quite difficult for the passengers to sit for so much long time. If Ryanair on
these factors and does changes according to the long flights, company will be able to attract more
passengers.
Change of low frill concept-

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Ryanair should change its no frill concept as this concept is applicable only on short route
flights but for the long route, it is not applicable. This concept with the secondary airport is
completely useless as after a long journey, passengers want to arrive at their destinations. They
do not want to stay at the other airport which is miles away from their original destination. So,
this concept must be change while the company is seeking to expand its business with the long
route flights to attract more and more customers (Walsh, 2011).
Ans4. Strategic Sense
According to the case, it is analyzed that the Aer Lingus Bid does not make any sense in
the business operations of Ryanair. In the current environment of the company, it is not advisable
for the Ryanair to continue the process of Aer Lingus Bid. It can be seen that each and every
stakeholder in the company is against of this bid. Some of the main players of the business such
as Aer Lingus board will not be accepting this bid. Along with this, there is also opposition from
both Irish Government as well as EU (Milmo & Wearden, 2008). So, it is recommended to the
company to keep its current shares on hold in Aer Lingus while focusing on bid. According to
the Financial Times, the bid of Ryanair in the Aer Lingus was not a good decision. At the time of
bidding, Ryanair to take over Aer Lingus may have seemed like a good idea. But, as the time
passes, it did not really make a strategic sense. Both the companies were account for 80% of all
the flights between European countries and Ireland. The company was focused to win over the
company along with the increasing bids starting from 19.2% to 26.2% and 28% of shares (The
Conversation, 2015).
Ryanair had wasted its lots of time and resources in trying to win over the Aer Lingus but
in this process company got a bad name for itself in the business due to various public issues.
Aer Lingus started to see a downfall in the business and announced the losses in various
operations. In such case, all the offers were put forward by Ryanair in the market (Freeman,
2012). According to Michael O’Leary, CEO of Ryanair, when there was no any bid between Aer
Lingus and Ryanair, the company had good position in the market as Aer Lingus was facing
continuous looses in the market (Clark, 2012). So, bid of company with Aer Lingus does not
make any importance for the business in the airline industry.

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References
Azar, O.H & Brock, D.M., (2010), The development of strategy process research and the
most influential articles and authors” in Handbook of Research on Strategy Process, F.W
Clark, N., (2012), Ryanair Approaches Aer Lingus for a Third Time, accessed on 5th
September 2017 from https://dealbook.nytimes.com/2012/06/20/ryanair-approaches-aer-
lingus-for-a-third-time/?mcubz=0
Freeman, M., (2012), Poll: Should Ryanair be allowed to buy Aer Lingus, ccessed on 5th
September 2017 from http://www.thejournal.ie/ryanair-aer-lingus-takeover-bid-poll-493631-
Jun2012/
Hitt, M.A, Ireland, D. R., & Hoskisson, R.E., (2010), Strategic Management:
Competitiveness & Globalisation, Concepts, Cengage Learning
Hoskisson, R.E., Hitt, M.A. & Ireland, R.D., (2008), Competing for advantage, Cengage
Learning
Milmo, D., & Wearden, G., (2008), Ryanair launches bid for Aer Lingus, accessed on 5th
September 2017 from https://www.theguardian.com/business/2008/dec/01/ryanair-aer-lingus
Milmo, D., (2011), Ryanair snubs Boeing by announcing jet design pact with China’s
Comac, The Guardian, accessed on 5th September 2017 from
http://www.guardian.co.uk/business/2011/jun/20/ryanair-designs-chinese-rival-boeing-737
Muller, C., (2011), Ryanair case study and strategic analysis: An analysis on the
competitiveness and low-cost strategy of Europe’s leading low-cost carrier Ryanair, GRIN
Verlag
Palepu, K.G., Healy, P.M., Geek, E. & Bernard, V.L., (2007), Business Analysis and
Valuation: Texts and Cases, Cengage Learning
Roosa, S.A., (2010), Sustainable development handbook, (2nd), The Fairmont Press, Inc
Szymanski, A., (2011), The Competitive Analysis of Commercial Aircraft Industry, GRIN
Verlag
The Conversation, (2015), British Airways isn’t chasing the rainbow with its Aer Lingus bid,
accessed on 5th September 2017 from https://theconversation.com/british-airways-isnt-
chasing-the-rainbow-with-its-aer-lingus-bid-36815

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Walsh, C.R., (2011), Airline Industry: Strategies, Operations and Safety, Nova Science
Publishers
Witcher, B.J. & Chau, V.S., (2010), Strategic Management: Principles and Practice,
Cengage Learning