Ryanair's Business Model: A Case Study in Competitive Advantage

This study examines Ryanair's business model, focusing on its pricing strategy, supply chain management, and marketing tactics. It analyzes how Ryanair has achieved a dominant position in the European aviation industry through a cost-leadership approach, leveraging secondary airports, efficient staff, and government grants. The study also explores Ryanair's evolving marketing strategy, emphasizing customer retention and acquisition through website and mobile app enhancements, SEO, and CRM initiatives.

Business Essentials: Extended Project – 2018
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Table of Contents
Introduction......................................................................................................................................3
Ryanair: Company Background......................................................................................................4
Market Segmentation and Target Markets......................................................................................4
Ryanair’s Pricing Strategy...............................................................................................................5
Ryanair’s supply chain battles with airports....................................................................................6
Ryanair’s constantly evolving marketing strategy..........................................................................8
Conclusion.....................................................................................................................................10
Reference List................................................................................................................................11
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Introduction
In the present market environment, maintaining competitive advantage is one of the most
important business objectives that companies strive to achieve through proper alignment of their
business operations. Since the scope of such an objective is diverse and brings into play various
factors, companies are not restricted to a particular amount of possible operations and activities
that they could undertake. However, businesses also have to keep in mind the aspect of ethics
and control when exercising such duties; not sticking to which could be fatal for the sales growth
of any organization. One of the most affected industries, in terms of maintaining competitive
advantage, is UK’s aviation industry, which has seen more than $ 300 million in acquisitions and
ventures take place in the last ten years.
This study will look into the aviation industry as a whole, with emphasized focus on the various
players within the industry and how they strive to maintain a competitive position in their
market. Although the study will take into consideration various large and small organizations in
the aforementioned industry, it will focus on Ryanair’s business operations and how they help
the company in attracting more consumers that their rivals. Various business functions, such as
pricing, supply chain management as well as marketing will be assessed to help the readers in
understanding the factors necessary to function sustainably in an over-populated market.
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Ryanair: Company Background
Found in 1984 and headquartered in Dublin, Ireland, Ryanair is currently the largest European
Airlines service provider, with respect to the number of passengers flown. The total assets of the
company are over € 11.98 billion, with an operating income of more than € 1.534 billion. The
airlines provide services to over 205 domestic and international destinations, made possible by
its large fleet size. The company operates more than 400 Boeing 737-800s in their total fleet
capacity of over 420. It is one of the major low-cost airlines in Europe with services and
destinations in over 34 international countries (Ryanair.com, 2018).
Michael O'Leary (CEO) and Peter Bellew (COO) are the two most associated names with the
company, making the airlines a present day success based on a low cost business model and still
beating large companies at their very own game. Whilst the company is constantly striving to
strengthen its positions, the activities undertaken by them are both traditional and contemporary.
Figure 1: Ryanair Official Logo
(Source: Ryanair.com, 2018)
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Market Segmentation and Target Markets
Targeting customers to achieve greater distribution of services is something that has been tried
and tested by almost all organizations in every customer-oriented industry. While creating
market segments help organizations in eliminating most of the probable threats, emphasis on
always laid on the opportunities that such processes generally enable the company to focus on.
The aviation industry in particular, has long used this method of market segments and target
customers to eliminate forms of homogeneity in services provided.
Ryanair has always focused on the psychographic segment within the aviation industry, which is
one of the main reasons for the company’s current positioning in the industry (Taneja, 2017).
Although one could say that Ryanair’s chief target market is the low and middle earning groups,
deeper analysis proves that there is a very evident structure that the company has followed in
order to segment its markets efficiently. It is one of those few companies in UK’s aviation
industry that has over ten different target customer segments, enabling the company to focus on
each of their needs and demands.
Firstly, the company focuses on the need for travelling, rather than travelling itself. This allows
the company to serve the people who travel domestically or internationally for various business
and medical purposes. Then there is the segment of frequency, making the company adept in
providing services to people who either fly almost every month or once a year. Ryanair
recognizes the possible outcomes its operations could have on a frequent as well as a not so
frequent traveller. Last but not the least; the organization has been successful in targeting the
consumers who have to reach a particular destination in a specified amount of time (Liu et al.,
2018). Sticking to strict schedules and always delivering within ser deadlines is something that
has given Ryanair a considerable competitive position in UK’s aviation industry.
Ryanair’s Pricing Strategy
Ryanair has always had a corporate strategy of expansion and growth, which they have sought to
promote through their focus on cost leadership. Their business model has portrayed a high
degree of situational analysis, whilst maintaining huge regards for their target markets and price
sensitive consumers. The company has predominantly focused on designing and implementing a
better model to make long and short haul travelling, cheaper (Thomas, 2018). Their low price
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strategy is in complete accordance to their business operations, which they have aligned to heir
cost effective model of pricing.
In depth analysis shows varying degrees of measures that the company has undertaken to
facilitate their cost effective pricing strategy. Some of those measures have been mentioned
below:
 Training costs: Ryanair is one of those few companies that operate one type of plane at
large. With over 400 Boeing 737-800s in their fleet, the company has been able to cut
down almost all overhead costs of training and development. Since the staffs are well
accustomed to the plane, even cleaning costs have been reduced because of the overall
situation of the know-it-all that persists among their employees.
 Using secondary airports: The Company has epitomized usage of secondary airports,
which has also enabled the company in cutting the costs down of landing and
maintenance charges of airports. In addition, using airports that are otherwise abandoned,
the airline has been able to land their planes as and when required, increasing punctuality
and reducing overhead costs.
 Efficiency in both cabin crews as well as ground staff: Ryanair has cut down on parking
fees by making use of a greatly efficient staff, boarding and seating passengers, in small a
time as possible. It is not unheard of that the airline has put passengers through boarding
lines, without the plane even being present.
 Government Grants and negotiations: Ryanair gets regular grants from the UK
government, which ultimately helps the company in lowering their prices that would
otherwise be high. In addition, the company also receives funds from major UK cities,
enabling the company in sticking to their “low-cost” model. Another factor which has
greatly helped Ryanair in maintaining such a competitive position is the fact that they are
able to almost direct the charges and fees that airlines have to pay to governing
authorities (Gillen et al., 2016). This has been prompted by the fact that they are the
airlines which direct almost 30% of the overall air traffic in the UK.
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Ryanair’s supply chain battles with airports
Ryanair has always been a company which has focused greatly on using their internal capacities
in complete synchronization with their existent markets. However, in depth analysis would show
that such a correlation demands great market understanding as well as strong internal
capabilities, and cannot be achieved on a “one or the other” basis (Handfield et al., 2015). Most
recently, the company was associated with creating and establishing new routes for their airlines
to follow. It was in complete agreements of the company to reduce travel costs as well as their
overhead costs. While the plan was almost sanctioned, the company pulled out of such an
agreement at the last moment. The main reason, as stated by officials of the company, was
because the company and the airports in those regions could not agree on a similar competitive
cost base. In addition, the company also announced that it would be decreasing the size of their
fleet from 7 to 6 Boeing 737-800s.
Another important factor that is evident from Ryanair’s supply chain management is the fact that
the airlines have always sought to adopt flexibility as the core functioning principle (Holloway,
2017). This has allowed the company to deploy air travel from those airports from which
profitability can be maximized. Their business model has matured greatly in the past five years,
and currently, Ryanair uses a mix of both primary and secondary airports to achieve competitive
advantage. While the use and implementation of such a business model is highly speculative and
has been debated by many large companies in UK’s aviation industry, the company has shown
no evidence related to curbing any of these measures. Opposite to it, Ryanair is looking to
promote these activities while urging the whole industry to focus on cost effectiveness as a
sustainable business measure.
Last but not the least; Ryanair, like all other aviation companies in the UK, has been affected by
the growing costs of fuel. According to statistics, for the FY 2012-13, almost 41% of the cost
base was because of the fuel costs that had soared by over 35 in the last decade. Its effect
becomes more visible if compared to the cost base of FY 2010-11, where fuel only had a 385
share rate (Johnston and Marshall, 2016). Due to this, Ryanair has started making use of carriers
that mirror their cost effective approach. Using such models has increased consumer volumes
from 73 million to 75 million, which has enabled the company in extracting cost reductions from
the airports themselves. Ryanair has 156 such airports which pays it annual grants because the
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company has increased air traffic through and via these terminals by almost 26% in the last 5
years (© and Research, 2018).
Ryanair’s constantly evolving marketing strategy
Initially, Ryanair had a very discrete way of functioning with their consumers; post flight
interactions almost inexistent in the company’s undertaken list of actions. However, as time has
passed, the company has focused on creating stronger relationships with their consumers through
various means available to them. According to the company’s officials, the new strategy will
help the company become more customer oriented, and the end of a flight will not mean end of
interactions with the customer (The Irish Times, 2018). An important factor that has to be kept in
mind is the fact that Ryanair always had access to huge big data, but the company were
complacent in making use of the same. However, as the industry rivalry has gone on increasing
and companies have used methods of even operating at break even margins, the company has
become aware regarding the analysis and evaluation of such data. At the same time, enough
attention is being paid to their marketing strategies for attaining competitive sustainability in
UK’s aviation industry.
 Customer retention: Ryanair’s focus on customer retention has been revitalized in the
way the company have recreated their website and mobile based applications. Although
many consumers have complained about the various add on that the website tries to sell
forcefully, the customers have praised the company’s efforts at requesting the consumer’s
to “sign up and log in” (Zartis, 2018). At the same time, their mobile based applications
are even more interactive than before, personalization and customization being the core
values that the company has followed.
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Figure 2: Ryanair official Website
(Source: Ryanair.com, 2018)
 Customer Acquisition: While retaining consumer’s has been the primary focus on the
airlines company, acquiring new consumers still remains the core principle on which
their business operations are based on. Through proper usage of search engine
optimization (SEO) and development of proper mobile application guidelines, the
company has been able to attract many new customers. One standout feature in their
mobile application is the ability to generate a boarding pass online, through the
Smartphone itself. Their efforts at Customer Relationship Management (CRM) as well,
have been appraised from time to time (Johnston and Marshall, 2016).
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Conclusion
The study has shed light on the various ways in which Ryanair, Europe’s leading airline
company, has gained a substantial consumer base, with primary focus on their present market
positioning. The various ways in which the company has used different strategies, to maintain a
competitive position in the market, has been discussed in detail. It has been analyzed that
Ryanair has used various new strategies to help them reach a position where they can dictate
terms and conditions, talking power away from the airports and distributing it amongst the
airlines service providers. Although the study is completely authentic, any suggestions aimed at
increasing its credibility, is duly welcome and highly appreciated.
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Reference List
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Irishaviationresearchinstitute.blogspot.in. Available at:
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battle.html [Accessed 16 Mar. 2018].
Gillen, D., Forsyth, P., Niemeier, H.M. and Muller, J. eds., 2016. Airport Competition: The
European Experience. Routledge.
Handfield, R.B., Cousins, P.D., Lawson, B. and Petersen, K.J., 2015. How can supply
management really improve performance? A knowledge‐based model of alignment
capabilities. Journal of Supply Chain Management, 51(3), pp.3-17.
Holloway, S., 2017. Airlines: Managing to make money. Routledge.
Johnston, M.W. and Marshall, G.W., 2016. Contemporary selling: Building relationships,
creating value. Routledge.
Liu, J., Liao, X., Huang, W. and Liao, X., 2018. Market segmentation: A multiple criteria
approach combining preference analysis and segmentation decision. Omega.
Ryanair.com. (2018). Official Ryanair website | Book direct for the lowest fares | Ryanair.com.
[online] Available at: https://www.ryanair.com/gb/en/ [Accessed 16 Mar. 2018].
Taneja, N.K., 2017. Driving airline business strategies through emerging technology. Routledge.
The Irish Times. (2018). Nice and profitable: How Ryanair revamped itself. [online] Available
at: https://www.irishtimes.com/business/transport-and-tourism/nice-and-profitable-how-ryanair-
revamped-itself-1.2655130 [Accessed 16 Mar. 2018].
Thomas, N. (2018). From budget to business: how the low cost airlines are winning us over.
[online] Telegraph.co.uk. Available at:
https://www.telegraph.co.uk/finance/newsbysector/transport/11059009/From-budget-to-
business-how-the-low-cost-airlines-are-winning-us-over.html [Accessed 16 Mar. 2018].
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Zartis. (2018). Employer Services - Zartis. [online] Available at: http://zartis.com [Accessed 16
Mar. 2018].
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