In 2015 Ryanair, based in Dublin, reported that it had carried over 90 million passengers in the 12 months to the end of March, 11 per cent more than in the previous year. Revenue had grown by 12 per cent and profit by 66 per cent. It believed this growth reflected managers’ efforts to improve passengers’ experience, such as renewing the website and allowing them to take on board an extra small item.

Tony Ryan (1936–2007) founded the company in 1985 with a single aircraft flying passengers from Ireland to the UK. Ryan, the son of a train driver, left school at 14 to work in a sugar factory, before moving in 1954 to work as a baggage handler at Aer Lingus, the state-owned Irish airline. By 1970 he was in charge of the aircraft leasing division, lending Aer Lingus aircraft and crews to other airlines. This gave him the idea, which he quickly put into practice, to create his own aircraft leasing company. As Guinness Peat Aviation this became a world player in the aviation leasing industry, and is now part of GE Capital.

In 1985 he founded Ryanair, to compete with his former employer. Southwest Airlines in the US inspired this move by showing that a new business could enter the industry to compete with established, often state-owned, airlines. Tony Ryan turned Ryanair into a public company in 1997 by selling shares to investors. In the early years the airline changed its business several times – initially competing with Aer Lingus in a conventional way, then a charter company, and at times a freight carrier. The Gulf War in 1990 discouraged air travel and caused the company financial problems. Rather than close the airline he and his senior managers (including Michael O’Leary, who is now Chief Executive) decided it would be a ‘no-frills’ operator, discarding conventional features of air travel such as free food, drink, newspapers and allocated seats. It would serve customers who wanted a functional and efficient service, not luxury.

In 1997 changes in European Union regulations enabled new airlines to enter markets previously dominated by national carriers such as Air France and British Airways. Ryanair management saw this as an opportunity to open new routes between Dublin and continental Europe, which they did very quickly. Although based in Ireland, 80 per cent of its routes are between airports in other countries – in contrast to established carriers, which depend on passengers travelling to and from the airline’s home country (Barrett, 2009, p.80). The company has continued to grow, regularly opening routes to destinations it thinks will be popular. It refers to itself as ‘the world’s largest international scheduled airline’, and continues to seek new bases and routes.

In May 2015 the chairman of the board presented the company’s results for the latest financial year. Measures of financial performance in recent financial years (ending 31 March). Michael O’Leary joined the company in 1988 (he was previously financial adviser to founder Tony Ryan) and became chief executive in 1994. He depends on securing agreements with airport operators, and on persuading authorities to allow Ryanair to open a route. This often leads him into public disputes with airport operators and/or with the European Commission. O’Leary takes a deliberately aggressive stance to these controversies, believing that: as long as it’s not safety-related, there’s no such thing as bad publicity. He is outspokenly dismissive of traditional high cost airlines, the European Commission, airport operators, and governments that subsidise failing airlines. Since 2013 the company has also adopted a friendlier approach to customers, which appears to have paid off, as passenger numbers have risen steadily since then. Airline seats have no value if they are not filled on a flight, so companies aim to maximise the proportion sold, using a technique known as dynamic pricing – typically, fares rise the nearer the date is to that of departure, though if seats are empty near the flight dates, fairs will fall.

It earns revenue by charging for services such as checking baggage into the hold or booking by credit card, selling insurance, priority boarding and refreshments. Each time a passenger rents a car or books a hotel room on the Ryanair website, it earns a commission. The company expects revenue from ancillary activities will grow more rapidly than ticket sales, and in 2015 they brought in 25 per cent of total revenue.

Sources: Financial Times, 5 October 2015, p. 14; company website.

Top management is organised by function. Under Michael O’leary as chief executive are two deputy chief executives who are also chief operating officer and chief financial officer respectively. There are executives in charge of pilots, customer service, engineering, legal affairs, ground operations and personnel/in-flight. The board of directors consists of the chief executive and eight non-executive directors – senior managers in other businesses. Managers are responsible for delivering the strategy – to bring the benefits of flying to as many people as possible. They control costs rigorously by:

• using a single aircraft type (Boeing 737–800), which simplifies maintenance, training and crew
• scheduling; using secondary airports (away from major cities) with low landing charges and less congestion;
• staff typically preparing an aircraft for its next flight in 25 minutes (many airlines take an hour), which allows aircraft to spend more time earning revenue (11 hours a day compared to seven at others);
• not assigning seats simplifies administration, and passengers arrive in time to board early;
• flying directly between cities avoids transferring passengers and baggage between flights;
• cabin staff collecting rubbish from the cabin, saving costs.

Managers soon saw the benefits of online booking, and it now sells over 99 per cent in this way. It has tried to minimize staff costs by introducing productivity- based incentive payments – such as awarding a bonus to cabin staff based on in-flight sales, and to pilots based on the number of hours they fly, within the legal limits. Over 90 per cent of flights arrived on time in 2015–16, helped by a daily conference call between the company and airport personnel at each base airport. These record the reasons for any flight or baggage delays, and aim to identify their root causes to prevent them happening again.

Sources: The Economist, 20 July 2004; company website.

A report noted that a competitive analysis of Europe’s leading low-cost carrier Ryanair. For this purpose, various concepts and frameworks of the strategic paradigm are applied, such as Michael Porter’s Five Forces and Value Chain Analysis, SWOT or Resource-Based View. When it comes to Ryanair’s external environment the report provides extensive information on the external factors that are having a significant impact on Ryanair’s low-cost strategy and its economic viability. For example, it takes into account recent global incidents, such as the volcanic eruption in Island or the public turmoil in Libya. Furthermore, based on the competitive analysis recommendations are made on Ryanair’s future direction and as to how it can sustain and extend its strategic position. In particular, this part deals with strategic human resource management, corporate social responsibility, lean thinking and diversification. Due to the complexity of the aspects covered in this report and the need to clarify some of them more comprehensively, appendices are provided to promote understanding.

Question:

1. Make notes showing which of Mintzberg’s management roles you can identify in the case. Support your answer with specific examples.
2. Make notes showing examples of the functions of management in the Ryanair case.
3. What examples are there in the case of the perspectives on competitive strategy? Which other strategy would you Ryanair can adopt and why? Why not other strategies?
4. Critically assess the relevance of at least three approaches he CEO Mr. Michael O’leary can utilize to management when managing a work force Ryanair.
5. At Ryanair, a number of decisions have to be made. Typically, you can use programmed and non-programmed decisions. Which decision were programmed and which ones were non-programmed decisions? Explain why it would be a good idea for the CEO to use group-aided decision as opposed to group-decision making.
6. Explain the sustainability (corporate social responsibility) issues that Ryanair would need to take into consideration. Give examples.