Need a introduction for this case study Ryanair: the low fares airline always getting better?

Ryanair, the first and largest budget airline in Europe, has enjoyed remarkable growth and success, based on a rigorously applied low-cost business model, with robust operating and financial performance even during the financial recession. However, Ryanair's prevous indifference to repeated complaints about its poor standards of customer service was suddenly reversed in 2014 with the introduction of an 'Always Getting Better' plan. The case illustrates how to analyse and deploy internal resources and capabilities to add perceived value to customers, thereby delivering sustainable strategic advantage. It also explores the difficulties of developing and extending strategic capabilities in response to changing environmental and industry conditions. BRYAN 'People say the customer is always right, but you know what they're not. Sometimes they are wrong and they need to be told so. Michael O'Leary, before 2014 'If I had known that being nice to customers was going to be so good for my business, I would have done it years' ago. Everyone loves a converted sinner. We have learned humility - and that we have to keep learning and listening to our customers.' Michael O'Leary, November 2014 In November 2014, CEO Michael O'Leary predicted a full year 2016 profit growth of 20 per cent. Ryanair shares Source Philippe Huguen/AFP/Getty Images had closed at a record high of 14.66. Customer traffic for the summer was over 30 million, with an average load factor of 95 per cent and over 90 per cent punctuality, because they want to break our rules. Why can't I get a In those 12 weeks, Ryanair had more customers than Air refund for my non-refundable ticket? Bugger off.? So France in a full year, it became the first airline to carry proclaimed Michael O'Leary in 2010. over 10 million international customers in a single The carrier had attracted complaints for its inflexible month. Cost discipline was evident, with fuel down five baggage policies and punitive charges, like hefty cancel- per cent and other costs expected to decline by one per lation and change penalties, and charges for printing cent for the year. Profits, excluding exceptional items, at boarding passes. However, these customer-unfriendly 1088m for the first half exceeded the previous year by practices had not appeared to daunt passengers who 37 per cent continued to fly Ryanair for its low fares. However, in autumn 2013, a series of events made 'Always getting better Ryanair sit up and listen. The airline was voted worst of the 100 biggest brands in the UK in customer relations This was almost a year after the airline had turned a new by readers of the consumer magazine Which? Its adver- leaf in its attitude to customers. Previously, Ryanair had sarial treatment of customers culminated in a wave of conveyed "The customer is usually wrong. The only time negative publicity after its refusal to allow a passenger to you hear from a customer is when they're complaining change his flight home to the UK when he learned his entire family had died in a house fire. Faced with height. Improve the product. Changing its previous policy of ened competition from other carriers offering cheap fares concentrating on cheaper secondary airports, primary and recognising that some passengers were willing to pay airports were added to the network. These included higher fares to competitors for a better customer experi Brussels National, Athens, Amsterdam Schiphol, ence, Ryanair did an about-face, changing its historic Milan Malpensa, Lisbon, Cologne, Hamburg and service attitude. Perhaps the most convincing factor that Glasgow International, alongside statements of a change would be worth trying was pressure on fares improved flight times and frequencies on the most and profits. popular routes. Ryanair claimed to publish its sched- Thus, in January 2014, Ryanair rolled out its "Always ules earlier than other airlines, meaning customers Getting Better' (AGB) three-year plan. Significantly, the could plan and book flights longer in advance. airline appointed its first Marketing Director, Kenny Jacobs. Heretofore, Ryanair had relied on newsworthy AGB phase 2 publicity stunts and provocative statements from Michael O'Leary as marketing tools, on the assumption that no In March 2015, to celebrate its 30th anniversary, Ryanair publicity is bad publicity. Examples of Mr O'Leary's unveiled the second phase of its AGB plan with an eight- statements were that overweight people should pay extra point Customer Charter, emphasising its new image: and that passengers should have to pay a fee to use Always Getting Better is the way we promise to do onboard toilets. Then, in January 2016, Ryanair hired its things. first PR head, Cristian Samoilovich, former manager of . We promise the lowest fares. European public policy for Uber to handle relations with . We promise the best choice of destinations. European governments and institutions. We promise to always prioritise safety. The AGB programme consisted of repositioning. We promise to strive to make your travel an enjoyable Ryanair as 'Low Fares. Made Simple'. It centred on experience. providing customers with more choice, an improved. We promise we will always be Europe's most reliable travel and digital experience, while maintaining budget airline. fares. The buy-in of Michael O'Leary and the board, and staff, alongside a relatively flat organisation structure and . We promise to be transparent and to make travel simple for you. open culture, facilitated a fast and effective execution of . We promise to innovate to make your travel exciting. the plan The most dramatic change was Ryanair's attitude to Ryanair also announced a series of initiatives to be customers, asserting that it starts at the top: listen to rolled out over the second year of the AGB programme, customers' Ryanair still maintained its cost focus to with a range of improved services, fee reductions and continue to offer relatively lower fares than competitors. exciting digital developments to be introduced over the Investment in capability was part of the changes, princi coming year. These included: pally in digital and technology. The company asserted New aircraft interiors, new seats with more leg room that it wanted to become the leader in the industry on all and new cabin crew uniforms. things digital, and created Ryanair Labs with a team of Lower airport check-in fees, missed departure fees over 150 working on a new digital platform. and a new flight cancellation option. Specifically the changes in the AGB consisted of: Real-time airline fare comparisons on Ryanair.com. improve the flying experience. Allowing customers to A new destination content service, featuring customer bring two bags on board and allocating seats. reviews. Embrace digital. Launching a new, simpler website, a A personalised Ryanair.com website with up to 100 new Ryanair app, a customer registration function versions of the homepage and personalised promo- called 'MyRyanair' so the airline could target and tional emails with customer-specific tailored offers. personalise its offers, communications and digital . A 24-hour 'hold the fare' feature for 5. platform, improving the selling of ancillary products Improved in-flight menus with more healthy meal choices like car hire and reserved seats. and a hot breakfast pre-order service on key routes. Broaden Ryanair's appeal. Segmenting products to Faster mobile apps, an improved Ryanair.com desktop meet the needs of different groups. 'Family Extra' was and an enhanced "My Ryanair' customer registration a new product focused on families and Business Plus' system. was aimed at business customers. Groups and corpo However, as of December 2015, Ryanair retained its rate service products were also launched. Skytrax 2 star rating, the worst for budget airlines in Europe. It ranked 155 out of 160 companies on a corpo- of 1.97 in October 2008, when global equity markets rate empathy index, which refers to being a company tumbled. The most dramatic share price rise had that relates in a human way to all its stakeholders, or occurred during the latter part of 2015 after stellar finan- emotional intelligence on a corporate scale." cial results, and expectations of even better to come. After its flotation in 1996, Ryanair's policy was not to Overview of Ryanair pay dividends. It retained earnings to fund its business operations, the acquisition of additional aircraft required Ryanair was founded in 1985 by the Ryan family to for new markets, expansion of existing services and provide scheduled passenger services between Ireland routine fleet replacements. However, thanks to a healthy and the UK, as an alternative to then state monopoly balance sheet, the no-dividend policy changed in June airline, Aer Lingus. Initially, Ryanair was a full service 2010 when Ryanair began to pay a series of special divi- carrier, with two classes of seating, leasing three dends. It had also engaged in various share buybacks. different types of aircraft. Despite growth in passenger The company had thereby returned over 2.9bn to share- volumes, by the end of 1990, the company had disposed holders over eight years, five times the 560m originally of five chief executives and accumulated losses of IR20 raised when Ryanair floated in 1997 and in two subse- million. Its fight to survive in the early 1990s saw the quent secondary issues. airline transformed to become Europe's first low-fares, The autumn of 2015 also saw the end of Ryanair's no frills carrier, built on the model of Southwest Airlines, 29.8 per cent stake in Aer Lingus. The Aer Lingus saga the successful US operator. A new management teambegan in 2007 when, in a surprise bid, Ryanair acquired led by Michael O'Leary, was appointed. Ryanair floated a 25.2 per cent stake, a week after the flotation of the on the Dublin Stock Exchange in 1997 and is now Irish national carrier. It subsequently increased its quoted on the Dublin and London Stock exchanges and interest to 29.8 per cent, at a total aggregate cost of on the NASDAQ-100 407.2m. By July 2009, the investment had been After its makeover into a budget airline, Ryanair never written down to 79.7m. At the time of the initial bid, looked back, as it added new bases, routes and aircraft. Ryanair declared its intention to retain the Aer Lingus Despite the up-and-down cycles of the airline industry brand and 'upgrade their dated long-haul product, and over the decades, Ryanair continued its upward trajec reduce their short-haul fares by 2.5 per cent per year for tory, among the world's most profitable airlines, leaving a minimum of 4 years ... one strong Irish airline group almost all others behind. will be rewarding for consumers and will enable both to At its 30th birthday, as of July 2015, Ryanair offered vigorously compete with the mega carriers in Europe." 1600-plus flights per day from 72 bases and 190 According to a Financial Times commentator, "Ryanair's airports across Europe, with a fleet of 315 Boeing bid for Aer Lingus was a folie de grandeur Even Michael 737-800 aircraft and six additional leased aircraft to O'Leary admitted it was 'a stupid investment. At the provide extra capacity for the summer. Year-on-year time, it was the right strategy to go for one combined traffic growth was 11 per cent from 81.7 million passen- airline but it has now proven to be a disaster." Aer Lingus gers in 2014 to 90.6 in 2015, expected to be 105 rejected the Ryanair approach and two subsequent bids million by 2016. Load factor had increased from 83 per in 2008 and 2012, notwithstanding blocking of its bids cent to 88 per cent. from the EU and the UK Office of Fair Trade (FT), and After two profit warnings in 2013-14, net profits had orders to divest its Aer Lingus stake. recovered in its 2015 results, increasing by 66 per cent After years of rejection from Aer Lingus shareholders from 523m to 867m. Average fares increased by just and jousting with Irish, European and UK competition one per cent from 46.40 to 47.05, whilst operating authorities, the matter was finally resolved in July 2015. revenue had increased by 12 per cent from 5036.7 to International Airlines Group (LAG), led by Willie Walsh, a 5654. Thus, much of the profit growth came from lower former CEO of Aer Lingus, made a successful bid to buy operating costs, especially a reduction of 11 per cent per Aer Lingus for 1.36bn, having gained EU approval after passenger in fuel costs. (Ryanair's financial data can be some concessions to give up some London airport slots. viewed in the 'Investor relations' section of the Ryanair The Irish government had already agreed to sell its 25 per website). cent stake in Aer Lingus, and the Ryanair board then agreed to dispose of its stake too. Ryanair had fully Investor perspectives and the Aer Lingus saga written down the value of its Aer Lingus stake. Proceeds, As of December 2015, Ryanair shares were trading in the totalling 398m, were distributed to shareholders via a 'B' 14.60 to 15.08 range, with a P/E ratio of 13.5. The share programme at the end of 2015, bringing the amount share price had risen steadily after plummeting to a low distributed to shareholders to over 3.3bn since 2010. Ryanair's strategy aircraft, each having 189 seats. In 2019, when the Ryanair designates itself as Europe's favourite airline, as Ryanair will become the launch customer for the new Boeing 737-800 is scheduled to go out of production, the world's largest international carrier by passengers. Boeing 197-seat 737-MAX-200 aircraft, designed to Before its conversion moment in 2013, Ryanair had stuck closely to the low-cost/low-fares model. It differed 200 of such aircraft. It expects to have an operating fleet replace the Boeing 737-800, and will purchase up to in its application of the Southwest Airlines prototype comprising approximately 520 Boeing 737s by 2024 business model, and that of its main European rival, comprising a mix of Boeing 737-800s and Boeing easyJet, as these two were not so frill-cutting. One 737-MAX-200 aircraft. In its 2015 annual report, observer described the difference between easyJet and Ryanair notes satisfaction with the pricing and conditions Ryanair as - 'easyJet is classy cheap, rather than just of its aircraft purchases from Boeing. plain cheap In its 2015 annual report, Ryanair indicated various enables Ryanair to limit the costs associated with personnel The purchase of aircraft from a single manufacturer key aspects of its strategy. training, maintenance and the acquisition and storage of Fare and route policy spare parts while also affording the company greater Ryanair's key selling point has been low fares designed flexibility in the scheduling of crews and equipment. to stimulate demand, particularly from fare-conscious Airport costs leisure and business travellers. Ryanair sells seats on a one-way basis. When launching a new route, Ryanair's Up until 2013, Ryanair reduced airport charges by policy is to price the new route at its lowest fare so that avoiding congested main airports, choosing secondary it will be significantly lower than other carriers' lowest and regional destinations, eager to increase passenger fares, but still provide a satisfactory operating margin. throughput. Ryanair further reduces its airport charges Consistent with the budget model, Ryanair's routes are by opting, when practicable, for less expensive gate loca- point-to-point only. In 2015 fiscal year, Ryanair flew an tions and outdoor boarding stairs, rather than jetways. average route length of 776 miles (1250 km) and average further from the centres of cities they serve than the Secondary and regional airports are significantly the need to provide free in-flight meals and movies, main airports, "from nowhere to nowhere in the words of expected on longer flights, while point-to-point flying Sir Stelios Haji-Ioannou, founder of easyJet, Ryanair's allows Ryanair to offer direct, non-stop routes and avoid biggest competitor. For example, Ryanair uses Frankfurt the costs of providing transfers for connecting passen-Hahn, 123 km from Frankfurt, Torp, 100 km from Oslo, gers, including baggage transfer and transit passenger and Charleroi, 60 km from Brussels. In December 2003, assistance. the Advertising Standards Authority rebuked Ryanair, In response to an operating environment characterised upholding a complaint of misleading advertising for by high fuel prices, typically lower seasonal yields and attaching 'Lyon' to its advertisements for flights to St higher airport charges and/or taxes, Ryanair has adopted Etienne, 62 km from Lyon. a policy of grounding a portion of its fleet during the However, as part of its AGB programme, it added winter months. In the winters of fiscal 2014 and fiscal more primary airports to its route system. Ryanair 2015, Ryanair grounded approximately 70 aircraft and continued to denounce charges and conditions imposed 50 aircraft, respectively, but was planning to ground by most governments at airports in the form of air approximately only 40 aircraft during the winter 2015-16 passenger duties. An example is its dispute with Athens season, due to lower fuel costs and higher anticipated Airport (AIA) over allegedly high charges imposed for its demand. installations and services. Ryanair blamed pricing policy rather than the Greek economic crisis for a decline in Low operating costs traffic. Ryanair promised to bring ten million tourists to Low operating costs continues to be at the heart of Greece within the next three years should AIA reduce Ryanair's strategy. There are various facets to the imple taxes and fees from current 12 per passenger down to mentation of this low-cost cornerstone. 5 and reduce to zero in other peripheral airports, an offer declined by the Greeks. Subsequently, the Greek Aircraft fleet government withdrew plans for the tax. Ryanair has always grown and developed its fleet to meet In September 2013, Ryanair made a ten-year growth expansion of its routes and to acquire the most up-to-agreement with Manchester Airports Group, the new date fuel-efficient aircraft. In 2015, the principal fleet owners of London Stansted, in relation to an expansion was composed of 315 Boeing 737-800 'next generation of capacity at Stansted in return for significant airport charge reductions for the incremental passenger volumes Having introduced a service to Copenhagen in the delivered. In 2015, Ryanair confirmed that it would bid spring of 2015, Ryanair had come under attack from for Gatwick slots which were to be sold as a condition of trade unions in Denmark. They accused the carrier of LAG's takeover of Aer Lingus, to develop further its violating workers' rights, and threatened to go on strike capacity at the London airport. after a ruling by the Danish Labour Court that Copenhagen airport staff had the right to refuse to service its flights Staff costs and productivity in the dispute. Moreover, the mayor of Copenhagen By 2015, Ryanair's employee number at 9394 was up on banned city employees from using the airline because its 8992 in 2014, reflecting growth in traffic and upgraded low wages amounted to 'social dumping: in general, product. Staff costs increased 1.1 per cent from Ryanair was subjected to a campaign of abuse in 9501m to 9586m. Ryanair refuses to recognise trade Denmark by labour protagonists, especially in social unions and negotiates with employee representative media. This included statements by Morten Windelv, a committees (ERCs), regarding pay, work practices and Ryanair pilot from 2007-11, and now a leading voice in conditions of employment. Following negotiations through the unions' campaign to the effect that "Ryanair's style is this ERC system, pilots and cabin crew at all Ryanair management by fear ... There is a widespread disdain bases are covered by long-term collective agreements for employees, you are not treated with trust or respect But, as seen below, various aspects of Ryanair's indus- as an individual." The dispute culminated in Ryanair's trial relations continue to attract controversy. exit from its two Danish bases in Copenhagen and Ryanair's employees earn productivity-based incentive Billund before the unions could carry out their strike payments. These include bonus payments for onboard threat. The airline announced that a planned 360m sales of products by flight attendants and payments investment in the Copenhagen base will instead be based on the number of hours or sectors flown by pilots spread throughout other European cities, and it would and flight attendants. By tailoring rosters, the carrier continue to fly to the Danish capital but will not base any maximised productivity and time off for crew members, aircraft or crew there. Ryanair's reputation went steeply whilst nonetheless complying with EU regulations which downhill in Denmark during the course of the row; it was impose a ceiling on pilot flying hours to prevent ranked last in YouGov surveys of corporate reputation. dangerous fatigue. Its passenger-per-employee ratio of However, customers were apparently indifferent, as a poll approximately 9640 was the highest in the industry. suggested more Danes would choose Ryanair than before Share option plans for employees (and directors) add to the dispute. staff remuneration packages. Generally, onboard crew have to pay for their initial Passenger service training and uniforms. Ryanair has licensed approved The internet has been a source of cost savings for organisations in Dublin, Germany and the UK to operate Ryanair in the passenger process. The development of its pilot training courses, using Ryanair's syllabus, to grant own internet booking facility has allowed Ryanair to elim- Boeing 737 type-ratings. Based on their performance, inate travel agent commissions, although, as part of its trainee pilots may be offered a position operating on improved service initiatives, the company has broadened Ryanair aircraft its distribution base by making its fares available online Apart from employing its own staff at Dublin Airport, to a limited number of other websites for a nominal cost. Ryanair outsources much of its services at other airports Direct sales via the Ryanair website and mobile app for ticketing, passenger and aircraft handling, and activ- continue to be the prime generator of scheduled ities that can be more cost-efficiently provided by third passenger revenues. parties. It claims that it obtains competitive rates for Ryanair pioneered cost-cutting/yield-enhancing meas- such services by negotiating fixed-price, multiyearures for passenger check-in and luggage handling. One contracts. was priority boarding and web-based check-in. Charging Ryanair imposes the same labour conditions, such as for check-in bags encouraged passengers to travel with no unions, and pay rates on its staff operating abroad as less or zero check-in luggage, thus saving costs and it does in Ireland. This has led to some disagreements enhancing speed. Before it charged for checked-in bags, where it was accused of breaching local labour laws. For 80 per cent of passengers travelled with checked-in instance, in October 2014, Ryanair lost an appeal luggage; within two years, this had fallen to 30 per cent, against a ruling that it breached French labour laws by and was less than 20 per cent in 2015. The airline met employing 127 local staff on Irish contracts. It was fined harsh criticism of its meagre luggage allowances and 200,000 and 8.1m in damages to trade unions, ever-rising fees for checking in bags with strict enforce- France's social security system and pilots among others. ment of limits on size and weight of carry-on luggage. Passengers incurred penalties for exceeding the limits. to have viewed it as a breach of the original contract As part of its AGB programme, it relaxed the limits by which entailed only direct ticket sales by Ryanair. allowing two pieces of carry-on luggage, but there are subsequently, in a change of strategy, Ryanair launched reports that this has created a shortage of space in over its own car hire website in a new partnership with online head lockers, with passengers forced to put their car rental aggregator, CarTrawler. This arrangement carry on luggage in the hold. would offer customers a direct connection to over 1500 From October 2009, Ryanair adopted a 100 per cent car rental agents in over 30,000 locations, across 174 web check-in policy, enabling a reduction in staff different countries. numbers, calculated to save 50m per year. Hefty fees Ancillary services accounted for approximately 25 per were incurred when passengers had not checked in cent of Ryanair's total operating revenues in the 2015 online. This was another heavily criticised aspect of and 2014 fiscal years, increasing 11.7 per cent, from Ryanair passenger service. It was moderated as part of 1247.2m in the 2014 fiscal year to 1393.7m in the its new customer-friendly ethos, cutting its airport 2015 fiscal year. Ancillary revenues per booked passenger check-in fee, which applies to anyone who has not increased to 15.39 from 15.27. This reflects an checked in online beforehand from 70 per person per improved product mix and fully reserved seating across flight to 45. The cost of checking in luggage at the the network. Revenues from non-flight scheduled opera- airport (rather than online) has fallen from 60 to 30, tions, including excess baggage charges, administration/ its boarding card re-issue fee has been cut from 70 to credit card fees, sales of rail and bus tickets, priority 15, and a 24-hour post-booking 'grace' period has been boarding, reserved seating, accommodation, travel insur- introduced to correct minor errors or spelling mistakes, ance and car rental increased 15 per cent to 1164.4m free of charge (after that it costs 110, or 160 at the from 1012.4m in the 2014 fiscal year. Revenues from airport). in-flight sales increased 9.2 per cent to 128.1m from 117.3m in the 2014 fiscal year. However, revenues from Ancillary revenues internet-related services, primarily commissions received Ryanair provides various ancillary services, including from products sold on Ryanair.com or linked websites, in-flight beverage, food and merchandise, console enter decreased 13.9 per cent, from 117.5m in the 2014 tainment sales and internet-related services. It distrib- fiscal year to 101.2m in the 2015 fiscal year. utes airport transfers, car park services, accommodation, travel insurance and car rentals through its website. Further growth and development Delivering these services through the internet enables Having become the largest international airline in Europe Ryanair to increase sales, while reducing unit costs. As with respect to passengers carried, Ryanair continues its part of its website upgrade, the company declared it growth ambitions, declaring in its 2015 annual report aimed to become the 'Amazon for travel in Europe, with that it intends to follow a growth path consistent with the all travel services currently being provided by intermedi- way it has expanded in the past. It intends to grow by aries available on Ryanair.com. offering low fares and fare promotions, thereby achieving Over the years, ancillary revenue initiatives were higher load factors. It will add additional routes and flight constantly being introduced to raise extra revenue. It was frequencies on existing flights, as well as new bases in the first airline to charge for check-in luggage and the EU, and in countries party to a European Common in-flight food and beverages. Virtually all budget airlines Aviation Agreement with the EU on both international have followed suit, as they have with other Ryanair initi- and domestic intra-country routes. It will seek opportuni- atives. It has continued to find ways of charging passen- ties to offer budget fares on routes currently served by gers for services once considered inclusive. While the mainstream and higher cost competitors, but expects to airline has now changed its seating policy from open open new routes, not currently served by any carriers. seating to allocated seats, an extra charge procures While it has mentioned plans to connect airports 'priority boarding' purchased in advance for 10/10 per within its existing route network, it does not mention flight, an initiative followed by many traditional carriers, anything about offering connection services to passen- such as British Airways, charging passengers to book gers, such as luggage transfers. Ryanair was in talks with seats online for an extra charge. Ryanair incentivises its Norwegian Air Shuttle and Portugal's TAP to provide ground staff to levy excess baggage charges. transfer connections on long-haul flights. Similar talks In July 2015, Hertz ended its long-standing contract with Aer Lingus and Virgin Atlantic had broken down, to market its car rental services through Ryanair's since Ryanair did not want to be responsible for missed website in a dispute over the airline's ticket selling connections or delays. In March 2015, Michael O'Leary arrangements using third-party agents. Hertz is believed retracted a statement issued two days' earlier, announcing board approval to launch a transatlantic airline. Indeed, Ryanair, contributing 20 per cent. However, the 2015 the company had talked for years about starting transat growth was also a product of buoyant demand. lantic services, offering one-way fares for as little as 10. The CAPA Centre for Aviation has divided European However, O'Leary admitted that the logistics were not airlines into five models: possible, as the plan was dependent on procuring long Major network carriers. This model comprises the haul, fuel-efficient, wide-bodied jets, which could take major legacy groups, such as Air France-KLM, IAG, many years to obtain, as aircraft manufacturers had Lufthansa. backed up orders from existing long-haul carriers devel Niche full-service carriers. These are airlines from oping their routes. In the past, Ryanair has grown organically, with one smaller countries, with less developed networks, and lower costs, such as Air Berlin. exception, its acquisition in 2003 of Buzz, a budget Pan European LCCs. Exemplified by easyJet, Vueling, airline subsidiary of KLM, the Dutch flag carrier, with Norwegian, these airlines are not pure LCCs as they headquarters at Stansted, for a bargain 15m. Buzz's offer some 'frills! operations were quickly absorbed into those of Ryanair. Ultra LCCs. Also pan-European, this group is led by Of course, Ryanair had been trying for eight years to Ryanair as following the pure low-cost model. Other acquire Aer Lingus until the matter was concluded when it conceded in 2015. Nonetheless, it is open to acquisi- . Leisure LCCs. These airlines are smaller scale, operate examples are Wizz Air and Pegasus. tion opportunities. These can arise by sweeping up competitors, although, in the past, Ryanair has been mainly out of one country, concentrating on leisure travel with longer distance routes to tourist destina- more inclined to eliminate competitors through open competition rather than by acquiring them. tions. Transavia, Monarch and Jet2.com are examples. The differences between the features and cost base of Safety and maintenance LCCs and legacy airlines have narrowed. Furthermore, Ryanair has always been conscious of safety as a crit- the distinction between the various business models for ical factor, and that any safety-related harmful inci short distances is increasingly irrelevant as traditional dents on Ryanair or other budget carrier could adversely flag carriers' short-haul operations now compete head to affect its business. It places resources into safety head with the LCCs' point-to-point services. training of its staff and maintenance of its equipment The operating margins of European LCCs, especially and a board-level safety committee constantly reviews ultra-Lcos, in 2014 compared favourably to those of safety issues. full-service carriers. Five of the top six and all of the top Ryanair carries out routine maintenance of its Boeing three by operating margin are LCCS. CAPA also points out fleet, but contracts out overhaul engine and component that for Europe's major network airlines, successful LCC services to third parties. The commonality of the fleet subsidiaries are rare and require a distinct culture. helps to keep down maintenance costs. Creating new lower cost platforms can cannibalise the mainline brand and present significant industrial rela- tions challenges in realising LCC cost savings. Ryanair Ryanair's competitive space was the most profitable listed European airline in 2014 Europe has a total of 168 carriers: low-cost carriers ranked by operating margin. The least profitable was Air (LCCs) or budget airlines make up 45 per cent of the Berlin. Wizz Air managed its unit cost down further while capacity share. The industry in Europe is fragmented, as raising its unit revenues. easyJet continued to take consolidation has slowed down, forcing each airline to advantage of its network of primary airports and its lead devise its own unique strategy. Airlines compete primarily over other LCCs in terms of initiatives towards business in respect of fare levels, frequency and dependability of travelers and customer service. However, some LCCS service, name recognition, passenger amenities (such as recorded falling margins in 2014, among them Vueling access to frequent flyer programs), and the availability and Pegasus, and two were even loss-making, Norwegian and convenience of other passenger services. The and Transavia. industry is highly susceptible to price discounting, because airlines incur very low marginal costs for providing service to passengers occupying otherwise Risks and challenges unsold seats. Although the company had been enjoying success in the Contributing to competition in 2015 was growth in 2014-15 period, it was conscious that it had to be short-haul capacity accelerating to 7.7 per cent in the equally vigilant about risks to sustain its exemplary fourth quarter. This growth was led by LCCs, especially record. Some of the challenges faced by Ryanair were