Ryanair From industry-based, resource-based, and institution-based views, how can we understand the drivers behind Ryanairs success? From an ethical standpoint, is CEO Michael OLeary a loose cannon or an astute strategist? Charles M. Byles, Virginia Commonwealth University Always in the news and not shy of adverse publicity, Ryanair has been soaring in profits for the past few years. In November 2011, CEO Michael OLeary announced a 20% increase in profits that in his words was a testament to the strength of Ryanairs lowest fare/lowest cost model. Ryanair did not start with this model, however. Founded in 1985 with its headquarters in Dublin, Ireland, Ryanair began flights between Ireland and the UK and later launched services on the lucrative Dublin-London route after challenging the British Airways-Aer Lingus duopoly. But its initial foray into the airline business was not profitable. As a result of severe financial losses in 1990, Ryanair changed its strategy, adopting the Southwest Airlines business model and becoming the pioneer of low fares in Europe. The next two decades showed growth from 745,000 passengers in 1990 to 73.5 million in 2010. Based on passengers carried, the airline is now Europes largest low-cost carrier and second largest airline. Resources and Strategy While Ryanair competes primarily on low cost, it also differentiates (through certain aspects of customer service) and raises revenues on non-ticket items (through ancillary services) as a means of offsetting the lower fares. Although successful, this strategy has been controversial. The airline has been accused of concealing its ancillary fees and offering customer services that are only available for a fee. How does Ryanair deliver on its low-cost strategy? Five value chain activities are key to its low-cost advantage: (1) operations, (2) human resource management, (3) customer service, (4) use of the Internet, and (5) ancillary revenues. Operations Use of a single model of aircraft (the Boeing 737-800) is the primary method of cost control because it allows minimization of training and maintenance costs, efficient management of spare parts inventory, and more flexible scheduling of flight crews. The popularity of the 737 model also means that flight crews are more readily available for hire. Finally, because Ryanair purchases a large number of aircraft from Boeing it can negotiate price concessions. Other cost savers are the use of secondary and regional airports that offer competitive prices, the use of outdoor boarding stairs instead of jetways, having all passengers check in on the Internet, and the introduction of a checked bag fee, which reduces the number of bags carried by passengers (hence reducing handling costs and the number of check-in desks). Airports are chosen because of their low fees rather than for market reasons. Some agreements with secondary and regional airports base the airlines fees on traffic volume.

1. From an industry-based view, assess the strength of the five forces and determine the extent to which Ryanair is positioned against those forces.

2. From a resource-based view, what explains Ryanairs success?

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