RYANAIR In 2007 Ryanair, based in Dublin, was Europes leading low-cost airline. It was created in 1985 to offer services between Dublin and London, in competition with the established national carrier, Aer Lingus. In the early years the airline changed its business several times initially a conventional, though slightly cheaper, competitor for Aer Lingus, then a charter company, at times offer a cargo service. The Gulf War in 1990 discouraged people from travelling by air, and caused financial problems for the company. In 1991 senior managers decided to focus the airline as a no-frills operator, in which many traditional features of air travel (free food, drink, newspapers and allocated seats) were no longer available. It aimed to serve a group of flyers who wanted a functional and efficient service rather than luxury. In 1997 changes in European Union regulations enabled new airlines to enter markets previously dominated by established national carriers such as Air France and British Airways. Ryanair quickly took advantage of this, opening new routes between Dublin and continental Europe. Managers were quick to spot the potential of the Internet, and in 2000 opened Ryanair.com, a booking site: within a year it was selling 75 per cent of seats online, and now sells almost all seats this way. It also made a long-term deal with Boeing to purchase 150 new aircraft over the next eight years. Several factors enable Ryanair to offer fares to its customers that are significantly below those of traditional carriers: Simple fleet using a single aircraft type (Boeing 737 most of which are also quite new) simplifies maintenance, training and crew scheduling. Secondary airports using airports away from major cities keeps landing charges low, sometimes as little as 1 per passenger against 10 at a major airport Fast turnrounds staff typically turn an aircraft around between flights in 25 minutes, compared to an hour for older airlines. This enables aircraft to spend more time in the air, earning revenue (11 hours compared to 7 at British Airways). Simplified operations not assigning seats at checkin simplifies ticketing and administrative processes, and also ensures that passengers arrive early to get their preferred seat. Flying directly between cities avoids the problems of transferring passengers and baggage between flights, which is where costly mistakes and delays frequently occur. Cabin staff collect rubbish before and after landing, saving the cost of expensive cleaning crews which the established carriers choose to use. S T U D Y The company has continued to grow rapidly, announcing in December 2006 that it had carried a record 40 million passengers that year. Passenger volumes rose by 20 per cent in the year to March 2007 to 42.5 million, following a 26 per cent rise the previous year. However it expected growth in the year to March 2008 to be only about 5 percent. It was now one of the worlds most profitable airlines, and continued to seek new bases from which to operate its growing European network. Despite the growing passenger numbers managers continued to seek ways to cut costs and raise revenues. They decided that their new aircraft would not have window blinds, headrests, seat-pockets or reclining seats: this would save money, and managers believed passengers would not miss these frills as most journeys are less than an hour. In 2005 the company earned 55 million from selling refreshments to passengers, and in 2006 began to charge customers for checking in their baggage. Each time a passenger rents a car or books a hotel room on the Ryanair website, it earns a commission. It now sells scratch cards on board, plans to offer in-flight gambling and online gaming over its website: the chief executive thinks that gambling could double Ryanairs profits over the next decade. A report by Paul Vallely for The Independent in late 2006 noted that: Currently hes offering advertisers the opportunity to repaint the exteriors of Ryanairs planes. Effectively turning them into giant billboards: Hertz, Jaguar and Vodafone have purchased space on the fuselages of Ryanairs 737s. Applicants for jobs as first officers are charged 50 to apply online, which is refunded if they are successful. They must also pay a non-refundable 200 for a simulator check. The company expects that in 2007 it will introduce a scheme enabling passengers to use in-flight mobile phones, and believes that revenue from such ancillary activities will continue to grow more rapidly than passenger revenue. The company depends on securing agreements with airport operators, and also approvals from aviation authorities in the countries to which it flies. This often leads it into public disputes, such as one with the European Commission over subsidies. The regional government and the company operating Charleroi Airport in Belgium offered the company a subsidy to persuade it to fly there. The European Commission ruled that such subsidies were illegal, and the company feared that it would lose subsidies it receives at other airports: Bureaucrats in Brussels wish to prevent privately owned airlines from developing low-cost arrangements for the benefit of consumers, said Michael OLeary, the chief executive. Ryanairs rivals lobbied in support of the Commission, urging them to stand firm against state aid. In May 2006 Ryanair suspended planned flights between two Italian cities because the Italian National Civil Aviation Authority had refused to allow it to operate the route: the company claimed this was a deliberate attempt to protect the high-cost Italian national airline from competition. Michael OLeary takes a deliberately aggressive stance to these controversies, believing that as long as its not safety-related, theres no such thing as bad publicity. He is dismissive of traditional high-cost airlines, the European Commission, airport operators, travel agents, and governments that try to protect established airlines from competition. The rise in low-cost travel has affected where some people live and work. Some now choose to work in expensive cities such as London for perhaps four days a week, returning at weekends to their families in other countries. Entrepreneurs also offer new services. One Briton who bought a second home in Slovenia now helps local estate agents to sell properties to English-speaking buyers. Others arrange for Britons to have dental treatment in less expensive eastern European countries S E Case questions 1. Explain any three functions Ryan air is performing? (8 Marks) 2. Suggest any three things management contributed to the growth of the airline? (12 Marks) 3. Give examples of three points at which managers changed what the organization does and how it works. (12 Marks) 4. Which of Mintzbergs three management roles can you identify being exercised in the latest stage of the Ryan air case? (12 Marks) 5. Decide which two of these roles are likely to be most critical in the next stage of the companys development, and explain why? (8 Marks) 6. Which two aspects of the environment affected the company? (8 Marks) 7. How has the company affected the environments? (8 Marks)