The development and future strategy of Ryanair
Ryanair became in 2009 the airline company which carry the most passengers in Europe. That is the result of its strategy which is based on a ‘no frills’ service in order to offer the lower prices. The business model of Ryanair is different from the classic carriers’ in the way that 20% of its revenue is generated from ancillary revenue, such as its “buy on board” program or extra fees for luggage. As we have seen above, the airline industry is very dynamic, and the apparition of alliances within the market forces Ryanair to stay competitive in its environment. Until now, the company did it very well by being emergent, its flexible structure ...view middle of the document...
The major threats for Ryanair’s development are the evolving legislation and the difficult cooperation with some governments. However, Ryanair has many opportunities to expand its routes:
- Developing routes in Central and Eastern Europe, and benefit from the development of tourism and the uniformity of legislation due to the continued expansion of Europe
- Going to North Africa, as both tourists and North Africans immigrants in Europe are demanding for these flights. Today, there are no real low-cost flights for these destinations so Ryanair can capture market shares there.
- Increasing the frequency of its existing European routes. Ryanair is the airline with the highest fill rate on board of its flights (98% in 2009). Increasing the number of flights by route could change the mind of classic carriers’ passengers who need more flexible timings.
- Creating new routes in Europe, as many routes are still un-served by the low cost carriers, or served by only one low-cost airline. More and more passengers are attracted by the cheap and no frill option proposed by Ryanair.
- Connecting airports within its existing route network (“triangulation”)
Pushing the cost reduction
Ryanair is a pioneer of innovative cost reduction methods, such as its no refund policy and its choice to fly in secondary airports instead of the expensive primary ones. They constantly try to cut the costs of their operations, and some of the key factors of cutting the costs are:
- The common Fleet with the same Boeing 737
- Contracting out of services
- The airport charges
- Staff costs and productivity
- Marketing costs
As the next phase of evolution’s goal is the free flight for all, Ryanair needs to develop innovative and alternative revenue generation, and to find new ways to cut its costs.
Among other projects to cut costs,
• Ryanair is planning to run flights where passengers stand during the journey at a price of 5£.
• Carry-on luggage, no more check-in
• No more window blinds
• No more reclining seats.
• enter into new agreements with third party contractors for passenger and aircraft handling, ticketing and other services
The risk of cutting the costs:
Ryanair’s strategy is to give the customers the illusion of free or extreme cheapness. However, Ryanair is not cheap; they just created a blue ocean on managing revenue while giving the illusion of being cheap. There are two major risks in this strategy: first, the customers’ experiences and feedbacks are often negative after they discover they had to add taxes, fees and other extra money beside the ticket cost itself, and there are many complaints of unhappy customers, which constitute bad advertising for the company. Secondly, Ryanair is sometimes on the edge concerning the convenience of its flights: all these cost savings create inconveniences, such as extra transport from the secondary airports to the city centres (which sometimes turn the cost of the travel into a nightmare for...