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Case Discussion

"There is only one thing in the world worse than being talked about, and that is not being talked about," declared Lord Charles in Oscar Wilde's novel, The Picture of Dorian Gray. This could have been the mantra of budget airline Ryanair, Europe's largest carrier by passenger numbers and market capitalization in 2010. The airline was given to making controversial news, whether it was annoying the Queen of Spain by using her picture without permission in marketing material or announcing plans to charge passengers to use toilets on its flights or engaging in high-profile battles with the European Commission.

Ryanair also made news with its achievements, such as winning international awards, like Best Managed Airline, or receiving a 2009 Ff-ArcelorMittal Boldness in Business Award in the Drivers of Change category. This award announcement said that Ryanair had "changed the airline business outside North America---driving the way the industry operates through its pricing, the destinations it flies to and the passenger numbers it carries." Ryanair had been the budget airline pioneer in Europe, rigorously following a low-cost strategy. It had enjoyed remarkable growth and in the five years to 2009, was the most profitable airline in the world, according to Air Transport magazine. Despite this apparent success, Ryanair faced issues.

The most pressing, shared by all airlines, was an industry that was "structurally sick" and "in intensive care" with plunging demand in the global economic recession and uncertainty about oil prices. What strategy should Ryanair use to weather this storm? Would the crisis produce a long-term change in industry structure? Could Ryanair take advantage of the situation as it had in the past by growing when others were cutting back? A predicament of its own making was Ryanair 's 29.8 percent shareholding in Aer Lingua, the Irish national carrier, following an abortive takeover attempt.

Aer Lingus's flagging share price had necessitated drastic write-downs, which had dragged Ryanalr's results into losses in 2009, the first since its flotation 12 years earlier. In 2010, Ryanair had 44 bases and 1,200-plus routes across 27 countries, connecting 160 destinations. It operated a fleet of 256 new Boeing 737-800 aircraft with firm orders for a further 64 aircraft to be delivered over the following two years.

It employed 8,100-plus people and had carried almost 67 million passengers in 2010, expecting to carry approximately 73.5 million passengers for fiscal 2011. Ryanair was founded in 1985 by the Tony Ryan family to provide scheduled passenger services between Ireland and the United Kingdom, as an alternative to then state monopoly airline Aer Lingus. Initially, Ryanair was a full-service conventional airline, with two classes of seating, leasing three different types of aircraft. Despite growth in passenger volumes, by the end of 1990, the company had flown through much turbulence, disposing of five chief executives and accumulating losses of IR£20 million. Its fight to survive in the early 1990s saw the airline transform itself to become Europe's first low-fare, no-frills carrier, built on the model of Southwest Airlines, the successful Texas based operator.

A new management team, led by Michael O'Leary, then a reluctant recruit, was appointed. Ryanair, floated on the Dublin Stock Exchange in 1997, is quoted on the Dublin and London Stock exchanges and on NASDAQ, where it was admitted to the NASDAQ-IOO in 2002. Ryanair designated itself as the "World's Favorite Airline" on the basis that, in 2010, IATA ranked it as the world's largest international airline by passenger numbers despite the fact that it had already been calling itself the world's favorite airline for a number of years. It was now the eighth-largest airline in the world (when the large U.S. carriers' domestic traffic is included).

Over the following five years, Ryanair intended to grow to become the second largest airline in the world, ranked only behind its mentor Southwest. Releasing Ryanair's 2010 results in June 2010, O'Leary announced, "We can be proud of delivering a 200 percent increase in profits and traffic growth during a global recession when many of our competitors have announced losses or cutbacks, while more have gone bankrupt." Revenues had risen 2 percent to ?2,988 million, as fares fell 13 percent to ?34.95. Unit costs fell 19 percent due to lower fuel costs and rigorous cost control. Fuel costs declined 29 percent as oil prices fell from $104 to $62 per barrel.

Fuel hedging was extended to 90 percent for full year 2011,50 percent for quarter 1 and 20 percent of quarter 2 of 2012. Airport and handling costs declined by 9 percent, despite price increases at Dublin and Stansted, two of Ryanair's busiest bases. Ancillary sales grew 11 percent to ?664 million, slightly lower than traffic growth and constituting 22 percent of total revenues.

The balance sheet had strengthened with a cash rise of ?535 million to ?2.8 billion.

According to the airline, currency hedging had locked in the cost of aircraft purchases in 2010-2011.

The full-year 2010 improvement in profit had followed a particularly miserable 2009, when Ryanair plunged to a ?180 million loss, as its ?l44 million operating profit was eradicated by a ?222 million write-down of its Aer Lingus shares and an accelerated ?51.6 million depreciation charge. Excluding these exceptional charges.

Underlying profits fell 78 percent from ?480.9 million to ?l05 million. Th.is was due largely to a surge in fuel prices in the first half of fiscal 2009, as Ryanair failed to hedge when oil prices rose to $147 a barrel in July 2008.

Then, bowing to shareholder pressure to cover against rocketing prices, it locked in fuel costs at $124 a barrel for 80 percent of its consumption during the third quarter-just as oil prices crashed to a low of $33 a barrel during that period. Passenger numbers rose 15 percent from 50.9 million to 58.5 million.

Average fares fell 8 percent to ?40. Ryanair provides services connected with its airline service, including in-flight beverage, food, and merchandise sales and Internet-related services. Ryanair also distributes accommodation, travel insurance, and car rentals through its Web site.

Providing these services through the Internet enables Ryanair to increase sales while reducing unit costs. In 2010, Ryanair's Web site ranked 12th by number of visits for e-tailers in the United Kingdom (behind Easyjet, which ranked 10th). Ancillary services accounted for 22 percent of Ryanair's total operating revenues, compared with 20.3 percent in 2009. However, it might be that ancillary revenue generation could have its Limits, as they had, in fact, dropped from ?10.20 in 2009 to ?9.98 per passenger in 2010. Ancillary revenue initiatives were constantly being introduced by Ryanair, such as onboard and online gambling and a trial in-flight mobile phone service in 2009.

A poll of Financial Times' readers had produced a 72 percent negative response to the question, "Should mobile phones be allowed on aircraft?" Among the comments was "Just another reason not to fly Ryanair.t''' However, O'Leary declared, "If you want a quiet flight, use another airline Ryanair is noisy, full. And we are always trying to sell you something''

In March 2010, despite a promising trial on 50 aircraft. Ryanair announced the suspension of its onboard telephone service due to a failure to reach an agreement with the Swiss provider, OnAir, on a plan to roll out the service to Ryanair's entire fleet. Ryanair was the first airline to introduce charges for check-in luggage.

Virtually all budget airlines have followed suit, as they have with other Ryanair initiatives It has continued to find ways of charging passengers for services once considered intrinsic to an airline ticket Passengers were charged extra for checking in at the airport rather than online (which also incurs a charge), although those with hold luggage did not have the option of checking in online. While avoiding pre-assigned seats, an extra charge procures "priority boarding." Interestingly, Aer Lingus took up a similar idea by enabling passengers to book seats online for a charge of ?5.

Some of Ryanair's revenue-generating ideas have provoked controversy-and publicity. One of the most talked about was its intention to charge passengers a £1 charge to use the lavatory by installing a coin slot on its aircraft.

While it has not implemented this concept, (it may contravene security rules), the idea generated much publicity. Another idea mooted by Ryanair was a "fat tax" for overweight passengers. (In fact, several U.S. airlines already require obese passengers who spill over into neighboring seats to buy a second seat.) In an online poll of more than 30,000respondents, the fat tax idea was approved by one in three. However, the airline later announced that it would not implement the surcharge because it could not collect it without disrupting its 25-minute turnarounds and online check-in process.

The same online poll, supposedly to generate ideas for additional revenue, also gained 25 percent approval for a ?1 levy to use onboard toilet paper with O'Leary's face on it. Since its flotation in 1996, Ryanair had never declared or paid dividends on its shares. Instead, Ryanair retained its earnings to fund its business operations, including the acquisition of additional aircraft required for entry into new markets, expansion of its existing services, and routine replacements of its fleet.

However, thanks to a healthy balance sheet and the suspension of its aircraft-buying program when negotiations with Boeing broke down, the no-dividend policy changed in 2010. The company declared a special ?500 million dividend with the possibility of a further similar dividend in 2013.

Previously, its healthy cash position had caused the company to seek alternative ways of improving the liquidity and marketability of its stock through a series of share buy-backs of the equivalent of about 1.2 percent of the issued share capital between 2006 and 2009. Ryanair shares reached a high of ?6.30 in April 2007 and plummeted to ?1.97 in October 2008 as global equity markets were reeling. By mid-2009, the shares were trading in the ?3.20 to ?3.40 range, with an expected medium term target of ?4.20, based on expected earnings and a PE ratio of 13.

In mid-2009, its rival EasyJet shares had a PE ratio of 29. Ryanair had often underperformed other budget airline peers on its PE ratio. However, this offered an upside potential for capital gains, according to Davy, the company's stockbrokers. O'Leary said, "Any fool can sell low airfares and lose money. The difficult bit is to sell the lowest airfares and make profits. If you don't make profits, you can't lower your airfares or reward your people or invest in new aircraft or take on the really big airlines like BA (British Airways) and Lufthansa" Certainly, Ryanair had stuck closely to the low-cost/Tow-fares model. Ever-decreasing costs was its theme, as it constantly adapted its model to the European arena and changing conditions. In this respect, Ryanair differed in its application of the Southwest Airlines budget airline prototype and its main European rival, EasyJet, as they were not as frill-cutting. One observer described the difference between EasyJet and Ryanair: "EasyJet, you understand is classy cheap, rather than just plain cheap." Ryanair continued its fleet commonality policy, using Boeing 737 planes, to maintain staff training and aircraft maintenance costs as low as possible.

Over the years, it purchased new, more environmentally friendly aircraft, reducing the average age of its aircraft to 3.3 years, among the youngest fleets in Europe. The newer aircraft produced 50 percent less emissions, 45 percent less fuel bum, and 45 percent lower noise emissions per seat. Winglet modification provided better performance and a 2 percent reduction in fleet fuel consumption, saving the company believed could be improved. Despite larger seat capacity, new aircraft did not require more crew. In 2009, in aircraft buying mode, Ryanair sought to repeat its 2002 coup when it placed aircraft orders at the bottom of the market. However, in late 2009, talks with Boeing for the purchase of 200 aircraft between 2013 and 2015 broke down.

Notwithstanding strict adherence to Boeing 737 planes, in an attempt to extract ever greater discounts from Boeing, Ryanair invited Airbus, the European aircraft manufacturer, to enter into preliminary bidding for a multimillion-dollar order for 200-plus short-haul aircraft. However, Airbus rebuffed the Ryanair invitation, declaring this sales campaign would be too expensive and time consuming. Yet Ryanair hinted that it had an interest in Airbus's new generation of fuel-efficient aircraft and, moreover, that it had the economies of scale to run a mixed fleet between Boeing and Airbus models. Ryanair refuses to recognize trade unions and negotiates with Employee Representative Committees (ERCs).

Its 2010 employee count of 7,032 people, composed of more than 25 different nationalities, had doubled over the previous three years. This was accounted for almost entirely by flight and cabin crew to service expansion. Ryanair's employees earned productivity-based incentive payments, consisting of 39 percent and 37 percent of total pay for cabin crew and pilots respectively. By tailoring rosters, the carrier maximized productivity and time off for crew members, complying with EU regulations that impose a ceiling on pilot flying hours to prevent dangerous fatigue.

Its passenger per- employee ratio of 9,457 was the highest in the industry. After a series of pay increases for cabin staff and pilots, in late 2009, staff agreed to a one-year pay freeze. Ryanair pioneered cost-cutting/yield-enhancing measures for passenger check-in and luggage handling. One was priority boarding and Web-based check-in. More than half of its passengers availed of this, thus saving on check-in staff, airport facilities, and time.

Charging for check-in bags encouraged passengers to travel with fewer and, if possible, zero check-in luggage, thus saving on costs and enhancing speed. Before Ryanair began to charge for checked-in bags, 80 percent of passengers were traveling with checked-in luggage; two years later this had fallen to 30 percent of passengers. From October 2009, it adopted a 100 percent Web check-in policy, enabling a reduction in staff numbers, calculated to save ?50 million per year. Ryanair claims "passengers love Web check-in". Never again will they have to arrive early at an airport to waste time in a useless check-in queue.

As more passengers travel with carry-on luggage only, they are delighted to discover that they will never again waste valuable time at arrival baggage carousels either. These measures allow Ryanair to save our passengers valuable time". A natural next step announced by Ryanair was a move to 100 percent carry-on luggage. Additional bags would be brought by passengers to the boarding gate, where they would be placed it in the hold and returned as passengers deplane on arrival.

These efficiencies would allow more efficient airport terminals to be developed without expensive check-in desks, baggage halls, or computerized baggage systems "and enable Ryanair to make flying even cheaper, easier and much more fun again," claimed the company.'' The feasibility of the proposals to require passengers to carry hold baggage through security to the aircraft was yet to be tested.

Consistent with the budget airline model, Ryanair's routes were point-to-point only. This reduced airport charges by avoiding congested main airports, choosing secondary and regional destinations, eager to increase passenger throughput. Usually these airports were significantly further from the city centers they served than the main airports, "from nowhere to nowhere" in the words of Sir Stelios Haji-Icanncu, founder of EasyJet, Ryanair's biggest competitor. Ryanair uses Frankfurt Hahn, 123 kilometers from Frankfurt; Torp, 100 kilometers from Oslo; and Charleroi, 60 kilometers from Brussels.

In December 2003, the Advertising Standards Authority rebuked Ryanair and upheld a misleading advertising complaint against it for attaching "Lyon" to its advertisements for flights to St. Etienne. A passenger had turned up at Lyon Airport, only to discover that her flight was leaving from St Etienne 75 kilometers away.

Ryanair continued to protest at charges and conditions at some airports, especially Stansted and Dublin, two of its main hubs. The airline was "deeply concerned by continued understaffing of security at Stansted which led to repeated passenger and flight delays ... management of Stansted security is inept, and BAA has again proven that it is incapable of providing adequate or appropriate security services at Stansted.

This shambles again highlights that BAA is an inefficient, incompetent airport monopoly."12 When BAA appealed its break-up, ordered by the UK Competition Commission in 2009, Ryanair secured the right to intervene in the appeal in support of the Commission and later applauded the loss of the appeal by BAA. Meanwhile, Ryanair bemoaned a ?10 tourist tax being levied in Ireland, along with a 40 percent price increase at Dublin Airport, largely to pay for a second terminal costing ?1.2 billion, initially commissioned in the heyday of the Irish Celtic Tiger and derided by Ryanair as a white elephant. Ryanair acted against Dublin and various UK airports by cutting its capacity and shifting its aircraft to countries, such as Spain, with cheaper airports and lower or nonexistent passenger taxes. Following the introduction of its Internet-based reservations and ticketing service, enabling passengers to make reservations and purchase tickets directly through the website, Ryanair's reliance on travel agents had been eliminated.

It had promoted its Web site heavily through newspaper, radio, and television advertising. As a result, Internet bookings accounted for 99 percent of all reservations. Ryanair minimized its marketing and advertising costs, relying on free publicity, by its own admission, "through controversial and topical advertising, press conferences and publicity stunts." Other marketing activities include distribution of advertising and promotional material and cooperative advertising campaigns with other travel-related entities and local tourist boards. As referred to earlier, one of Ryanair 's publicity stunts was its unauthorized use of a photograph of Spanish Queen Sofia after she took a £13 flight from Santander Northern Spain to London.

When it incurred the Queen's displeasure, Ryanair apologized and promised to donate ?5000 to a charity of her choice. In another instance of controversy over using pictures of the rich and famous, in 2008, Ryanair was forced to pay a fine of ?60,000 to President Sarkozy of France and his Italian bride, Carla Bruni, for using their images with the slogan, "With Ryanair, all my family can come to my wedding." It also used the face of Spanish Prime Minister Zapatero in an advertisement depicting him supposedly musing over its offers. According to a commentator in the Financial Times, "Ryanair 's bid for Aer Lingua was a folie de grandeur."

Even O'Leary admitted it was "a stupid investment. At the time, it was the right strategy to go for one combined airline but it has now proven to be a disaster." During 2007, in a shock bid, Ryanair had acquired a 25.2 percent stake in Aer Lingus, only a week after the flotation of the national carrier. It subsequently increased its interest to 29.8 percent, at a total aggregate cost of ?407.2 million.

By July 2009, the investment had been written down to ?79.7 million. At the time of the initial bid, Ryanair declared its intention to retain the Aer Lingus brand and "up-grade their dated long-haul product, and reduce their short-haul fares by 2.5 percent per year for a minimum of 4 years ... one strong Irish airline group will be rewarding for consumers and will enable both to vigorously compete with the mega carriers in Europe ... there are significant opportunities, by combining the purchasing power of Ryanair and Aer Lingus, to substantially reduce its operating costs, increase efficiencies, and pass these savings on in the form of lower fares to Aer Lingus' consumers". It had been an achievement for the Irish government finally to have floated Aer Lingus after several false starts over a number of years. Once they recovered their collective breaths, Aer Lingus and its board firmly rejected the Ryanair approach, stating that it had acted in "a hostile, anticompetitive manner designed to eliminate a rival at a derisory price."

A combined Ryanair-Aer Lingus operation would account for 80 percent of all flights between Ireland and other European countries. Affirming that his company was fundamentally opposed to a merger with Ryanair, even if it raised its price, then-Aer Lingua Chief Executive Dermot Mannion stated, "I cannot conceive of the circumstances where the Aer Lingus management and Ryanair would be able to work harmoniously together ... this is simply a reflection of the fact that these organizations have been competing head to head, without fear or favor, for 20 years.

It would be like merging Manchester United and Liverpool football clubs". In fact, the bid was opposed by a loose alliance representing almost 47 percent of Aer Lingus shares. This included the Irish government, which still retained a 25.4 percent holding, two investment funds operated on behalf of Aer Lingus pilots accounting for about 4 percent of shares, and Irish telecom tycoon Denis O'Brien, who bought 2.1 percent of shares explicitly to complicate Ryanair's move.

A critical 12.6 percent of the shareholding was controlled by the Aer Lingus employee share ownership trust (ESOT), which had the right to appoint two directors and a stake in future profits. Its members rejected the Ryanair offer by a 97 percent majority vote, dismissing Ryanair's claim that each ESOT member stood to receive an average of ?60,000 from the transaction. They asserted that its members would receive only ?32,OOOafter borrowing costs. Having abandoned this bid due to the shareholder opposition and a blocking decision by the European Commission on competition grounds, Ryanair came back in December 2008 with an offer of ?1.40 per share, a premium of approximately 25 percent over the closing price.

It proposed to keep Aer Lingus as a separate company, maintaining the Aer Lingus brand, to double Aer Lingus' short-haul fleet from 33 to 66 aircraft, and to create 1,000 associated new jobs over a five-year period. It claimed that if the offer was accepted, the Irish government would receive more than ?180 million and the ESOT members and other employees who owned 18 percent of Aer Lingua would receive more than ?137 million in cash. However, in January 2009, when the offer was rejected by Aer Lingus management and by the ESOT and other parties, Ryanair decided to withdraw it. Aer Lingus' fortunes continued to deteriorate, with the company announcing losses for 2008 and projecting even worse for 2009.

In July of that year, its shares were trading at less than ?0.50. In April, its CEO, Dermot Mannion, resigned after controversy over a potential secret payoff deal in the event of a hostile takeover. While Ryanair did not have a seat on the board, it continued to denigrate Aer Lingus, forecasting "a bleak future as a loss making, subscale, regional airline, which has a high cost base and declining traffic numbers.n17 Meanwhile, the two airlines continued to compete vigorously, especially within the Irish market. In July 2009, Aer Lingus appointed a CEO to replace Dermot Mannion.

This was Christoph Mueller, known as "axe man," former CEO of Sabena Airlines before it went bust in 2001. Mueller had already crossed swords with Ryanair when it compared its own fares to those of Sabena in advertisements that were alleged to be misleading, offensive, and defamatory. When Ryanair lost a court case over the matter and was ordered to publish an apology in Belgian newspapers and on its Web site, it used the apology to continue its publicity about its relatively lower fares. In July 2010, the European General Court upheld the European Commission's decision, as well as a verdict in a case brought by Aer Lingus, to block the takeover of Aer Lingus by Ryanair. However, it did not go as far as forcing Ryanair to sell its stake in Aer Lingos, an action that Aer Lingus wanted the Court to impose. Upon hearing the Court decision, O'Leary declared that he had not ruled out making a third bid for Aer Lingus at some future date.

Despite the European level judgment, later in 2010, the UK Office of Fair Trade (OFT) announced that it would conduct a preliminary competition investigation into Ryanair's 29.8 percent holding in Aer Lingus. Ryanair, of course, rejected the investigation, arguing that the UK OFT had no jurisdiction in the matter and a four-month time limit after the European ruling for the case to be brought had elapsed. Apart from its foray into Aer Lingus, Ryanair faced various challenges in 2009, some specific to itself and some general to the aviation industry.

The global recession commencing in 2008 created unfavorable economic conditions such as high unemployment rates and constrained credit markets, with reduced spending by leisure and business passengers alike. This constrained Ryanair 's scope to raise fares, putting downward pressure on yields. Continued recession could restrict the company's passenger volume growth.

Perhaps the greatest concern in input costs is fuel Jet fuel prices are subject to wide fluctuations, increases in demand, and disruptions in supply, factors that Ryanair can neither predict nor control. In such unpredictable circumstances, even hedging is only palliative. The situation is compounded by exchange rate uncertainties, although declines of the U.S. dollar against the euro and sterling worked in Ryanair's favor, as fuel prices are denominated in dollars.

Ryanair's declaration of "no fuel surcharges ever" and its reliance on low fares limit its capacity to pass on increased fuel costs. Ryanair is especially sensitive to airports that raise charges, like Stansted and Dublin. Indirectly, it is also vulnerable to extra taxes and charges, such as a ?10 tourist tax imposed by the Irish government. On February 17, 2005, new EU regulation (EU 261) came into effect, providing for standardized and immediate assistance for air passengers at EU airports for delays, cancellations, and denied boarding. It was initially expected that the compensation costs would amount to a sector-wide bill of ?200 million annually.

Passengers affected by cancellations must be offered a refund or rerouting and free care and assistance while waiting for their rerouted flight-specifically, meals, refreshments, and hotel accommodation where an overnight stay necessary. Financial compensation is payable, unless the airline can prove unavoidable exceptional circumstances like political instability, weather conditions, security and safety risks, or strikes.

For Ryanair, the typical compensation cost would likely fall into the ?250 category, based on the average distance of its flights. Passengers subject to long delays would also be entitled to similar assistance. Until April 2010, the new regulation was largely ignored and had no material impact on Ryanair, despite the emergence of online "advisors" to help passengers make claims against airlines when their flights have been canceled or delayed. However, the situation with respect to compensation wad highlighted dramatically with the eruption of Iceland's Eyjafjallajokull volcano, causing volcanic ash that closed airspace in Europe for six days in April 2010, with further sporadic disruptions in May.

The losses to Europe's air sector resulting from flight cancellations and compensation were estimated at ?2.5 billion. These closures resulted in the cancellation of 9,490 Ryanair flights for 1.5 million passengers. Many airlines were demanding government aid to make up for lost revenue and the cost of feeding and lodging stranded passengers. The airlines contended that flawed computer models used by member states were partly to blame for grounding planes even after it was safe to resume services. The ED Commission noted that fiscal conditions prevented cash-strapped governments from offering aid to airlines, even if the rules could be bent to allow such aid. Ryanair argued strongly against offering aid to airlines, as did Easyjet, on grounds that it could be used as a back door to prop up ailing airlines, especially national carriers.

Initially Ryanair declared that it would not compensate passengers for food and accommodation expenses incurred as a result of canceled flights, although it would offer refunds. It argued strenuously about how ludicrous it was that passengers could charge airlines unlimited sums to cover their expenses, no matter how cheap had been the cost of their ticket. Furthermore, Ryanair claimed that the compensation regulations were discriminatory because competitor ferry, coach, and train operators were obliged to reimburse passengers only to a maximum of the ticket price paid. Such a situation was not sustainable for the airlines, especially because the disruption to air traffic from ash cloud from the erupting volcano could continue sporadically and indefinitely, depending on the strength of the volcano and weather conditions.

However, several days into the crisis, Ryanair did an about-tum, saying it would comply with the EU compensation regulation, but it would continue to work alongside other low-fare airlines to alter the regulation to put a reasonable limit on compensation. O'Leary said that Ryanair would reimburse "reasonable costs" to passengers caught up in the chaos in April. Asked if Ryanair would make it difficult to make claims, O'Leary responded, "Perish the thought." Ryanair expected to refund these monies and reimburse passengers reasonable expenses, although it would take a substantial period of time to complete this and management estimated that the approximate costs of this and the non-recoverable fiscal costs incurred during the cancellations would be in the order of ?50 million. At the end of May 2010, it was announced that the Eyjafjallajokull volcano had subsided and was unlikely to cause any further problems in the short to medium term.

However, later in 2010, Ryanair was obliged to cancel flights to and from Spain during wildcat strikes by Spanish air traffic controllers in August and then in December when unusually severe winter weather forced the closure of a number of airports for several days. Again, this entailed not only lost revenue but also issues of compensation. Growth plans by Ryanair entailed investment in new aircraft and routes. If growth in passenger traffic did not keep pace with its planned fleet expansion, overcapacity could result. Related pressures were additional marketing costs and reduced yields from lower fares to promote added routes, especially to airports new to the Ryanair system. In its drive for growth, Ryanair was likely to encounter increased competition, putting even more downward pressure on yields, as airlines struggled to fill vacant seats to cover fixed costs.

In light of the recession and financial losses, Ryanair negotiated with all employee groups and secured a pay freeze for fiscal 2009 and 2010. It also planned to make 250 people redundant at Dublin Airport. Ryanair came under fire for refusing to recognize unions and allegedly providing poor working conditions (for example, staff are banned from charging their own mobile phones at work to reduce the company's electricity bill). It conducted collective bargaining with employees on pa~ work practices, and conditions of employment through internal elected Employee Representation Committees.

However, the British Airline Pilots Association (BALPA) was constantly attempting to organize Ryanair pilots in the United Kingdom and legal action was pending in this regard in 2011. In July 2006, the Irish High Court ruled that Ryanair had bullied pilots to accept new contracts, where pilots would have to pay ?15,OOO for retraining on new aircraft if they left the airline or if the company were forced to negotiate with unions during the following five years.

Some Ryanair managers were judged to have given false evidence in court. Meanwhile, Ryanair was contesting the claims of some pilots for victimization under the new contracts. By 2009, only 11 of the 64 pilots who had lodged the claim remained with the company and still had claims. Ryanair was ordered to pay "well in excess" of ?1 million in legal costs after a court refused the airline access to the names and addresses of pilots who posted critical comments about the company, on a site hosted by the British and Irish pilots' unions. O'Leary claimed anonymous pilots were using a Web site to intimidate and harass foreign-based pilots to dissuade them from working for the company. The pilots involved used code names such as "ihateryanair" and "cant-fly-wontfly."

Nonetheless, in effect, Ryanair appeared to have no problems recruiting cabin staff, including pilots, to meet its needs. Aviation fuel had been exempt from carbon taxes, but the EU had established an Emissions Trading Scheme to encompass the aviation industry commencing in 2012. Ryanair was predicted to be the fourth-most adversely affected airline in the world with a shortfall of 2.8 tons in CO2 allowances, equivalent to ?40 million in extra costs.

This is despite its young fleet of fuel-efficient, minimal pollution aircraft. Therefore, Ryanair has contended that any environmental taxation scheme should be to the benefit of more efficient carriers, so airlines with low load factors that generate high fuel consumption and emissions per passenger and those offering connecting rather than point-to-point flights should be penalized. Ryanair has been in litigation with the EU about alleged receipt of state aid at certain airports. An EU ruling in 2004 held that Ryanair had received illegal state aid from publicly owned Charleroi Airport, its Brussels base. Ryanair was ordered to repay ?4 million.

The Belgian authorities were claiming back a further ?2.3 million in the Irish courts for the reimbursement to Ryanair of startup costs at Charleroi. On appeal, the original EU decision was overturned in December 2008, Ryanair was refunded its ?4 million, and the Belgian authorities withdrew their claim. Nonetheless, the ED launched further investigations into allegations of illegal aid, purportedly subsidizing Ryanair at publicly owned airports, such as Lubeck and Frankfurt Hahn in Germany and Shannon in Ireland. Other legal challenges were launched against Ryanair by competitors.

On another front Ryanair was vigorously opposing French government attempts to protect Air France-KLM by forcing Easyjet and Ryanair to move their French-based staff from British employment contracts to more expensive French ones. Often, Ryanair took the initiative on alleged illegal aid to rivals. For example, it filed a complaint with the EU Commission accusing Air France-KLM of attempting to block competition after the French airline filed a case, alleging that Marseille was acting illegally by offering discount airlines cut-price fees at its second, no-frills terminal.

That complaint came a month after Ryanair called on the Commission to investigate allegations that Air France had received almost ?I billion in illegal state aid, benefiting unfairly from up to 50 percent discounted landing and passenger charges on flights within France. Adverse rulings on these airport cases could curtail Ryanair's growth, if it was prevented from striking advantageous deals with publicly owned airports and confined to the fewer privately owned airports across Europe. On another front, Ryanair was being sued by three airport authorities over alleged delays in paying airport charges.

After the company applied for the judge hearing the case to withdraw on grounds of bias toward Ryanair in previous proceedings, the judge did indeed withdrawn because he admitted Ryanair's charges but to avoid delay in the case. However, when pulling out, Justice Peter Kelly of the Irish High Court stood by his previous comments that "Ryanair told untruths to and about the court and ... that the airline and the truth made uncomfortable bedfellows."

In 2009, Ryanair took a successful legal action against Till, a screen scraper, to prevent it from selling Ryanair flights on grounds that it had no agreement to do so and accusing it of charging a fictitious £40 "fuel surcharge" and falsely inflating airfares to consumers buying Ryanair tickets. (Screen scrapers are Web sites that compare costs from different airlines and can also book flights.) Having secured its legal victory for "Ryanair and consumers," the carrier declared its intention to "pursue unlawful and misleading tickettouts in the courts in the interest of our passengers."

In 2003, Ryanair published a Passenger Charter, which includes doctrines on low fares, redress, and punctuality. Its annual report offers figures to show its superiority over competitors with respect to punctuality, completed flights and fewest bags lost per thousand passengers.

However, its Skytrax two-star rating is among the worst for budget airlines. In Europe, only bmibaby and Wizzair achieve as low a rating. There have been suggestions that Ryanair's "obsessive focus on the bottom line may have dented its public image. In an infamous incident it charged a disabled man £18 (?25) to use a wheelchair. In response to protests over the charge, Ryanair imposed a 50-cent wheelchair levy on every passenger ticket. Campaigners for the disabled accused Ryanair of profiteering, declaring that the levy should be no more than 3 cents.

It was the only major airline in Europe to impose such wheelchair charges. There was growing attention to extra charges continually being imposed by Ryanair on passengers, many an unavoidable services such as check-in. In some instances, these extra charges made Ryanair more expensive than BA.22 Examples were a family of four traveling to Ibiza from London with three bags for a two-week holiday costing £1157 with Ryanair versus £913 with BA and £634 with EasyJet. A single passenger traveling to Venice from London for a week at Christmas with one bag would pay a total £139 on Ryanair compared to £89 on BA and £121 on EasyJet.

Ryanair features on many consumer complaint interactive Web sites and some blogs have been established specifically to disparage the airline. In a blog titled "20 reasons never to fly Ryanair," extra charges for booking fees, baggage overweight and low weight limits, premium rate helplines, and the fact that "you are always being flogged stuff" were enumerated. Claiming that the service is provided by a third party, Ryanair even charges passengers a ?10 service fee to collect lost property.

When the Irish Times put Ryanair customers' gripes on the Pricewatch blog to its head of communications. Stephen McNamara, his response was to dismiss them as "subjective and inaccurate rubbish" and even implied Pricewatch had made them up to further some class of anti-Ryanair agenda.24 Among the complaints were, "Customers want to be treated like a human being, to get to their desired destination (not 50/60 miles away) to be allowed to bring luggage without persecution a complete and utter lack of communication when flights run late ... I'm sick of that miserable booking charge/service charge/admin charge system." So, why are so many people willing to put up with an airline that, in the words of The Economist, "has become a byword for appalling customer service, misleading advertising claims and jeering rudeness?" Ryanair has responded to such comments, declaring that, in effect, customers vote with their feet by choosing Ryanair for its four tenets of customer service: low fares, a good on time record, few cancellations, and few lost bags. "If you want anything more-go away," admonishes O'Leary.

The Financial Times aerospace correspondent observed that Ryanair still offered relative value compared with rail alternatives, at least on a journey from London to Scotland, even when Ryanair extras are factored in. As listed in its own report, Ryanair faced other risks, some particular to itself and some generic to the industry: . risks associated with growth in uncertain highly competitive markets, such as downward pressure on fares and margins; . prices and availability of new aircraft; . potential impairments from Ryanair's 29.8 percent stake in Aer Lingus; . threats of terrorist attacks; . potential outbreak of airborne diseases, such as swine flu; . dependence on key personnel (especially O'Leary); . dependence on external service providers; . dependence on its Web site; and . the continued acceptance of budget carriers with respect to safety. Tied in with the latter are potential rises in insurance costs.

Globally, airlines were hit hard during the economic downturn with a $9.9 billion loss in 2009 and $16 billion in 2008, but in 2010 it was believed that the cyclical movement of the airline industry had begun to improve as the International Air Transport Association (lATA) had actually predicted a $2.5 billion airline industry profit forecast for 2010. However, European carriers were still expected to generate losses of $2.8 billion, aggravated by the disruption from the volcanic ash in April and May.

In 2009, of the mainstream European carriers, only Lufthansa made a net profit. BA, Air France-KLM, and Scandinavian Air Systems (SAS) all made severe losses, due to declining traffic from long-haul business-class passengers. The woes of these legacy carriers were compounded by huge pension fund deficits. Some industry analysts considered the possibility that the economic recession could offer an opportunity for budget carriers, as passengers who continued to travel were expected to trade down. By mid-2009, budget airlines accounted for more than 35 percent of scheduled intra-European traffic.

Ryanair was the clear market share leader, with EasyJet another dominant force. The two were often compared and contrasted because both operated mainly out of the United Kingdom and served the same markets. However, it was a matter for debate as to whether EasyJet's use of primary airports would be better than Ryanair's at capturing the traffic trading down from network carriers. Other budget carriers of diverse size and growth ambitions, trajectories, and regional emphases varied in different levels of services to passengers and use of main versus secondary airports.

Another possible development trajectory for Ryanair was to follow up on its announcement in 2007 to offer ?10 transatlantic flights, an idea that had not yet taken off and appeared to have been shelved as of 2009. EasyJet, the second-largest budget airline in Europe, was Ryanair's greatest rival. As of the end of 2009, EasyJet served 114 airports in 27 countries on 422 routes with Airbus aircraft. Ryanair and Easyjet frequently attacked each other as part of their "public relations." When accused by EasyJet of introducing stealth charges, Ryanair retaliated by pointing out that, even with taxes included, its average fare was well below Easyjet's. Ryanair said that Easyjet had charged each passenger £14 (?20) more per ticket than Ryanair, thereby overcharging their passengers by £413 (?600) million in a year. In fact, eventually, Easyjet had followed many of Ryanair's extra charge initiatives, such as a fee for check-in baggage.

Based at London Luton Airport, EasyJet was founded by Greek Cypriot EasyGroup entrepreneur Sir Stelios Haji-Ioannou in 1995. Although it was listed on the London Stock Exchange, members of the Haji-Ioanncu family still owned almost 40 percent of the company in 2010. The business model of EasyJet is somewhat different to Ryanair in that it uses more centrally located airports, thus incurring higher airport charges, but more actively courts the business traveler. For example, Schiphol in Amsterdam and Orly Airport in Paris are hubs, while the airline also uses Charles de Gaulle Airport in the French capital.

In 2009, Easyjet grew the number of business passengers in spite of an overall decline in the business travel market. Easyjet won a number of industry awards in 2009, including Best European Budget Airline (World Traveler Awards), Best Airline Website (Travolution), and the Conde Nast Traveler Best Low Cost Airline award (for the sixth consecutive year). In March 2008, Easyjet purchased GB Airways, franchise of British Airways, headquartered at London Gatwick, in a deal worth £103.5 million.

The takeover was used to expand EasyJet operations at Gatwick and start operations at Manchester. While all GB aircraft (fortuitously Airbus) were transferred to Easyjet, slots used by G8 Airways at London Heathrow Airport were not included in the sale. Compared with Ryanair, Easyjet traditionally struggled on the profit front, as it strove to bring down its costs However, from the mid-2000s, its results moved into profit In contrast to airline industry peers, the airline traced resiliently in 2009 during the recession, as it was one of the few airlines globally to make a profit, with an underlying pretax profit of £43.7 million.

Revenue grew by 129 percent to £2,666,8 million, partially offsetting the £86.1 million increase in unit fuel costs (equivalent to £1.63 per seat). The carrier claimed to have given itself a platform for profitable growth in the medium term from which to achieve a 15 percent return on equity through improvements in network quality by taking advantage of capacity cuts by other carriers to advance its position, gaining share in important markets such as Milan, Paris, Madrid, and London Catwtck, and increasing its slot portfolio at congested airports by more than 10 percent. Other measures taken to improve performance were lower-cost deals with key suppliers and enhancements to its Web site. The board agreed to a fleet plan that would deliver about a 7.5 percent growth per annum in seats flown over the next five years, enabling EasyJet to grow its share of the European short-haul market from about 7 percent to 10 percent.

However, all was not well in the EasyJet boardroom. In May 2010, Sir Stelios and another nonexecutive board member he had nominated, Robert Rothenberg, declared open warfare on EasyJet by resigning from its board to become "shareholder activists" against its expansion plans.

Sir Stelios was continuing his campaign started in 2008, objecting to "the management's strategy of relentless growth in aircraft numbers and lack of focus on profit margin increase," notwithstanding that the dispute had earlier appeared to be resolved with a compromise that would see the airline keep expanding by 7.5 percent a year. The resignation of Sir Stelios came just three days after he delivered a blast at departing chief executive Andy Harrison, declaring he was "over-rated and had increased nothing but the size of his bonus since joining the airline in late 2005." These comments were seen as a parting shot at the chief executive after a 2008 boardroom row over EasyJet's growth strategy that preceded the announced departures of Harrison and the airline's finance director and chairman. EasyJet's incoming chief executive was to be Carolyn McCall, the head of the Guardian Media Group.

Sir Stelios added that he "feels sorry for the outgoing chief executive's new employers," Whitbread, owner of Premier Inn and Costa Coffee. Sir Stelios continued, "Over the past five years Andy Harrison developed a love affair with Airbus, squandered £2.4 billion, doubling the size of the fleet, while he paid no dividends and the share price has gone sideways." People close to the airline said they believed the move was related to a separate brand license dispute between the airline and Sir Stelios, whose private EasyGroup owns the "Easy" brand and licenses it to EasyJet.

The dispute was settled out of court in October 2010, whereby a previous annual payment of £1 by EasyJet to use the "Easy" name was turned into a minimum £4 million per year in a 50-year agreement. The altercations occurred as EasyJet was forced to cut its 2010 full-year profit guidance by £50 million because of the volcanic ash disruption from the eruption of Iceland's Eyjafjallajokull volcano that had closed airspace in Europe for six days, obliging Easyjet to cancel 6,512 flights in April 2010. This disruption was followed by a summer of delayed flights and canceled services, resulting in the dismissal of EasyJet's director of operations by new CEO McCall, who appeared to be placating Stelios when she announced a maiden dividend, slower growth plans, and tougher negotiations for new aircraft, involving both Airbus and Boeing.

The fierce rivalry between Ryanair and Easyjet was highlighted in a libel action brought by Stelios against Ryanair over a Ryanair advertisement depicting Stelios as Pinocchio (whose nose grew ever longer as he told more fibs), tagging him as "Mr. Late Again" on the basis of EasyJet's refusal to publish its punctuality statistics. Initially, when Stelios objected to the advertisements as personal and libelous, O'Leary refused to apologize and suggested that the dispute should be settled by a sumo wrestling contest or a race around Trafalgar Square. However, O'Leary ended up apologizing unreservedly to Stelios, as Ryanair agreed to pay a £50,000 penalty and published a half- page apology in a national newspaper.

Stelios promised to donate the money to charity, saying, "I would like to dedicate this little victory to all those members of the travelling public who have suffered verbal abuse and hidden extras at the hands of O'Leary." Ryanair continues to hold a 29.8 percent share of Aer Lingus. The carrier, operating short- and long-haul services, was the national state-owned airline of Ireland until it was floated in October 2006. The events of 9/11 were particularly traumatic for Aer Lingus, as the airline teetered on the verge of bankruptcy. It put in place a plan for a flotation, which had already been postponed several times.

In late 2001, the choice was to change, be taken over, or be liquidated. Led by a determined and focused chief executive, Willie Walsh (who was to become the CEO of British Airways in 2005), and his senior management team, the company set about cutting costs. One ingredient of its cost reduction was a severance program, costing more than ?100 million, whereby 2,000 of its 6,000 employees left the group. By the end of 2002, Aer Lingus had turned a 2001 ?l25 million loss into a ?33 million profit, and it continued to improve still further, posting a net profit of ?88.9 million in 2005.

In essence, Aer Lingus maintained that it had transformed itself into a low-fares airline and that it matched Ryanair fares or was only very slightly higher on most routes The airline's chief operating officer said that "Aer Lingus no longer offers a gold-plated service to customers, but offers a more practical and appropriate service ... it clearly differentiates itself from no-frills carriers. We fly to main airports and not 50 miles away. We assign seats for passengers, we beat low fares competitors on punctuality, even though we fly to more congested airports, and we always fulfill our commitment to customers--unlike no frills carriers". In its defense document against the Ryanair takeover bid in October 2006, the airline proclaimed. A strong track record of growth, with a return on capital and operating margin second only to Ryanair in the European airline industry, leading the Irish market in terms of technological innovation and value-added service innovations such ad self-cheek-in, advance seat selection, Web check-in, and a dynamic and easy-to-use online booking service. Its customer proposition was "Low Fares, Way Better," flying to more convenient airports and posting leading punctuality statistics at Heathrow.

A survey conducted by the airline found that customers considered Aer Lingus a better value for the money than Ryanair, even at slightly higher fares. Aer Lingus achieved more than three times as much short- haul passenger growth as Ryanair from Dublin in 2005, with substantial opportunities to grow ancillary revenues. Staff productivity improved from 3,475 to 6,108 passengers per employee between 2001 and 2005. However, from 2008, Aer Lingus' fortunes began to deteriorate in the face of the gathering recession, rising fuel costs, and fierce competition on all its routes resulting in losses for the years 2008 and 2009. Christopher Mueller joined the company as CEO in September 2009 and set about trying to staunch losses suffered by the airline as it expanded during a recession that hit its three main markets of Ireland, the United Kingdom, and the United States. Mueller outlined a plan to achieve cost savings of ?97 million a year by the end of 2011, in part by cutting staff numbers by nearly a fifth and removing several senior pilots who were among the airline's most expensive employees.

The airline was also targeting higher yields rather than simply pursuing market share. Gross cash balances had increased by ?90.4 million since December 31, 2009 to ?918.9 million. The cost reduction program, involving staff and pay cuts, alongside work increases had been approved in a 74 percent positive staff ballot. The network had been enhanced through an extended code-share agreement with United Airlines and the launch of an Aer Lingua Regional franchise. The company was on target to achieve pretax profits of ?31 million in 2010 and ?74 million in 2011, driven by a 12.5 percent increase in revenue per passenger. Investors seemed optimistic about the new strategy. The airline had burned through ?400 million cash in 2009, but still had a strong balance sheet with gross cash and deposits of ?825 million, of which ?770 million was unencumbered.

Mueller declared that in a worst-case scenario, Aer Lingua could fun for at least four and half years without running out of cash. Mueller had also declared that the large Ryanair holding remained a deterrent to other airlines that might wish to take a stake in Aer Lingus. Revamping the strategic approach and culture of the airline was a priority in Mueller's ambition to improve revenue. Thus, the airline rebranded itself as "Ireland's civilized airline" as it unveiled a plan to position itself midway between Ryanair and high-end carriers such as British Airways, which some analysts compared with the positioning of Easyjet. The airline's "civilized" tag was seen as a dig at Ryanair.32 While Aer Lingus hoped to lure business travelers with faster check-in times, pre-paid meals, and conveniently located airports, rather than the secondary ones for which Ryanair was known, it would not focus on the quality lounges and free food and drinks associated with full-service airlines. "It is good to have someone like Michael O'Leary around.

He scares people to death." This praise of Ryanair's CEO came from none other than his fellow Irishman, Willie Walsh, CEO of BA.33 O'Leary had been described as "at turns, arrogant and rude, then charming, affable and humorous, has terrorized rivals and regulators for more than a decade. And so far, they have waited in vain for him to trip up or his enthusiasm to wane". ln fact, O'Leary had been pronouncing his intention to depart from the airline "in two years' time" since 2005. He had declared that he would sever all links with the airline, refusing to "move upstairs" as chairman. "You don't need a doddery old bastard hanging around the place," he proclaimed. O'Leary bred racehorses at his Cigginstown Stud 50 miles (80 kilometers) from Dublin. In 2006, his horse, War of Attrition won the Cheltenham Gold Cup, one of the most prestigious races in steeplechasing, while another, Hear the Echo, won the Irish Grand National in 2008. He stayed in budget hotels and always flew Ryanair, startling fellow passengers by taking their boarding passes at the gate and by boarding the plane last where he invariably got a middle seat. He did not sit in an executive lounge, had no BlackBerry, and did not use email. In 2010, O'Leary held just under 4 percent of Ryanair's share capital, having sold 5 million shares at ?3.90.

Although O'Leary consistently praised the contributions and achievements of his management team, Ryanair was inextricably identified with him. He was credited with singlehandedly transforming European air transport. In 2001, O'Leary received the European Businessman of the Year Award from Fortune magazine; in 2004, The Financial Times named him as one of 25 European "business stars" who have made a difference. The newspaper described him as personifying "the brash new Irish business elite" and possessing "a head for numbers, a shrewd marketing brain and a ruthless competitive streak".

Present and former staff have praised O'Leary's leadership style. "Michael's genius is his ability to motivate and energize people ... There is an incredible energy in that place. People work incredibly hard and get a lot out of it. They operate a very lean operation ... It is without peer," said Tim Jeans, a former sales and marketing director of Ryanair, currently CEO of a small low-cost rival, MyTraveILite." O'Leary's publicity-seeking antics are legendary. These included his "declaration of war" on EasyJet when, wearing an army uniform, he drove a tank to Easyjet's headquarters at Luton Airport.

In another stunt, when Ryanair opened its hub at Milan Bergamo, he flew there aboard a jet bearing the slogan II Arrividerci Alitalia." He had also dressed up as St. Patrick and as the Pope to promote ticket offers. Another provocative idea enunciated by O'Leary was the recommendation that co-pilots could be done away with on flights, so aircraft could fly with just one pilot, because "the computer does most of the flying now" and "a flight attendant could do the job of a co-pilot, if needed."38 In fact, he even went so far as to suggest that under present arrangements, "maybe the second pilot could be doing some of the in-flight service." O'Leary's outspokenness has made him a figure of public debate. "He is called everything from 'arrogant pig' to "messiah." His avowed enemies included trade unions, politicians who imposed airport taxes (calling former UK Prime Minister Gordon Brown a "twit" and a "Scottish miser'"), environmentalists, bloggers who ranted about poor service, travel agents, reporters who expected free seats, regulators and the ED Commission, and airport owners like BAA, whom he once called "overcharging rapists". An EU Commissioner, Philippe Busquin, denounced O'Leary as "irritating ... and. insists he is not the only Commissioner who is allergic to the mere mention of the name of Ryanair's arrogant chief".

Irish Times columnist John McManus suggested that "maybe it's time for Ryanair to jettison O'Leary," asserting that O'Leary had become a caricature of himself, fulfilling all 15 warning signs of an executive about to fail.44 Professor Sydney FinkJestein of the Tuck Business School at Dartmouth U.S. identified the 15 signs under five headings: ignoring change, the wrong vision, getting too dose, arrogant attitudes, and old formulae.

But having demonstrated the extent that O'Leary met the Finklestein criteria, McManus concluded: "So, is it time for Ryanair to dump O'Leary?

Depends whether you prefer the track record of one of the most successful businessmen in modern aviation or the theories of a U.S. academic from an Ivy League school."

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This is a 750 words assignment which talks about a Case Discussion of Ryanair airline. The budget airline Ryanair, was Europe''s largest carrier by passenger numbers and market capitalization in 2010. The airline was given to making controversial news, whether it was annoying the Queen of Spain by using her picture without permission in marketing material or announcing plans to charge passengers to use toilets on its flights or engaging in high-profile battles with the European Commission. The work is written in Microsoft word and follows APA style of referencing along with incited references.

Reference no: EM131214815

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Reviews

inf1214815

9/23/2016 9:22:05 AM

Thank you to such an extent. I truly value this. I'm so happy I can really believe an organization with remarkable client benefit and astonishing essayists like yourself. Much thanks to you.

inf1214815

9/23/2016 9:21:41 AM

Ryanair surely used all types of advertisement in its favor. Whether it was good or “bad” they always found a way to turn it into a cost leadership strategy but, were they really pursuing a cost leadership strategy or were they pursuing a product differentiation strategy by emphasizing their lower cost?

inf1214815

9/23/2016 9:21:23 AM

What environmental threats is Ryanair faced with? What external threats is the firm faced with? How can cost leadership strategies help reduce or neutralize Ryanair’s external threats? Ryanair was the first airline to introduce charges for check-in baggage and other controversial fees. Based on what you learned from Chapter 4, what reasons do you think the airline had for doing this? What effect did it have? How do you think Ryanair can fix their reputation as an airline in the eyes of those customers who disagree with their policies? Describe the steps they should take. Is cost leadership worth decreasing your attractiveness to customers? It has been suggested that larger firms may have technology-base cost advantages that reflect their ability to exploit economies of scale. Do you think Ryanair took advantage of their technology in order to “exploit” economies of scale? How was or was not this archived?

inf1214815

9/23/2016 9:20:38 AM

After reading about Ryanair respond to one (or more) of the prompts below. Try to tie in what you've learned from Chapter 4 in our textbook. What actions do you believe Ryanair airline performed to deliver a 200 percent increase in profits and traffic growth during a global recession? What cost advantages do you believe they had while other competitors were announcing losses and cutbacks? In regards to Ryanair’s cost leadership business strategy, how was Ryanair able to lower costs and gain profits? Why didn’t other airlines match Ryanair’s ticket prices? An organizational structure like a functional organizational structure or a U-form structure is utilized to help firms implement cost leadership strategies. What organizational structure has Ryanair adopted? How does Ryanair’s organizational structure help implement its cost leadership strategies?

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