NAME: VICTOR NDUKWE

ASSESSMENT CODE: AS1

ASSESSMENT TYPE: REPORT

MODULE NAME: DYNAMICS OF STRATEGY: CASE STUDY OF RYANAIR IN UK

MODULE CODE: STRM083

MODULE LEVEL: 7

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Table of Contents

1. Introduction

1.1 A brief overview of Ryanair

1.2 Pestle Evaluation

1.3 Porters Five Elements

2. Critical evaluation of Ryanair's capabilities and core competencies to address

implementation challenges and sustain their competitive strategy:

2.1 Core competencies (VRIO framework):

2.2 Strategy and expected outcome

3. Strategic Recommendations according to the challenges of Ryanair's CEO

3.1 Summary of current challenges

3.2 Recommendations

References

1.0 Introduction

1.1 A brief overview of Ryanair

Ryanair was established in the year 1985 with the launch of daily flights on a 15 seated
turboprop plane between Waterford airport and London Gatwick. It’s a public quoted company
which has its shares traded on London, Dublin and New York (Nasdaq) stock exchanges. Its is
now the largest low cost airline service in Europe and United Kingdom which is based on the
strategy of a Low Cost Leadership model. It is commits to low cost airfares and introduces
competition to flag carriers and growing alliances in the European airline market. With its ability
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of offering lowest fares in this industry to passengers makes it one of the toughest competitors
for any new entrances. Ryanair was the first European airline specifically to offer low fares to its
customers on short inter European routes.

PESTEL Evaluation

Political: There are issues with Brexit uncertainty and European airline regulation. Ryanair is
subject to regulatory issues because to its focus on Europe. Firstly, the UK government has
imposed sanctions on Russia and the companies would not be able to fly to Russia which may
lead to a loss of revenue. Also, Irish airlines are the major lesser of the planes to the Russian
airlines and the ongoing situation would make it difficult for the companies to get back their
aircraft as the ultimate power to return the aircraft lies with the Russian government (Carswell,
2022). This uncertainty can lead to huge losses. Further, the European Commission in which
Ireland is a member is planning to levy an aviation fuel tax on polluting aviation fuels (Macola,
2021). This has high impact on the company’s revenue.

Economic: Ryanair's cheap pricing are under strain due to growing fuel costs and inflation that is
restricting consumer spending. Fears of a recession loom amid the slowing economy. (Michael
Jay White. 2017). The airlines in Ireland suffered a major loss in the COVID and a total of
183,000 flights were canceled which led to a 62% increase in air traffic. Further, almost all the
Irish airlines lost huge amounts of money ranging from 1 billion euros to 4 billion euros per
airline. However, the current economic scenario is wholly different and the Irish economy surged
by a huge margin of 13.5% in 2021.

Social: The trend of traveling is decreasing in Ireland with 11% of people not going on domestic
trips in the last two years and even the business trips have drastically declined by 68%. This
ongoing trend can lead to a decline in business for airline companies. Also, consumers are now
highly educated and compare prices keenly before buying air tickets. Hence, the companies in
the industry will have to work on competitive pricing strategies to acquire more customers and
this could have a medium impact on Ryanair’s activities. Some tourists choose not to fly due of
heightened environmental consciousness. Ryanair's carbon footprint is seen unfavorably.

Technological: Various technologies that have revolutionized the airline industry include the use
of blockchain for managing the supply chain and 3D printing for manufacturing various parts of
an aircraft. There are also chances to apply fuel economy breakthroughs and enhance
websites/apps to increase supplementary income. Ryanair lags behind rivals in terms of
digitization. (Michael Wittman. 2014). This could have a high impact on the company’s affairs.

Environmental: one of the main sources of pollution is air travel. In order to fulfill emission
targets, Ryanair needs to manage reputational risks and modify its approach. The amount of
carbon emissions that the aviation sector releases within Ireland is about 12.42 million tons. The
largest source of emissions relates to the use of unsustainable fuel. The airline industry can face
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difficulties while operating as Ireland is a signatory to the biggest environmental pact which is
the Paris Accord based on which it aims to reduce carbon emissions by 51% by 2030 and be a
carbon-neutral economy by 2050. Likewise, the Israeli government is aiming to reduce
greenhouse gas emissions by 27% by 2030. This can pose a danger to the operations of the
airline companies as they would have to shift to sustainable means of doing business.

Legal: Labor law conflicts and litigation about passenger damages due to delays or cancellations
result in expenses and harm to a company's reputation.

1.2 Porter's Five Elements

Porter's Five Forces

Competitive rivals: fierce low-cost rivalry between Wizz Air, easyJet, and Vueling. Legacy
carriers including inexpensive affiliates. There are some rivalries which this can lead to price
wars, high-priced marketing battles, and races for slight advances that could mean a competitive
advantage. These tactics can stimulate companies to make ever better products but also erode
profits and market stability. (Schubert et al., 2017)

Potential for New Entrants in an Industry: Industries where new firms can enter more easily
almost always have lower profit margins, and the firms involved each have less market share.
Customers also have an extensive selection of LCC alternatives because of some of the
contributing factors such as economic of scale, product differentiation, capital requirements and
regulations. Due to their lack of distinctiveness, Ryanair is vulnerable to switching.

Suppliers: Suppliers are powerful when they are the only source of something important that a
firm needs, can differentiate their product, or have strong brands. When the power of suppliers in
an industry is high, this raises costs or otherwise limits the resources a firm needs such as the
number of suppliers, uniqueness and forward integration, with few options, aircraft
manufacturers have negotiating strength. Oil prices are increasing the influence of fuel suppliers.

Customer: When customers have more strength, they can exert pressure on businesses to provide
better products or services at lower prices. Short-haul aircraft can be replaced with autos and
trains. Travel for work can be replaced by teleconferencing.

Threats of substitutes: When customers can find substitutes for a sector's services, that's a major
threat to the companies in that industry. If the cost of a substitute is lower and its performance is
comparable or better, customers are likely to switch to the substitute. (Maxim, Laura. 2012).

2.0 Critical evaluation of Ryanair's capabilities and core competencies to address

implementation challenges and sustain their competitive strategy:
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Overview of Ryanair's low-cost leadership strategy and associated challenges with sustaining
cost advantages:

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2.1 Core competencies (VRIO framework):

 Effective operations: Ryanair's fundamental competencies include high asset utilization,

rapid aircraft turnarounds, and lean processes. This allows them to maintain cheap
expenses.

 Ancillary revenue generation: Ryanair is particularly good at making money from fees
associated with baggage, seat preference, and onboard sales. This expands revenue
sources beyond travel charges.

 Branding and marketing: Ryanair's low fares have helped to forge a distinctive brand
identity. Their marketing encourages online reservations and fosters client loyalty.

 Cost control: Ryanair maintains its cost leadership by strict budgeting, sourcing
agreements with suppliers, and cutting costs.
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  The VRIO framework details operations efficiency as a continuous source of competitive
advantage that is valued, uncommon, expensive to replicate, and utilized by
organizations. While less unique qualities, revenue generating and cost control are
strategically significant competencies. (SEO et al., 2015).

Ryanair currently responded to the disruption and uncertainty caused by pilot and cabin crew
strikes by implementing a strategy to entice hesitant customers to book in advance. They utilized
their database to target potential passengers with daily special offers at incredibly low prices. By
consistently offering these discounted deals, Ryanair aimed to reassure customers and regain
their trust, ultimately mitigating the negative impact of the strikes on their bookings. This
proactive approach demonstrated their commitment to providing affordable and reliable travel
options despite the challenges they faced. (Cooper. 2018).

2.2 Strategy and expected outcome

 Pilot Training:

To address potential pilot shortages resulting from strikes, Ryanair has implemented a
comprehensive strategy to train and recruit new pilots. As part of a strategic partnership
with an esteemed international flight school based in Cork, Ireland, the airline has
committed to training a maximum of 450 new pilots over a five-year period. This
initiative is aimed at bolstering the airline's operational capacity and supporting its
ambitious expansion plans throughout Europe. Furthermore, Ryanair has publicly
announced its intention to annually recruit as many as 1,000 new pilots, demonstrating its
commitment to proactively addressing potential staffing challenges and ensuring the
continued growth and success of the company. (Taylor. 2018).

 Expansion:

In 2018, Ryanair completed its acquisition of Laudamotion, an Austria-based airline that

was founded by legendary Formula One champion Niki Lauda and formerly sold to Air
Berlin. Ryanair invested €100 million euros to transform Laudamotion into a low-cost
carrier that could compete against the dominant Lufthansa Group across Germany,
Austria, and Switzerland. Specifically, Ryanair aimed to use Laudamotion to offer cheap
fares on routes from those markets to popular Mediterranean leisure destinations. A key
difference from Ryanair's traditional model was that Laudamotion would operate a fleet
of Airbus A320 aircraft rather than the all-Boeing fleet used by Ryanair. Since the
acquisition, Laudamotion has expanded its fleet to nine A320s. Additionally,
Laudamotion unveiled a new livery and implemented revised pay and scheduling policies
for its staff. At the time, these changes were enthusiastically welcomed by employees and
by Niki Lauda himself, who retained an active role in the airline. Ryanair expected it
would take about three years for Laudamotion to achieve consistent profitability under its
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 low-cost structure. Now over three years from the purchase, the growth and evolution of
Laudamotion represents an important test case for Ryanair's expansion strategy and
ability to successfully integrate a new airline into the group. (O’Halloran. 2017). Ryanair
faces challenges in balancing Laudamotion's branding and independence with optimizing
synergies in operations, costs, and customer experience. However, if successful,
Laudamotion could give Ryanair vital scale and presence across central Europe to
compete against legacy rivals.

 Low Fares Advantage:

Offering low fares has been a fundamental part of Ryanair's budget airline model,
designed to drive demand among price-sensitive leisure and business travelers. Ryanair
strategically sets fares on each flight to ensure high load factor targets are achieved, with
pricing varying based on the level of demand for particular routes and departures.
Typically, higher fares are charged for flights that have higher demand and bookings
made closer to the travel date. (Avogadro et al., 2021) .Ryanair also periodically runs
special promotional fare campaigns, especially when launching new routes. These
promotional fares can have the effect of increasing passenger load factors on those
flights, but reducing the overall yield or revenue per passenger. Ryanair asserts it will
leverage significant fare discounts to stimulate demand during periods of lower travel
activity or at peak times when excess capacity is available. The low-fare strategy aims to
maximize aircraft utilization and ancillary revenues, while making the base fares
attractive to customers across Europe. (Ge et al., 2022). Ryanair's website and app make
it easy for customers to compare fares across multiple dates and destinations. Dynamic
pricing algorithms take into account competitor pricing, seasonal demand shifts, and
other factors to optimize both load factors and yield. While discounted fares form the
core of Ryanair's offering, ancillary fees for services like baggage, seat assignments, and
in-flight purchases have grown to represent a major stream of income. The balance
between base fares and ancillary revenues is critical to Ryanair's budget carrier model
going forward.

 Remodeled flights schedule:

Ryanair operates a point-to-point network model, focusing on providing frequent, direct

flight services over short-haul routes across Europe. Since 2018, Ryanair's average route
length has been approximately 775 miles, with an average flight duration of 1.9 hours.
This strategic focus on short-haul flying helps Ryanair eliminate costs and service
expectations associated with longer flights. For example, passengers do not expect
complimentary in-flight meals, expansive entertainment options, or other amenities on
shorter budget flights. The quick turnarounds also enable Ryanair aircraft to perform up
to six flights per day, maximizing utilization. Additionally, the point-to-point structure
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 means flights operate directly between the origin and destination airports rather than
through a hub-and-spoke model that connects via a central hub airport. (Fuyane. 2021).
This allows Ryanair to offer more nonstop routes and avoid expenses related to transfer
services like baggage handling and passenger connections between flights. However, the
point-to-point model does limit potential to feed traffic between routes or consolidate
operations through a base airport. As Ryanair continues expanding across Europe, it faces
challenges balancing the efficiency of direct point-to-point flights with the flexibility of
limited connections through strategic hubs. Overall, the short-haul, point-to-point
approach has been a key aspect of keeping operating costs low. (Avogadro et al., 2021).

 Flight policies:

Ryanair schedules frequent daily flights across its most popular routes to meet customer
demand at regular intervals. The flight schedule is continuously adjusted with a focus on
providing high-frequency service and business travel-friendly timings between Europe's
major business hubs. Since 2018, Ryanair has launched 260 new routes to expand its
network footprint. In a slight departure from its traditional pure point-to-point model,
Ryanair has also opened a new line of business providing feeder traffic to long-haul
carriers' intercontinental networks. For example, Ryanair reached an agreement in
principle with Aer Lingus to feed passengers into Aer Lingus' growing transatlantic
routes out of Dublin. This arrangement allows customers to book connecting Ryanair-Aer
Lingus itineraries through either airline's website. Additionally, Ryanair sells seats on Air
Europa flights to South America departing from Madrid. However, attempted
negotiations with Norwegian Air to develop a feeder arrangement for transatlantic flights
out of other cities ultimately broke down and did not materialize. Moving forward, these
select feeder partnerships represent a pragmatic evolution of Ryanair's network strategy.
(Taylor. 2018). Feeder traffic provides incremental passenger volume without the costs of
operating long haul flights. However, partnerships also pose risks including reliance on
other airlines' operations.

 Low operating and aircraft financing costs:

Back in 2019, Ryanair became one of the launch customers for Boeing's next-generation
189-seat 737-800 aircraft, placing an order for up to 200 planes. Ryanair expects its
operating fleet to reach approximately 520 Boeing 737s by 2024, comprised of a mix of
the 737-800 and the newer 737 MAX-200 models. Purchasing aircraft from just Boeing,
rather than multiple manufacturers, provides Ryanair with significant cost advantages in
areas like pilot and mechanic training, maintenance procedures, and spare parts sourcing
and inventory. Sticking with one aircraft type also gives Ryanair more flexibility in
scheduling crews and maintenance.

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 Ryanair has historically financed its fleet purchases using strong internal cash flow rather
than relying on external financing. It believes the contractual terms it has negotiated with
Boeing are highly favorable and contribute to keeping operating expenses low. However,
relying solely on Boeing does entail risks, as evidenced by the global grounding of the
737 MAX in 2019 after technical issues arose. As the fleet expands, Ryanair must
balance the cost and operational efficiencies of fleet commonality against the risks of
over-reliance on a single manufacturer. Some industry analysts argue that introducing a
secondary aircraft type from Airbus could provide a hedge and increased leverage in
price negotiations with Boeing. However, for now, Ryanair remains committed to the 737
as its platform for low-cost growth.

To control operating costs, Ryanair pursues fixed-price, multi-year service contracts with
external third-party providers at airports across its network. Services contracted out
include ticketing, passenger handling, aircraft handling, catering, and other airport
operations that can be performed more cost-efficiently by specialist providers compared
to handling in-house. (Constantino et al., 2016). By consolidating passenger volumes
across its route network and flight schedule, Ryanair leverages its negotiating power to
secure competitive rates and contractual terms from these service partners. Multi-year
contracts also enable Ryanair to lock in pricing, increasing budget certainty. However,
relying on third parties poses potential risks of service disruptions or deteriorating
performance over time if contracts are not managed effectively. There is also a balancing
act to ensure cost savings from contracting out justify the loss of control versus handling
services in-house. As it expands into more primary airports, Ryanair may need to bring
more functions in-house to have greater oversight of the passenger experience. Overall,
thoughtful outsourcing of commoditized services creates cost efficiencies, but Ryanair
must be strategic regarding which capabilities remain core competencies versus those
better performed by outside experts. Savvy contracting and contract management will
continue enabling the low-fares model. (Gabor et al., 2022).

3.0 Strategic Recommendations according to the challenges of Ryanair's CEO

3.1 Summary of current challenges

Maintaining Ryanair's low-cost leadership in a post-pandemic landscape and amidst increasing

competition.

 Industry headwinds:

Ryanair faces significant headwinds from broader aviation industry cost pressures that
threaten its low-cost advantage. Perhaps most significantly, fuel costs have been rising
due to increased global demand and political instability. As an ultra-low-cost carrier,

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 Ryanair is especially vulnerable to fuel price hikes given its razor thin profit margins.
(Fuyane. 2021).

 Competition:

Many legacy flag carriers, including British Airways, Air France-KLM, Lufthansa, and
IAG, have launched low-cost short haul subsidiaries to compete directly against Ryanair's
cost structure. For example, Lufthansa's Eurowings and IAG's Level provide competitive
pricing and scheduling on intra-Europe routes.

 Passenger preferences shift:

While base fares remain low, passenger demand for ancillary services like checked bags,
extra legroom seats, and in-flight WiFi continues growing. Ryanair lags rivals in
providing some of these services which represent missed revenue opportunities. (Kim et
al., 2022).

 Environmental footprint:

Environmental concerns are also shaping traveler choices, with some consumers reducing
air travel due to the industry's carbon emissions impact. Ryanair's green reputation lags
behind other airlines which could affect brand perceptions and loyalty. (Olcen, Olcay.
2023).

3.2 Recommendations based on the SWOT analysis of Ryanair:

Optimize Cost Structure

 Fuel hedging: Consider dynamic hedging strategies to mitigate fuel price volatility.
(KPMG, 2023)

 Fleet modernization: Evaluate fuel-efficient aircraft like Airbus A321neo to reduce

operating costs. (Airbus, 2023)

 Targeted outsourcing: Analyze non-core activities like ground handling for potential cost
savings. (Accenture, 2023)

Diversify Revenue Streams

 Ancillary services: Expand beyond baggage fees, explore paid seat selection, onboard
meals, and airport lounge access. (Ryanair Annual Report, 2022)

 Targeted partnerships: Collaborate with loyalty programs, travel companies, and tourist
destinations for cross-selling opportunities. (Booking Holdings, 2023)

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 Cargo revenue: Consider dedicated cargo flights or partnerships with cargo airlines to
leverage existing capacity. (Boeing, 2023)

Enhance Customer Experience:

 Personalization: Offer dynamic pricing, targeted promotions, and service bundles based
on customer preferences. (Amadeus, 2023)

 Digital transformation: Streamline booking process, implement self-service kiosks, and

invest in mobile app capabilities. (Ryanair investor presentation, 2023)

 Environmental initiatives: Develop carbon offset programs, invest in sustainable fuels,

and communicate green efforts to attract eco-conscious travelers.

Address Laudamotion's Integration and Growth

 Fleet harmonization: Evaluate options for transitioning Laudamotion to Boeing fleet over
time for operational and maintenance synergies.

 Brand differentiation: Refine Laudamotion's positioning to avoid market cannibalization

with Ryanair, potentially targeting premium economy segment.

 Network expansion: Leverage Laudamotion's base in Austria and potential partnerships

to access new markets in Eastern Europe and beyond.

 Embrace Strategic Partnerships:

 Airline alliances: Explore joining existing alliances or forming strategic partnerships with
complementary airlines for network expansion and cost benefits.

 Technology providers: Collaborate with innovative companies to develop cutting-edge

solutions for revenue optimization, customer experience, and operational efficiency.

 Monitor the ongoing consolidation within the European airline industry and be prepared
to react strategically to potential merger and acquisition opportunities.

 Flexibility and agility are key in this dynamic market. Regularly review your strategy and
adapt based on emerging trends and competitor actions.

 Maintain Ryanair's core strengths of cost efficiency and operational excellence. This is
your foundation for building long-term success.

 Invest in people and technology. Attract and retain top talent, and leverage technology to
drive innovation and improve customer experience.

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 By implementing these recommendations and staying ahead of the curve, Ryanair can
solidify its position as a low-cost leader and navigate the evolving aviation landscape for
continued success.

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