The aim of this paper is to analyse and decompose the strategy followed by the low-fare airline Ryanair, in order to achieve success within the highly competitive air transported passenger business.
Starting from the statement advocated by Doganis (1985) that airline industry is characterized by falling unit cost and an unusually high rate of growth in the demand for its products, and following with Cowe et al. (2010) suggesting that few businesses can cause more customer frustration and at the same time can lose the owners so much money when referring to airline carriers. It is clear that there is a noticeable difference between the two statements.
In 25 years, the time elapsed between both opinions, the industry's perspective has changed due to facts occurred during this time (Oil prices, European Skies deregulation, etc). The former would expect firms to obtain substantial profits while the latter emphasizes the risky kind of business that carriers are dealing with and the difficulties they are going to find when trying to design a business model appropriate to the changing and highly competitive airlines industry.
Whereas state-run airlines have allowed their costs to spiral out of control and are now struggling to survive throwing loses year after year, private and independent almost newcomers (carriers), seem to have discovered the secret to achieve a sustainable and profitable business revenues by cutting costs and meeting customers demand. The question would be: How an industry dominated by price wars can best survive?
"Low-fare carriers are here to stay; full-service carriers may not be here to stay" Steve Smith, Zip CEO (Calder, S 2003)
Ryanair is aligned with the idea that traditional airline model keeps people out, but low-fare flying brings them in. (Calder, S 2003) Nonetheless the situation was not always like this.
When the Irish airline was awarded with an operating licence in 1985, it started as a traditional airline, oriented to promote the idea of Ireland as the main entrance to Europe and also to foster tourism in the country. The competence with Aer Lingus (Irish National flag carrier) and the intrinsic difficulties of the business, made Ryanair to become close to bankruptcy in 1988. On a pure business basis, what went wrong (originating accumulated losses of £20 million in 1990) was that Ryanair expanded very quickly in a climate of aggressive competition with Aer Lingus and British Airways.(Ruddock, A 2007)
Everything began to change in 1989 when Michael O'Leary commenced to study and analyse the airline's flaws in the background (he would not become Ryanair's CEO until January 1994). He dismantled the ambitions of expansion into Europe because he considered essential to secure the future of the core airline by retreating from the head-to-head competition on routes and identifying routes left alone and where Ryanair had a chance of making some profit. (Ruddock, A 2007)
Once the airline seemed to have stabilized by, among other measures, cutting back fleet and routes from nineteen to six lowering fares and increasing frequencies, the real changes started to happen from 1992. Following the successful low-fares model established in first term by the American carrier Southwest Airlines, Ryanair oriented its traditional model into a low-fares model, examining in detail each aspect of the supply chain and dispensing with the unnecessary parts of the business which were not considered core elements of the company. (Ruddock, A 2007)
Operations & Process Management.Low cost = High profits
Operations and process management is at the core of every organization and concerns the engineering of the resources and value-added activities that transform inputs (e.g., material, labour, capital, skills) into outputs (goods and services). (Cowe et al., 2010)
Effective and innovative operations are keys to success in the airlines industry and Ryanair has shown high understanding of these factors during the course of its life. When the carrier took the low-fares route it started by looking at its supply networks, assessing which elements of the equation could be avoided and which could be produced more efficiently. Core activities include network development, pricing, yield management, finance, operations control, and brand management. In contrast, Ryanair outsourced catering services, heavy maintenance activity (engine overhaul, component overhaul and heavy airframe checks), ground handling at non-hub airports and flight simulator ownership. (Aerostrategy Management Consulting)
The carrier adopted a processes perspective and in its light analyzed the business as a collection of interrelated processes. The general transformation process model (Figure 1) shows the essential Ryanair's operation which, in turn, is formed by several processes (recruiting pilots and crew, acquiring aircrafts, ground crew, selling tickets to passengers, etc).
Helped by this perspective Ryanair was capable to integrate the managing of the airline's resources into the strategy of the organization. This strategy, in general lines, is aimed to offer low fares that generates an increased demand while maintaining a continuous focus on operating efficiencies.
Within this operating efficiencies are included subjects such as frequent point to point flights on short-haul routes, low operating cost (turnaround time), customer service cost (no meals, no desks), personnel productivity, (crew capable to operate any flight same specifications), aircraft equipment cost (same plane especially designed for Ryanair's needs, low level of supplies inventory and same type) and airport access fees.
Each of the elements referred above are different processes within the whole of the core operation of passengers' and freight's transport from point A to point B. Without these processes the main objective of the carrier could not be achieve with the same efficiency or could not even be achieve at all.
The difference between success and failure within the airlines industry depend in how to manage the operations on a day-by-day basis. (Cowe et al., 2010)Impact on costs, revenues, investment & capabilities
The impact that operations and process management have in Ryanair strategy are mainly directed to reduce the operating costs of the airline. Other aspects taken into account when planning the strategic impact are the increase of revenue, effective investment and building of capabilities. (Cowe et al., 2010)Operating costs
Ryanair's operating costs are among the lowest of any European scheduled passenger airline (Ruddock, A 2007). Ryanair strives to reduce or control four of the primary expenses involved in running a major scheduled airline:Aircraft equipment cost
Ryanair operates a single class aircraft layout, the Boeing 737-800s with capacity for 189 passengers. In 2009 the fleet reached the impressive number of 202 aircrafts. Ryanair attained an agreement with Boeing to specially design the aircraft with the specifications needed by the carrier and its low-fares model. Ryanair asked for a customised aircraft with less compartments and gaps which in turn will imply the crew less time to set the plane ready for the next flight.
The advantages of having only one type of aircraft are closely related with gaining competitive advantage by reducing the operating costs of the fleet. It gives the company two main benefits: first, low amount of supplies stored, due to the fact that the carrier does not need different types of supplies for different aircrafts. Every part can be use indistinctly and interchangeable. This makes the placing of new orders for the airplane's parts very systematic and allows the carrier to easily control the storage and stock of spares. At the same time, when an aircraft has to be sent to repair, old pieces not damaged coming from other aircrafts can be reused, implying a save in cost.
Furthermore, using one type of aircraft gives Ryanair a high grade of flexibility when designing the schedules for pilots and crew. Personnel do not need any special training when they have to operate in a different flight because they all have the same specifications. Applied to maintenance personnel it is also an advantage because engineers only need to know a model of aircraft in detail.
In Ryanair's words "the purchase of the additional new Boeing 737-800s aircraft will allow Ryanair to continue to grow and the significant size of the original and supplemental orders allowed Ryanair to obtain favourable purchase terms, guaranteed deliveries, and a standard configuration for all of the aircraft." (Ryanair Holdings PLC - RYAAY Annual and Transition Report)Personnel expenses Cabin Crew
Ryanair works with a number of contract cabin crew agencies and training organizations, such as Crewlink, Dalmac, St. James Management and Cavok. The carrier outsources the training of potential cabin crew to third party contractors. The agreement with the contractors consists in a training offered by them in exchange for an amount of money paid by candidates (Around £3.000).
The training lasts 5 weeks and the successful candidates are granted with a three year contract to supply cabin crew to Ryanair, on a sub-contract basis, for placement at one of the Ryanair's bases. After those three years and depending on Ryanair's appreciations and performance of the sub-contract member of the crew, there is a possibility to effectively become a member of Ryanair's staff gaining a contract directly signed with the carrier.
By operating this way, Ryanair seeks to avoid the risk of investing its own money on candidates that could not be suitable for the positions offered. The company trusts in outsourcing the process in order to transfer the risk of failing candidates to the third party contractors and, furthermore, to the candidates themselves, given the fact that the payment for the training course is wholly paid by them.
While this can be seen as a competitive advantage in terms of cost saving, on the other hand it is a risky action assumed by Ryanair that can originate complaints related with the ethics and create suspicion and discomfort among the personnel.Pilots
Ryanair works with contract pilots (employed by intermediaries, or external agencies), and Ryanair trainee pilots.
Cadets (no airline experience) must complete a course in a Ryanair's approved training organization (eg.: CAE) in order to become pilots for the carrier. To qualify as cadets, applicants must have a valid JAR Frozen ATPL (Air Transport Pilots License), which can be obtained from a JAR (Joint Aviation Requirement) approved flying school. The potential pilot should support the expenses of the course (around £30.000).
Contractors are a significant and constantly changing work force, and they are used as a powerful instrument to deal with demands coming from Ryanair trainee pilots when they want to get some kind of improvement in their working conditions. So that, contract pilots serve several purposes for Ryanair and they are often the best paid Ryanair's pilots.
In general, Ryanair holds that it is the responsibility of pilots to pay for all the equipment essential to the discharge of his or her duties. In times of pilot surplus there is a general trend for Ryanair salaries and conditions to move downwards.
As outlined above Ryanair applies its low-cost strategy over its pilots and does it by adopting measures such as long working days or, in Ryanair's terms, efficient labour employment, lack of any independent representation for pilot interests (preferring to deal with the employees in a one-by-one basis), arbitrary changes to working terms and conditions, deductions from pay (food, ID and uniform charges), etc.
It could be seen as a risky policy for the carrier due to the fact that pilots are at the core of its air passenger business.
REPA (Ryanair European Pilots Association)Reduced customer service cost Passenger and aircraft handling
The carrier, in its seek to reduce customer service costs, decided to outsource capital intensive activities such as passenger and aircraft handling to third party contractors.
Ground handling addresses the service requirements of passengers between the time they arrive at a terminal gate and the time they depart. Speed, efficiency, and accuracy are important in ground handling services in order to minimize the turnaround time (the time during which the aircraft must remain parked at the gate).
Ryanair considers these services more cost efficient when outsourced and negotiates multi-year contracts at fixed prices or subject only to periodic increases linked to inflation. The carrier has agreements with Servisair PLC, Lesma Handling and others provided by local authority airports, either directly or through subcontractors. However, Ryanair provides passenger and aircraft handling at Dublin Airport, its main hub.Ticketing
The carrier maintains a policy of direct sales, through Ryanair's website and direct telephone reservations achieving on the whole a 100% of Ryanair's reservations.
This has been possible thanks to the development of its own internet booking system and reservations centre which allowed Ryanair to eliminate travel agent commissions, and consequently to reduce costs. (Strategy. Ryanair website)
The sales system is proving customer-friendly and is often praised for its speed and simplicity. (Unknown 2004 Strategic Direction)
Meals on board
No frills flights mean that there is no extra value added for the passengers when flying. During the flight, as food or drinks are not comprised in the flight ticket paid for the passenger, the crew has, between others, the duty to foster the sales of food, beverages, merchandise and internet-related services which in turn will mean incomes for the carrier. The way Ryanair seeks to get the commitment of the crew with sales on-flight is by granting them with incentives directly dependent on the sales effectively performed.
This strict policy of no frills has brought the carrier to eventual ludicrous situations when, due to external factors, a flight ready to take over, with all the passengers aboard, has had to wait for hours until obtaining the permission from the airport control tower to depart. In this situation, the crew and pilots could not be able to decide by themselves, while waiting for departure, to assist the passengers by simply giving them free water or refreshments because they would be taking the risk of being fired. (Edwards, Karen 2006)
Reducing costs and being flexible at the same time can be sometimes hard to achieve.Airport access fees
Ryanair airport policy implies the use of regional and secondary airports in order to reduce the costs connected with the access fees as well as to avoid the overcrowded skies and strict schedules present at main airports which, in turn, will compromise the effectiveness of the airline's operations and strategy.
In Management Today, O'Leary (Ryanair's CEO) revealed that where British Airways operates six flights a day, Ryanair operates eight. This represents an efficiency gain of one third. The passion for quick turnarounds demonstrated by the carrier can only be possible by using airports with low levels of sky congestion. (Unknown 2004 Strategic Direction) "An airline which prides itself on the simplicity of its operation and service will not want to be associated with an airport that is congested and overcrowded". (Pitt, M.R. & Brown A.W., 2001)
Most of these regional airports have a need for customers (some of them had not had a scheduled service for years) and the carrier, by applying its low fares can provide it. Nonetheless, the only possible way to maintain these low fares is by negotiating exceptional deals at the airports Ryanair wants to serve. These deals consist in regular discounts or, also, agreements to waive all landing, passenger and air-traffic control charges. These airports incur the costs to get them into the scheduled passenger game, limiting the scope of making money to duty-free shops, catering and car parking facilities operated by them. (Ruddock, A 2007)
Ryanair does not forget the critical part played by local authorities. The carrier maintain conversations with local authorities before opening a new route in order to stress the advantages in terms of increased tourism and the benefits visitors will mean to the later development of the region. By doing so, Ryanair tries to foster the positive reception of the airline among the inhabitants of the region.Increased revenue, effective investment and building of capabilities
Ryanair decided to direct its main efforts to the consecution of a low operative cost. While doing so, other strategic variables in operations and process management were not forgotten but could hardly be treated in the same extension. Nevertheless, the carrier tried to cope with the needs of the passengers and the business itself.
An organization can enhance its revenue by increasing customer's satisfaction, as actual customers would be retained and new customers would be attracted to the products and services offered. (Cowe et al., 2010) Two of the most important factors to consider when purchasing a flight are safety and punctuality of the service offered. Ryanair, in its attempt to improve the company's image, published a list of commitments which are oriented to assure the punctuality of the flights as well as the transparency in the existing communication between the passenger and the carrier.
Ryanair, also, decided to renew the aircrafts and abandon the old heterogeneous fleet system. It consisted in buying second hand aircrafts and, leasing others from GPA. The carrier was looking for an effective investment which in the future will facilitate more efficient and effective operations with reduced cost and increased revenues. At the same time, with the renewal of the fleet the carrier guaranteed higher passenger's safety by offering a fleet with an average age of 2.8 years, one of the youngest fleet between all the airlines. (http://www.elfaa.com/statistics.htm)
"Flying with Ryanair is very much about getting safely from A to B - anything else simply gets in the way of efficiency!" (Unknown 2004 Strategic Direction)
Michael Porter value chain applied to Ryanair will result as follows:
The value chain is used to describe the activities of an organization and how they are linked to the maintenance of a competitive position within the market.
Supply chain management: Impact on cost, speed, quality, dependability and flexibility.
Supply chain management is the activity of command and administration of the liaisons and flows between operations and processes. (Cowe et al., 2010)
Supply chain objectives:
The overall objective of supply chain management is to meet the demands of the customers by achieving appropriate levels of the five operations performance objectives - quality, speed, dependability, flexibility and cost. (Cowe et al., 2010) The decision of putting more effort in the consecution of some of these objectives, while leaving others aside, is a critical moment in the design of the general strategy of the business. The overlapping and counteracting effect that objectives have between them, make necessary the distinction of some of these objectives as primary to be able to achieve profit and, consequently, sustainability.
Ryanair decided to prioritise two objectives over the rest. These objectives were to reduce the cost of the service and to increase the dependability (guarantee on-time delivery). Doing so, it clearly oriented its business to leisure and VRF (visiting relatives and friends) passengers which are less concerned with the quality or flexibility and highly affected by the price and dependability of the service. The carrier expressed its desire to reduce the cost of the service, which had an immediate effect on the price paid for the final customer, as well as an impact in the quality and flexibility of the service offered. Ryanair is proud to say that they have the lowest fares in the routes they operate while, at the same time, it meets the customer's expectations in some way, (the fact that passenger numbers increase every year support this statement). However, quality of the service is lower, with no extras comprised during the flight whatsoever (meals, drinks, reduced space between seats, etc.). On the other hand, the flexibility showed by the carrier is, in great extension, subordinated to the necessity of punctuality and productivity applied by Ryanair. One small deviation on the processes carried out by Ryanair's personnel or suppliers can affect the success of the operation and, consequently, compromise the general strategy of the carrier when trying to achieve the promised dependability.
The turnaround of the aircraft is crucial in the overall passenger's transport operation from point A to point B. Lots of agents are implied and closely related on the process. In the event of the process failing in the consecution of the established objective, the whole service will lose its balance. A delay in one of the operations carried out will involve accumulated delays during the entire service day which, in turn, will affect the dependability and the cost of the operations, and can jeopardize the image of reliable company Ryanair tries to achieve.
Ryanair's Supply Chain
The future holds a new mix of airline business models, with more of the capacity and demand served by the low fare model. As a result, the future fleet mix will no longer be a simple extrapolation of previous buying behaviour and the airline supply chain faces inevitable change in its customer base. This in turn will have a fundamental impact on airline suppliers in terms of their market, service and product strategies. (Aerostrategy Management Consulting)
Ryanair's supply chain is very limited, consisting in basically three main elements that can affect in great manner the smooth run of the business. These elements are: Aircrafts, airports, fuel.Relationship with suppliers
Aircrafts: The low fares carriers market tends to be an "all or nothing" opportunity. These carriers stick with one type of equipment. This focus on a single type, combined with the scaleability of their business model, means that the most successful low cost carrier can become a very significant customer in a relatively short period of time. (Aerostrategy Management Consulting)
Boeing Co. is the supplier of aircrafts for Ryanair's business. The relationship between Ryanair and Boeing can be considered strong and on a long-term "partnership" basis. Cowe et al. (2010) argued that the meaning of this kind of relationship is that supplier and customer are expected to co-operate, even to the extent of sharing skills and resources, to achieve joint benefits.
The actual fleet of the carrier is fully composed of Boeing aircrafts and there is a new order placed for two hundred new 737-800s aircraft for delivery between 2013 and 2016 (Reuters). Ryanair place a strong focus on aircraft availability and reliability of equipment, spare parts supply and technical support. Thus Boeing not only delivers aircrafts to Ryanair but, also, gives advice in subjects such as maintenance, facilitates the obtaining of spares on favourable terms, offers training for Ryanair's engineers and customizes aircrafts following the indications and needs of the carrier's business model. These favourable terms, when purchasing and obtaining spares from Boeing, mean an added value within the supply chain, that allows Ryanair to lower the prices to passengers and make the flight experience safer. At this point, it is important to outline that "Information taken from the number of accidents, incidents, near-collisions and pilot deviations per fight over several years, shows that there is no statistical variation between the safety levels of traditional and low cost flights." (Strategic direction Journal)
However, Michael O'Leary has recently claimed against Boeing and threatened to end its partnership, with the result of possible order deferrals and cancellations if the aircraft manufacturer does not meet their low cost expectations by reducing the price demanded. It reflects the general policy of Ryanair when the carrier negotiates its partnerships but cast doubts around the strength of the relationship between Boeing and Ryanair and how this relationship can help the carrier's strategy.
In O'Leary's words "We see no point in continuing to grow rapidly in a declining yield environment, where our main aircraft partner is unwilling to play its part in our cost reduction programme by passing on some of the enormous savings which Boeing have enjoyed both from suppliers and more efficient manufacturing in recent years." (Ryanair News. Website)
Airports: A high utilization of assets is a critical driver for Ryanair. The daily aircraft utilization of around twelve hours from Ryanair fleet contrast with its traditional airlines competitors struggling to reach an average of nine hour on short haul flights.
The only way to reach that amount of hours on air is by reaching strong partnerships with the airports served. The carrier negotiates each contract individually and, depending on the airport, the conditions of the agreement are different, but always enclosed into the boundaries of cost reduction and agile operations established by them. In general, when the airport fail to meet the demands and requirements established by Ryanair, the carrier break relations and start from scratch with a new airport prone to close the deal in the terms proposed. The carrier has shown that it can generate new traffic and significant growth, hence they provide new opportunities for regional and local airports.
Ryanair closely monitors relationships with airports around Europe, so they provide subsidies to the airline in order to let them achieve low cost and offer low prices. Furthermore, Ryanair has agreed with these airports to provide storage hubs as to when a plane enters these sites it is automatically re-fueled and food, beverage and duty free products are reloaded at negotiable prices, reducing cost and improving the turnaround time of the aircraft. Ryanair contracts staff for aircraft handling, ticketing and baggage handling to third parties at competitive rates, as well as engine repairs and heavy maintenance of its aircrafts. Thus reduces direct exposure to employee relationships and disputes, reducing cost all through value chain.
Everything counts for Ryanair and the carrier ensures that small things such as food and beverage are received accomplishing the standards and on-time in order to add value through out its value chain.
Michael O'Leary negotiating airport's fees said: "There are three elements in game, supply, demand and price. Ryanair is the supplier and creates the demand by reducing the price. If airports or authorities force it to rise the price, the demand will go down and Ryanair would have to drop its supply". (Ruddock, A.2007) p.402.
Fuel: Fuel cost constitutes a substantial portion of Ryanair's operating expenses. Unfortunately, the supply of which is virtually totally dominated by the oil companies and very little can be done to try to change it. The relationship is mainly market-based transactional, which means that it is directed by the seeking of the best supplier at each moment. However, Ryanair engages in fuel price hedging transactions when has the chance. It means that "Ryanair and a counterparty agree to exchange payments equal to the difference between a fixed price for a given quantity of jet fuel and the market price for such quantity of jet fuel at a given date in the future, with Ryanair receiving the amount of any excess of such market price over such fixed price and paying to the counterparty the amount of any excess of such fixed price over such market price". (Ryanair Holdings PLC - RYAAY Annual and Transition Report)
Given the fact that the fuel price can not be affected by the airline, the carrier keeps on focus the performance of the fuel into plane suppliers and the reliability and speed of the procedure. Once more the carrier, in order to reach a quick and effective turnaround needs to seek a perfect supplier's alignment with the time frame established for such process. The oil companies need to satisfy this requirement or face losing business.
Other Suppliers: This category contains those suppliers non essential to the core carrier activity but still important for the general success of Ryanair's strategy. The company uses them as a way to complete the service offered to the passenger, adding value to it:
- Hertz: Car rental in airports
- Booking.com: Hotels
- Ryanairvillas.com: owned summer houses site
- Hostelworld: Hostels
- Costacruises: Offers connection to cities visited by the boats
- Axa Insurance: Travel insurance
- Parking booking: Offered via Ryanair website
- Lost baggage trace: Used to claim lost bags via web
- Airport transfers: Private bus/coach service or public bus or train from airport to city. (Terravision, Hispano Igualadina, Stansted Express).
- Free city guides: Online
- On-line shopping: Buy as you fly
- On-line games: Mainly betting games
Throughout the pages above we have been able to see how a complex and costly world such as passenger air transport can be managed in an easy and efficient way by decomposing the main operation into small processes and assessing each of these processes in the light of the question: "can we (as an organization) do it better or should we outsource it and concentrate the efforts in what we consider essential parts at the core of the business?"
Ryanair's management decided to focus on tasks such as selling tickets, transporting passengers and customer service. The rest of the operations were outsourced, allowing the carrier some space and time to analyse, design, develop and improve the three main processes retained.
By having only two main suppliers (for this matter I am not considering fuel as it is hardly controlled or affected by the airline's needs), the carrier concentrates its energies into attaining strong and favourable agreements with different airports and the aircraft supplier, Boeing. These strong agreements, in turn, facilitate the smooth run of the business and the possibility to direct its movements to improve the overall accomplishment of objectives.
The future of the carrier seems to have a clear direction, with an expressed desire to keep growing in Europe and, furthermore, probably extending its operations to long-haul routes. Nonetheless, Ryanair first needs to find an appropriate aircraft to sustain such expansion (able to maintain the low cost philosophy) and, on the other hand, has to deal with the recent tension appeared between Boeing and the carrier whilst negotiating the conditions for the new aircrafts.
- Calder, Simon 2003 No Frills: The Truth behind the Low Cost Revolution in the Skies, London, Virgin Books Ltd.
- Cowe et al., 2010 Creating Competitive Advantage 2nd Ed, NJ, Pearson Education Limited
- Creaton, Siobn 2004 Ryanair, how a small Irish airline conquered Europe, London, Aurum
- Doganis, Rigas 1985 Flying off course: The economics of International Airlines, 2nd Ed, London, Harper Collins
- Johnson, Gerry 2008 Exploring corporate strategy: text & cases 8th ed, Edinburgh, Pearson
- Ruddock, Alan 2007 Michael O'Leary: A Life in Full Flight, Dublin, Penguin Ireland
- Taylor, David 1997 Global Cases in Logistics and Supply Chain Management, Oxford, International Thomson Business Press
- Unknown 2004 Industrious times at British Airways and Ryanair: winning the battle for the skies in Strategic Direction 20(4) pp 4-6 Emerald Group
- Unknown 2006 Can the aviation industry claw its way out of price-wars and into profit? in Strategic Direction 22(6) pp 6-7 Emerald Group
- Pitt, M.R. & Brown A.W., 2001 Developing a strategic direction for airports, Facilities, 19 (1/2) pp. 52-60, MCB University press
- DVD/Video, Edwards, Karen 2006 Ryanair: caught napping
Total Operating Expenses
Depreciation and Amortization
Fuel and Oil
Maintenance, Materials and Repairs
Marketing and Distribution Costs
Airport and Handling Charges
Other Ancillary and Operating Expenses
Ryanair model versus British Airways model
To carry out the comparison it is needed to divide the study in to different critical areas as follow:Strategies:
- Product: Ryanair (FR) model works in a high percentage of low-cost seats with a fairly simple structure, not offering any kind of frequent flyer programme. The product offered is cheap with no assigned seating and no free food or drink. British Airways (BA) operates a complex fares system and yield management system, being crucial for the carrier the frequent flyer programme in order to retain passengers' loyalty. BA adds value to the product by offering different classes within their flights.
- Schedule: FR use secondary airports what means lower fees and less congestion, increasing the punctuality and turnaround times. FR does not participate in alliances (code sharing) and its flights work in a "point to point" system with no connections. BA, instead, uses primary airport, focussing in the segment of the market which needs direct service to major population centres. It participates in alliances with other airlines and fosters connections and frequency in its flights.
- Operations: While FR has standardised fleets due to similar average distance of its flights, which implies lower training and maintenance costs, BA uses a wider range of aircraft types due to the different distances covered. The aircraft's utilisation by FR is much more efficient than the BA's. This is due to the use of different airports (congested vs uncongested) which, in turn, prevent BA to achieve quick turnarounds and, its policy of proficient customer service against FR's policy of reducing customer service costs.
- Strategy: FR directs its flights to leisure and VFR passenger while BA gives priority to business class and high frequency passenger which expect more quality and attentions from the crew. BA has higher personnel costs than FR. The latter offers a standard service for all the passengers and does not compromise cost in favour of quality when BA, due to the brand image it wants to show, has to do it.
- Distribution: FR encourages direct reservations on its website eliminating intermediaries while BA uses a mix of direct reservations through its website and travel agents that get a commission for sale. Facilities requirement:
- Access: The location of the airport for FR is less important than for BA. For FR is enough to have good road and rail links while for BA is essential to use airports with good location and transport links.
- Terminal: BA uses large ticketing desk promoting its brand image while FR uses small desk when it does. FR does not consider terminal services and facilities essential to its business while BA understands that these services and facilities are expected by its customers when arriving to the airport with a BA flight ticket.
- General: FR offers a small amount of catering facilities, and the customer has to pay for it on-flight. The cleaning of the aircraft is done by the crew, being more important the time used than the quality of the cleaning. BA has a larger catering option with preparation of food on-flight and it is considered essential and included in the price paid by the passenger. The cleaning of the aircraft has to be perfect between flights, with no chance to miss a gap.
BA must offer business and first class lounges to make distinction between its customers and justify different prices paid, while FR only offers the economy lounge facilities.
BA requires aircraft parking during daytime while FR tries to keep aircrafts flying as much as possible.
(Pitt, M.R. & Brown A.W., 2001)
As stated before the differences between Ryanair and British Airways or a low-cost carrier and a traditional one are clear and it is due to the different strategic approach followed by the airlines. In this case in particular, traditional companies stress the customer as the centre of the business while Ryanair and in extension the low-cost carriers emphasize the operational cost.
When Ryanair continues to extend its share of the no frills European market, BA is returning to its roots by declaring itself a "full-service netwook carrier". Where Ryanair does not encourage connecting passenger, BA welcomes them with open arms. And where BA pursues consolidation through its oneworld global airline alliance, Ryanair pushes ahead on its own. (Unknown 2004 Strategic Direction)