Ryanair
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Introduction
Ryanair is one of the most profitable low-cost and low-fare airlines in the world. Even though it was merely bankruptcy in 1991, it could stand up and become very successful by 1999. An issues was what led Ryanair to huge losses in 1991, how did it re-gain its position, and what lay ahead in the next century.
Analysis
Prior to 1991, Ryanair had suffered from continuous losses from 1985 to 1989. The first reason that put it into this situation was that it tried to position itself as a low fare airline with the first rate services. It tried to keep low and unrestricted fare, while keep focusing on the best customer service and relationship. This mixed model was proven inefficiency. The low price could lure number of passengers; however, the increase in revenue could not offset the cost of service that Ryanair promised to customers. As a result, the company faced large losses.
Another reason was due to Ryanairs expansion, and deregulations in Europe. It expanded its routes, and some of those were Aer Lingus existed routes. This crash led to price war. As Ryanair tried to keep its price 10% lower than its competitors, it suffered even more loss. Although the Irish government separated Aer Lingus and Ryanair routings, Ryanair still lost its money until 1991.
However, by the end of 1999, Ryanair was become one of the most profitable airlines in the world. One of the reasons came from its low cost strategy. It had eliminated all frills, served secondary airports, and used no air bridges. Moreover, it started using online booking via its website; therefore, it can reduce some employees. Furthermore, it bought new aircrafts in a recession period so it could get cheap prices. Therefore, it could achieve the low price which was one of key factors to entry this industry (see appendix).
Another interesting strategy was that Ryan scheduled a press conference to announce its new 6 routes, and still negotiate more than 6. By doing this, Ryan could get more advantages than its competitors who were going to expand routes as well (Game theory, Managerial Economics course note)
In terms of human resource, Ryanairs workplace environment was informal and flexible which would create relaxation to its employees and might encourage them to be more productive. Pay was based on productivity would be an incentive to staffs to put more efforts on their jobs; however, this could be a double-edged sword. It might force employees to compete among each others, and finally it would destroy relationship among them (Alfie Kohn, Harvard business review. 1993. Sep-Oct).
As for operation management, Ryanair did well in quick unloading baggage, on-time arrivals, and short-time preparation for a new taking-off after landing. Moreover, it used online booking, and participated in several computerized reservation systems which travel agents were familiar with, thus it ease processes of reservation. These would increase customers satisfaction to the airline. On the other hand, Ryan did not support the check-through baggage for connecting flights on other airlines. As a result, it could lose some passengers to its competitors who allowed the check-through luggage.
For marketing point of view, Ryanair established itself in a good position, a low-cost and low-price airline. Although it did not much provide services and offered no frills, it still tried to build trust