Dogflight over Europe : Ryanair Case Analysis In 1991, Ryanair was on the verge of bankruptcy. Appointing Michael O'Leary as a Deputy of Executive was the most suitable decision that they ever made. They drastically changed the firm strategy to face market competition and avoid bankruptcy. They became the cost leader among airlines companies in Europe. Under O'Leary, Ryanair cut its cost radically. It dropped loss-making routes, and planes redeployed on a handful of remaining routes. Ryanair turned its focus away from customer service and as a result, was able to generate and preserve cash. For instance, they were eliminate flight amenities such as free coffee and snack. In addition, labor contract were renegotiated so that pay reflected productivity. Furthermore, they were created source of income from selling beverage, snack, and merchandise that generated 5 – 7% of Ryanair revenue and they also leased out space behind seat-back trays to advertiser. US financial analysts would claim later proclaim Ryanair "the Southwest Airlines in Europe". They completely mimic the Southwest business model except didn't offer free snack and drinks, not even the peanuts for which Southwest was well known. Almost exclusively, Ryanair served secondary airports. This airport were not congested, making it easy to obtain landing slot, and likely that flights would land and depart on time. Prior to opening a new route, Ryanair negotiated vigorously with airport authorities for low landing fees, low turnaround cost and other incentives. They got some advantages by served secondary airport. Ryanair might pay no fee even several airports essentially paid them to serve their locales. Contract with the airport ran for 5 – 10 years to secured runway slots for their fleets. On the investment aspect, they made a decisive decision by buying the new aircraft (Boeing 737) at the end of the worldwide recession in the airline industry and getting very low prices which gave them a competitive edge. Moreover, Ryanair started using booking online through its website and used several computerized reservation systems, which the travel agents were used to. The online booking reduced the number of its employees while the reservation system increased customer satisfaction. From the marketing standpoint, Ryanair marketed its self as "low fares airline". They advertised in the newspaper, on radio, and on television. They relied heavily on word-of-mouth advertising by satisfied customers. The presence of British Airway's Go in the low-fares segment provided a fairly serious threat to Ryanair. Go has been able to use the strong brand image of British Airways to give its brand a competitive edge. Go still offering some of the services that British Airways are known for. With all these benefits, customers will be willing to pay more for Go, and as a result, it would threaten Ryanair's market share. Moreover, based on on-time performance All U.K Arrivals shows that Go has a lower average arrival delay than Ryanair. As a response to the competition, Ryanair dropped its fares to 22 destinations, and that's gave a huge impact on its profit margin. This very low-price strategy can't go forever. Ryanair needs to find the right solutions to respond to this competition. The Ryanair's competitive advantages are not sustainable. The ability for Ryanair's business model to be imitated is a big threat which is further extended because of the regulation by the government which allow many airlines to enter the market and use the same strategy as Ryanair. To achieve sustainable competitive advantage, a company must do two things. First, it must have a strong offense by achieving a dominant market position. The second task is to develop a strong defense in order to protect this position from the effects of competition, primarily competing on price. One of the options that Ryanair needs to consider is expanding the new route to wider their market and becoming the market leader by controlling the low-cost segment.
