{"id":4376,"date":"2015-12-09T00:30:58","date_gmt":"2015-12-09T05:30:58","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/ryanairs-low-cost-30th-birthday\/"},"modified":"2015-12-09T00:31:32","modified_gmt":"2015-12-09T05:31:32","slug":"ryanairs-low-cost-30th-birthday","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/ryanairs-low-cost-30th-birthday\/","title":{"rendered":"Ryanair\u2019s low-cost 30th birthday"},"content":{"rendered":"

Ryanair, the Dublin-based low cost carrier (LCC), celebrates its 30th<\/sup> birthday this year. Though some may scoff at the company\u2019s claim to be \u201cEurope\u2019s favorite airline,\u201d the numbers are hard to dispute. This year the airline will carry 105m customers between 200 airports across 31 countries and will overtake both IAG and Lufthansa in terms of passenger numbers.<\/p>\n

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The company\u2019s business model is a \u2018\"Screencopy and paste\u2019 of the low cost carrier model first established by Herb Kelleher at Southwest Airlines \u2013 Michael O\u2019Leary (Ryanair\u2019s long-serving CEO) spent a number of weeks observing Southwest before taking over as CEO. What\u2019s interesting is that Ryanair was not the only imitator of the Southwest model. EasyJet, Germanwings, Flybe, and countless others have attempted to follow the lost-cost and low-fare model in Europe. In fact, the abundance of low cost carriers has helped to consistently drive down the cost of air transport over the last number of decades.<\/p>\n

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Though many have tried to emulate the low cost model, Ryanair\u2019s performance clearly stands out. It is estimated that Ryanair\u2019s cost per passenger is approximately one third lower than that of EasyJet, the second largest LCC in Europe. Its success has been built on aligning all elements of its operating model with the company\u2019s business model.<\/p>\n

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There are a number of elements to Ryanair\u2019s operating model which are worthy of consideration:<\/p>\n

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Ryanair operates just one aircraft type <\/strong><\/p>\n

Ryanair only uses Boeing 737-800 aircraft helping to keep costs down in a number of ways. Firstly, it offers the airline full flexibility as aircraft can be deployed across all routes and crew can be staffed across all aircraft. Secondly, standardization helps Ryanair \u2018work\u2019 its planes harder than anyone else in the industry – the average time on the ground between flights is just 25 minutes. Thirdly, the scale of Ryanair\u2019s relationship with Boeing has enabled the airline to negotiate low cost aircraft and to imposed detailed specifications (e.g., Ryanair achieves 189 seats per aircraft, compared with easyJet\u2019s 156 on A319s and 174 on A320s).<\/p>\n

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\"Vatry<\/a>
Vatry Airport is advertised by Ryanair as \u2018Paris\u2019, despite being over two hours drive from the Eiffel Tower!<\/figcaption><\/figure>\n

Ryanair operates in low cost airports<\/strong><\/p>\n

Ryanair flies to very few major airports, choosing instead smaller and less congested terminals. Flying in and out of smaller airports has many advantages. It allows greater flexibility in choosing landing and take-off slots and greatly reduces the amount of time spent queuing for runways. And because Ryanair is willing to fly to smaller airports, it has been able to negotiate extremely advantageous rates. In fact, at one point, airports or local governments were paying Ryanair in order to bring passengers to their airport or region.<\/p>\n

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Ryanair sells direct-to-consumer\u00a0<\/strong><\/p>\n

Ryanair has worked to disintermediate its sales channel refusing to\u00a0deal\u00a0with either travel agents or with GDS partners. All sales are made through Ryanair.com or through its dedicated booking line thereby eliminating\u00a0the loss of\u00a0value\u00a0to\u00a0intermediaries.<\/p>\n

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Ryanair has killed the \u2018sacred cows\u2019 of the airline industry <\/strong><\/p>\n

Once committed to the low cost model, Ryanair went about destructed many of the \u2018sacred cows\u2019 of the airline industry in order to radically simplify the operating model. It has dispensed of all free inflight hospitality and entertainment which reduces costs and frees cabin crew\u2019s time for revenue generating activity. It offers only point to point flights thereby avoiding the need to transfer passengers or luggage. Finally, the airline went against conventional wisdom and scrapped its frequent flyer rewards system.<\/p>\n

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Ryanair Incentivizes its customers to play their part<\/strong><\/p>\n

The airline has taken many steps to ensure their customers do everything possible to reduce the airline\u2019s costs. Passengers are charged punitively for printing a boarding pass or for checking in luggage. As a result, only a small portion of customers require these services thereby further streamlining Ryanair\u2019s operation.<\/p>\n

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Results<\/strong><\/p>\n

Ryanair\u00a0has delivered outstanding results as compared to peers. It is one of the only airlines in the world to consistently deliver economic profit (return on invested capital minus the weighted average cost of capital). If the airline can continue to closely align\u00a0its\u00a0business model and operating model, few would bet against Ryanair celebrating many more birthday’s as Europe’s most profitable airline, and maybe even its favorite.<\/p>\n

\"Ryanair<\/p>\n

References:<\/strong><\/p>\n