tour335 strategic management in tourism ryanair key capabilities

Building Cost – Saving Capabilities
Ryanair is one of Europe s largest low – cost carriers and one of the world s most profi table airlines. Founded in 1985 by Christy Ryan, Liam Lonergan, and Tony Ryan, the original airline offered service from Waterford in southeastern Ireland to Gatwick in London. In its fi rst full year of operation under partial European Union (EU) deregulation, the small airline obtained permission to challenge the duopoly of Air Lingus and British Airways on the Dublin London route. With two routes and two planes, this small Irish airline was off and running. By 1991, the airline had been running continuous losses; it abandoned its business – class product and discontinued its frequent fl yer club.
To save the company from ruin and make the airline profi table, Michael O Leary, the CEO, visited America to borrow ideas from Southwest Airlines, a well – established low -cost carrier. He returned with several key elements for a no – frills model, including the importance of quick turnaround times, no extras, and a single aircraft for operating effi ciency. With an additional Ryan family investment of 20 million, the fi rm emerged from restructuring as Europe s fi rst low – fare airline, making a profi t for the fi rst time. Deregulation of the European airline industry in 1992 gave carriers from any EU country the right to operate a schedule between other EU states, paving the way for Ryanair to begin launching new routes throughout Europe.
Today the airline serves more than 42 million passengers, with 2007 profi ts of 401.4 million. A comparison of 2007 to 2006 performance shows profi t growth of 33 percent, traffi c growth of 22 percent, revenue growth of 32 percent, and yield increases of 7 percent. Ryanair s passenger numbers have grown by up to 25 percent per year for most of the last decade. With plans to double traffi c and profi ts by 2012, Ryanair continues to execute on its low – cost strategy by offering low fares that generate increased passenger traffi c while maintaining a dedication to cost containment and operating effi ciencies.
The key elements of Ryanair s strategy are low fares to stimulate demand, and customer service in the form of punctuality, fewer lost bags, and fewer cancellations than its primary competitors had. To accomplish these activities, Ryanair stresses quick turnaround times for aircraft, and chooses point – to – point short – haul routes to secondary and regional airports versus hub – and – spoke service. Short – haul and point – to – point service allows for direct nonstop service and avoids the cost of service for connecting passengers, including baggage transfer and passenger assistance. These regional airports offer lower landing and handling charges, faster turnaround times, less congestion, and fewer terminal delays. Ryanair negotiates extremely aggressive contracts with its airports, demanding low fees as well as fi nancial assistance with marketing and promotional campaigns. In subsequent contract renewal negotiations, the airline plays airports off against each other, threatening to withdraw services and deploy the aircraft elsewhere
if the airport does not make further concessions.
Lower operating costs also come from aircraft equipment costs and personnel productivity. Operating a fl eet of aircraft with a single model, the Boeing 737 – 800 series provides operating effi ciencies in maintenance and pilot scheduling. Taking advantage of the slump in airplane sales, the company ordered Boeing 737 – 800 series aircraft in 2001 at a substantial discount. Additional savings have come from more recent orders of aircraft without window shades, seat – back recline, or seat – back pockets. Reduced cleaning and repair costs for these planes have accompanied the savings of several hundred thousand dollars per aircraft when purchasing these bare – bones planes. Third parties are used at certain airports for passenger and aircraft handling, further lowering costs. Taking advantage of the Internet, direct selling to passengers through online bookings cuts out the cost of using travel agents, with the web site now handling 96 percent of all reservations. Ryanair does not employ an advertising agency, instead producing all
of its advertising material in – house.
With a clear and focused strategy as a low – cost carrier, future plans include manageable growth, continuing efforts to appeal the EU commission decision to prevent acquisition
of Aer Lingus, and the possibility of entering into the long – haul market with a transatlantic low – cost airline.
Discussion Questions:
1. What are the major contributors to Ryanair s profi tability?
2. Would the acquisition of Aer Lingus complement Ryanair s key capabilities?
You will chose any companies or firms in subsectors in
1) food and beverage,
2) hotel industry ,
3)accommodation,
4) adventure tourism,
5) travel trade,
6)transportation in Canada or that company have property in Canada and USA .no in other country
Propose of this posting assignment is to understanding course concepts you have to first understanding and after that provide example and explain and bring course concept in your example.

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