Ryanair and its low cost flights in Europe

TABLE OF CONTENTS

Executive Summary

Appendices

1 Introduction: Ryan Introduction: Ryanair Holdings plc

2 Situation Analysis
2.1 Analysis of the internal environment
2.2 Analysis of the customer environment
2.3 Analysis of the external environment

3 SWOT Analysis

4 Marketing Goal and Objectives

5 Marketing Strategies
5.1 Target customer profile
5.2 Product
5.3 Price
5.4 Place and Process
5.5 Integrating Marketing Communications (Promotion)
5.6 People and Physical Evidence

6 Marketing Implementation

7 Projected Profit and Loss Statement

8 Evaluation and Control

9 Conclusion

List of references

Executive Summary

The purpose of this report is to provide a Marketing Plan for Ryanair, which is developed to strengthen the company’s position in the market. It is precisely tailored to the company’s actual organizational situation and its market environment.

The report deals with analyses of Ryanair Holdings plc and its core business – low cost flights – with regards to get a status of its performance and the actual market situation in order to develop a suitable and successful marketing strategy, including its corresponding implementation, evaluation and control measures.

Ryanair offers low cost passenger flights within Europe. The airline serves short haul, point-to-point routes between Ireland, the UK and Continental Europe. Our idea is it to keep the product as simple as possible. Passengers travel ticketless without any frills in one class without any seat – it is simple air transportation from A to B.

The external environment in Europe favors Ryanair and the entire low-cost airline market with an air traffic growth of up to 20%. In this connection, Ryanair is the pioneer in Europe and pursuing this business model in its pure form. Regarding the competitive environment Ryanair - with a clear strategy and structure - gains in importance and already became the market leader in the intra-European low-cost airline market – closed-packed with Easyjet and followed by Air Berlin. With its 35 Mio passengers in 2006 and an excellent profitability on a high level of 20% is growing healthy and shows strong financial reserves of more than €2 billion.

Our customer is anyone within Europe in the age between 15 and 64, who wants to save money and still be able to travel by air to attractive destinations. This awareness of different passenger types requires marketing campaigns that cover all categories of potential customers. With this in mind we developed a Marketing Plan with specific tactical marketing activities.

We have ambitious goals and objectives for further growth and market penetration in Europe within a time frame of 6 years till 2012. On the one hand we plan to raise the market share within the low cost sector up to 40%. With our growing fleet of 200 airplanes in 2012, we want to double our annual passenger transportation to 80 million by then. On the other side we plan to eliminate the rest of our costly call centers and base the distribution only on online booking.

These concrete plans base on a realistic financial plan (see Profit Statement). The included best and worst case scenarios illustrate clearly that with implementing and executing all activities properly, the airline can quadruple its annual profit up to €1,230 billion in 2012.

With our planned tactical activities and our marketing budget of €20m we spend most of our marketing budget in advertising (60%) and sales promotion (pull strategy), and in public relations (30%), in order to expand the market by raising the customers’ awareness of our unbeatable price and our new eco-friendly fleet. A smaller part (10% = €2m) flows into a direct mailing campaign to attract price-conscious business travelers even more.

Ryanair will review the marketing plan every month to assess progress and alterations as the business progresses. Therefore this Marketing Plan is also providing certain counter measures, which has to be undertaken as recommended.

Appendices

Appendix 1: Ryanair’s strategy (<www.ryanair.com>)

Appendix 2: Characteristics of the major competitors compared to Ryanair’s

Appendix 3: Current resources and structural issues of Ryanair

Appendix 4: Executive Summary of the macroenvironmental analysis

Appendix 5: SWOT Ryanair in more detail

Appendix 6: Customer segmentation of low cost airlines in general

Appendix 7: Major European low cost carrier

Appendix 8: Construction of Ryanair’s Value Chain

Appendix 9: Cost advantage of low cost carriers

Appendix 10: Evaluation, Control and counter measures

Appendix 11: Porter’s five forces for Ryanair (extra)

1 Introduction: Ryan Introduction: Ryanair Holdings plc

Company Background: Ryanair Holdings operates the first of all founded low cost scheduled passenger airlines in Europe. Starting in 1985 Ryanair followed the example of Southwest Airlines, introduced the low cost concept in Europe and became market leader in the low-cost airline market by consequently saving costs. The company is headquartered in Dublin, Ireland, employs about 4,200 people, operates with a fleet size of 120 Boeing 737-800, carries approximately 35 Mio passengers a year and had a turnover of 1,692.5 Mio € in 2006 with a net profitability of about 10 % (Ryanair 2007, pp.2-3).

Mission Statement: Ryanair will become Europe’s most profitable lowest cost airline by rolling out our proven ‘low-fare-no-frills’ service in all markets in which we operate, to the benefit of our passengers, people, and shareholders (Ryanair Report, 1997).

‘Ryanair’s objective is to firmly establish itself as Europe’s leading low-fares scheduled passenger airline through continued improvements and expanded offerings of its low-fare service.’ (Ryanair 2007, Strategy, pp.1-4, see Appendix 1).

2 Situation Analysis

2.1 Analysis of the internal environment

Current Performance

Ryanair, with its 35 Mio passengers in 2006, is the market leader in the intra-European low-cost airline market – closed-packed with Easyjet and followed by Air Berlin. Appendix 2 gives a detailed overview by a comparison of the three major competitors. Ryanair’s profitability remains surpassing on a high level of around 20 %, while its competitors only reach 6% and less (Arthur D Little 2004, pp.7-8). The following table compares the latest financial and operational results of Ryanair, Easyjet and Air Berlin, whereas the Positioning-Portfolio illustrates Ryanair’s pure low cost strategy.

Table 1: Comparison of financial results and operations 2006

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*numbers in million € - Ryanair and Air Berlin profit: after tax, easyJet: pre-tax profit, financial year 2006

Source: Own compilation from web sites of airlines

Market Positioning on the European Airline Market:

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Current resources and structural issues

Ryanair works with a tight and compact organizational structure and with a clear strategy. Its main strength is the big financial reserves it has earned since years, which is estimated on 2 billion Euros (International Herald Tribune 2006). These savings and the airline’s profitability enable it to survive in a crisis or compete in price fights. This economical advantages result from its learning curve in aggressively optimizing production costs. In this regard Ryanair has kept its cost low also because of outsourcing services (see also Appendix 8 “Value chain”) to specialty operators and aggressively behaving towards suppliers like ground handling or airports. A very detailed description of “resources and structural issues” is attached as Appendix 2.

2.2 Analysis of the customer environment

Ryanair’s main target customers are people within Europe who mostly travel for private purpose, for example, who visit friends and relatives^[1] go on city-sightseeing trips. They are price-sensitive with a lower income level or other preferences and less willing to pay for the add-on services onboard. Flying has developed to be a daily commodity like going by bus.^[2] On the other side nowadays even business travelers use low cost carriers like Ryanair to save travel expenses. An increasing part of the customers purchase their flight tickets either on the airline’s website on their own rather than they authorize travel agency to book for them.

2.3 Analysis of the external environment

As long as the European political situation stays stable and the economy continues to grow, air traffic will increase simultaneous with a high rate of 7% – meanwhile the purchasing power is good and people want to spend their money. Additionally, people become more price-conscious in their consumption, which increases competition in the market, whereof Ryanair as a cost-effective operator profits from. Furthermore Ryanair uses the Internet as new technological advancement to reduce its distribution costs.^[3] Besides the proceeding liberalization of the aviation market, the Europeans become environmentally conscious, thus the European Commission counteracts by integrating the airlines flying in or to Europe into the existing EU-ETS^[4]. However, this measurement would decelerate its economic growth and lead to higher ticket prices. Indeed, the sustained high level of the oil price is the biggest cost factor of an airline, but Ryanair with its much better and more effective cost structure can compensate this fact in competition to other airlines.

3 SWOT Analysis

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Source: Datamonitor 2007, pp.21-25.

Ryanair has an exceptional capability of optimizing their production cost efficiency and therefore maintains the leading position among the European low cost carriers. The only weakness that has to be stressed out is its concentration on small regional airports, which may result in a reduced ability to be a focus for certain customer groups. However, this can be interpreted as strength as well because the focus on secondary airports leads to minimized landing and ground fees and avoids direct competition with big network carriers.

Ryanair profits from several opportunities on the market – further EU-enlargement on the one hand creates the opportunity to expand in new market. The fact that the low cost concept has not be established constantly on long haul routes, gives Ryanair the chance to demonstrate its ability to go new ways. However, the airline is always threatened by a rise in fuel prices and the general dependence of the airline industry on the economic cycle, but keeping its good cost structure and pursuing an elaborate fuel risk management could limit the threats in competition.

4 Marketing Goal and Objectives

The outcome of the situation and SWOT analyses points to the following marketing goal and objectives for Ryanair’s low cost flights:

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^[1] Visiting friends and relatives are so-called VFR-travelers

^[2] Beside the growing demand for air travel generated by a ulation, falling ticket prices and an increasing customer acceptance for flying create more demand for air travel (Mercer growing pop 2002)

^[3] Over 90% of all seats on Ryanair flights are sold over the Internet, making Ryanair one of Europe’s biggest Internet retailers (Binggeli & Pompeo 2002, p.89).

^[4] EU-ETS (=EU Emission Trading System)