Low-cost Carrier and Ryanair’s Strategy Essay

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Ryanair
To what extent can Ryanair’s existing strategy continue to deliver sustained financial performance? Your answer should refer to relevant strategy theories to explain Ryanair’s strategy and its limits and to the company’s financial performance, using the data provided.

Ryanair is a Irish low cost airline, its objective is to firmly establish itself as Europe’s leading low fares scheduled passenger airline through continued improvements and expaned offerings of its low fares service. According to Ryanair’s current strategy document, the key elements of Ryanair’s strategy are low fares, frequent fights on short haul routes, taking advantage of the internet, low operating cost and commitiment to safty and quality maintenance.

Ryanair’s strategy can be explained through Porter’s generic strategies which include three main types of strategy, differentiation, cost forcused and niche. Obviously, Ryanair’s strategy is cost focused. Table 4 and table 11 shows that the total costs of Ryanair in 2008 was around 2.1 million, which occupied small percentage of its total revenue. While the total cost of British Airway occupied almost 80 percent of its total revenue in the same year. This can also can explain the huge differences in the price of average tickets between Rynaire and British Airways, which can be shown on table 8 that Ryanair’s average fare was 44 Euros in 2007 while BA’s fare was 324 Euros.

Porter’s five forces theory is useful in a discussion of Ryanair because it looks at how influences affect competing companies within an industry. As customers’ purchase decisions are made on the basis of price in this kind of market, Ryanair’s low cost strategy attract more customer than its competitors. This can be shown by Ryanair’s flown passenger load factor table. From 2006 to 2010, the load factor of Ryanair were remained above 80 percent which is higher than other competitors’ load factor. Regarding to power of suppliers, it could directly have a huge influences on Ryanair’s operating profit. As data shows on table 1, the opertating profits of Raynair increased stably from 2001 to 2008, however, in 2009, it suddenly reduced from 537 million Euros in 2008 to 93 million Euros. This is because the average fuel cost dramatically increased from 1.67 Euros per
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