‘The worst sort of business is one that grows rapidly,
requires signifi cant capital to engender the growth, and
then earns little or no money. Think airlines. Here a
durable competitive advantage has proven elusive ever
since the days of the Wright Brothers. Indeed, if a farsighted
capitalist had been present at Kitty Hawk, he
would have done his successors a huge favour by shooting
Orville down.’
Warren Buffett, annual letter to
Berkshire Hathaway shareholders, February 2008
While the words of Warren Buffett were generally true,
as airlines had seen no economic profi t over a 40-year
period to 2012, there were exceptions. Most noteworthy was
Ryanair, the Irish budget airline, which had been consistently
reporting earnings in excess of 20%. With 76 million
passengers in 2012, Ryanair nominated itself as the world’s
favourite airline, since it carried more international
passengers than any other airline.
The question was whether Ryanair could continue to
defy industry trends that had caused so much distress to its
competitors. In January 2010, CEO Michael O’Leary had
observed: ‘ The environment is, from Ryanair’s perspective,
great, because it is awful. We’re doing remarkably well
because this is the time when the lowest-cost producer wins.’
Would this still continue to be the case?
Overview of Ryanair
As of July 2012, Ryanair ran more than 1,500 fl ights per
day from 51 bases on 1,500 routes across 28 European
CASE STUDY
Ryanair: the low-fares airline – future directions?
Eleanor O’Higgins
Ryanair, the first and largest budget airline in Europe, has enjoyed remarkable growth and success. However,
are Ryanair’s strategic business model and its implementation robust enough to withstand the challenges it
faces in its environment, notably economic recession and uncertainty about fuel prices? The case illustrates
how to analyse and deploy internal resources and capabilities to add perceived value to customers, thereby
delivering sustainable strategic advantage. It also explores the difficulties that hamper achieving and retaining
such advant age. The reader is invited to devise and evaluate strategic options for Ryanair, including elements
of corporate strategy in relation to its attempts to take over Aer Lingus, the Irish national carrier.
? ? ?
??