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Case 2-2: Ryanair-The W h i th e r N o w ? *· Airline:

Low Fares

"There is only one thing in thew rid worse than being talked about, and tha t is not being talked about," declared Lord Charles in Oscar Wilde's novel, 71,e Picture of Dorian Gray. This could have been the mantra of budget airlin Ryanair, Europe's largest carrier by pa enger numbers and market capitalization in 2010. The airline was given to making contro­ versial news, whether it was annoying the Queen of Spain by using her picture without permi ion in marketing material or annow,cing plans to charge passengers to use toilets on its flight or engaging in high-profil battles with the European Commi sion. Ryanair also made new with its achievements, such as winning international awards, like Best Managed Airline, or receiving a 2009 Ff-ArcelorMittal Boldness in Bu iness Award in the Drivers of Change category. This award announcement said that Ryanair had "changed the airline business outside orth America-driving the way th industry perates through its pricing, the de tination it flies to and the passenger numbers it carries."1 Ryanair had been the budget airline pioneer in Europe, rigorously following a low-cost trategy. ft had enjoyed remarkable growth and in the five years to 2009, was the most profitable airline in the world, according to Air Transport magazine.

De pite this apparent success, Ryanair faced i sues. The most pressing, shared by all airlines, was an industry that was "structurally ick'' and "in intensive care,"2 with plunging demand in the global economic recession and un­ certainty about oil prices. What strategy should Ryanair use to weather this storm? Would the crisis produce a long-term change in industry structure? Could Ryanair take advan­ tage of the situation as it had in the past, by growing when others were cutting back? A predicament of its own making wa Ryanair's 29.8 percent shareholding in Aer Lingus, the Irish national carrier, following an abortive takeover at­ tempt. Aer Lingus's flagging share price had necessitated drastic write-downs, which had dragged Ryanair's results into losses in 2009, the first since its flotation 12 years earlier.

Overview of Ryanair

In 2010, Ryanair had 44 bases and 1,200-plus routes across 27 countries, connecting 160 destinations. It operated a

~i _case was written by Eleanor O'Higgins, University College blin. It is intended to be used as a basis for class discussion

ti\lher than to illustrate effective or ineffective handling of a lllanagement situation.

t Blcan r O'Higgins, 2011. All rights reserved.

fleet of 256 new Boeing 737-800 aircraft with firm orders for a further 64 aircraft to be delivered over the following two years. lt employed 8,100-plus people and had carried almost 67 million passengers in 2010, expecting to ca rry approximately 73.5 million passengers f r fi cal 2011.

Ryanair was founded in 1985 by the Tony Ryan fa~ily to provide scheduled pa senger ervices b tween lreland and the United Kingdom, as an alternative to then­ state .monopoly airline Aer Lingus. Initially, Ryanair was a full-service conventional airline, with tw classes of seat­ ing, leasing three different type of aircraft. Despite growth in passenger volumes, by the end of 1990, the company had flown through mucl1 turbulence, disposing of five chief ex­ ecutives and accumulating losses of IR£20 milli n. Its fight to survive in the early 19 Os saw the airline transform itself to become Europe's first low-fare, no-frills carrier, built on the model of Southwest Airlines, the successful Texas­ based p rat r. A new management tea m, led ·by Michael O'Leary, then a r luctant recruit, was appointed. Ryanair, floated on the Dublin Stock Excl1ange in 1997, i quoted on the Dublin and London Stock exchanges and on NASDAQ, wher it was admitted to the ASDAQ-100 in 2002.

Mixed Fortunes

Mixed Results

Ryanair designated itself as the "World's Favourite Airline" on the basis that, in 2010, IATA rnnked it as the world's largest international airline by passenger numbers­ despite the fact that it had already been calling itself the world's favorite airline for a number of years. It wa now the eighth-large t airline in the world (when the large U.S. carriers' dome tic traffic is included) . Over .the following five year , Ryanair intended to grow to become the second­ largest airline in the world, ranked only behind its mentor Southwest.

Releasing Ryanair's 2010 results in June 2010, O'Leary announced, "We can be proud of delivering a 200 percent in­ crease in profits and traffic growth during a global recession when many of our competitors have announced losses or cutbacks, whil more have gone bankrupt." Revenues had risen 2 percent to €2,988 million, as fares fell 13 percent to €34.95. Unit costs fell 19 percent due to lower fu I c sts and rigor u cost control. Fuel costs declined 29 percent as oil prices fell from $104 to $62 p r barrel. Fuel hedging wa ex­ tended to 90 percent for full year 2011, 50 percent for quarter 1

PC 2-18 Business-Level Strategies

and 20 percent of quarter 2 of 2012. Airport and handling costs declined by 9 percent, despite price increases at Dublin and Stansted, two of Ryanair':, busiest bases. Ancillary sales grew 11 percent to €664 million, slightly lower than traffic growth and con tituting 22 percent of t tal revenues. The balance sheet had trengthened with a cash rise of €535 mil­ Ji n to €2.8 billion. According to the airline, currency hedg­ ing had locked in the cost of aircraft purchases in 2010-2011.

The full-year 2010 improvement in profit had fol~ lowed a particularly mi ·erable 2009, when Ryanair plunged to a €180 million loss, as its €144 million operat­ ing profit was eradicated by a €222 million write-down of its Aer Lingus hares and an ace 1 rated €51.6 million

depreciation charge. Excluding these exceptional charges, underlying profits fell 78 percent from €480.9 million to €'105 milli n. This was due largely to a surge in fuel price in the first half of fiscal 2009, as Ryanair failed to hedge when oil prices rose to $147 a barrel in July 2008. Then, bowing to shareholder pressure to cover against rocketing prices, it locked in fuel costs at $124 a barrel for 80 percent of its consumption during the third quarter-ju t as oi l pric era hed to a low of $33 a barrel during that period. Pass nger numbers rose 15 percent from 50.9 million to 58.5 million. Average fares fell 8 percent to €40. (Ryanair's financial data are given in Exhibits la and lb, and operat­ ing data are given in Exhibit 1c.)

Exhibit la Ryanair Consolidated Income Statement

Year end Year end Year end March 31, March 31, March 31,

2010 2009 2008

€M €M €000

Operating revenues Scheduled revenues . ... .... ................. ... ..... . .. .. . . ... ....... . ... . ...... .. 2,324.5 2,343.9 2,225.7 Ancillary r venues .. .......... ....... ..... .................. ........ . .. ..... .. .. . 663.6 598.1 488.1 Total operating revenues-continuing operations ....... ... , . ....... .. 2,988.1 2,942.0 2,713.8

Operating expen es Sta(f co ts .... .. .... ... .... ... .. ..... ....... .. .. . ...... ... ... ... ...... .. .. .. ... .. . (335.0) (309.3) (285.3) Depreciation .... . .... .. ... .... ..... .... .... ... ... ... .. ..... .... ..... .... . .. .... .. (235.4) (256.1) (176.0) Fuel and oil ...... ... ..... . . ........ .. .... .... ... . .... ... ... . , ........ ........... . (893.9) (1,257.1) (791.3) Maintenance, materials, and repairs ............ .. .... .. , ... .. . ... ...... . . (86.0) (66.8) (56.7) Marketing and distribution co ts .... ..... ... .... . . , .. ...... . ... ......... .. (144.8) (12.8) (17.2) Aircraft rentals .................... ... .... .. ... .... ... ..... ....... ........ .. .... . (95.5) (78.2) (72.7) Route charg .. ... ..... .... .. ..... .... .. ... ... .. .. ..... ...... .. .... .. .... .. .... . (336.3) (286.6) (259.3) Airport and handling charg ... ... .. .... .. ... ................ ......... .... . (459.1) (443.4) (396.3) Other ... .. .. ... ....... .. ... .... .. ..... ..... . .. ... .. .. .. .... ...... .... .. ... ... .. .... . -· ~ ~

Tota l operat.ing expenses ....... ... .... ........ ........ ... .. .. .... .. . ........ .. (2,586.0) (2,849.3) (2,176.8)

Operating profit-continuing operations ......... .... ........ ..... ... .. . .. 402.1 92.6 537.1

Other income/ (expenses) Finance income .. ... ...... .... .. .. .... .. .. .... .... .. ........ ... ... ... ... ... .. .. . 23.5 75.5 83.9 Finance expense ..... ........ ... . ...... .. ... .. ...... .. .... ... ... .. .. ... ..... . .. (72.1) (130.5) (97.1) Foreign exchange gain / (lo es) ... .. .. .... ... ... . ......... ... ...... . .. .. . (1.0) 4.4 (5.6) Loss n impairment of available-for-sa.le financici l asset .... ..... ... . (13.5) (222.5) (91.6) Gain on disposal of property, plant and equipment ... .... .. .. ..... . . 2.0 12.2

Total other income / (expenses) ............ .. . ... .. ....... ........ .. .. .... .. (61.1) (273.1) (98.2)

Profit / (Loss) / before tax ..... ... .... ..... ................. .... ... . ... .... ... .. 341.0 (180.5) 438.9 Tax on profit/ (loss) on ordinary activities .......... .... ... ......... .. . (35.7) 11.3 (48.2)

Profit/ (Loss) for the year - all attributable to equity holders of parent ... .... ..... . ......... .... ....... .. .. .. ... .... ...... . 305.3 (169.2) 390.7

Basic earnings per ordinary share (eurocents) ... .. . ....... .. .... ...... .. . 20.68 (11.44) 25.84 Diluted earnings per ordinary share (eurocents) .... .. ... .. .. .. ...... ... . 20.60 (11.44) 25.62 Number of ordinary shar (in 000s) ...... .. ............... .... ....... . .. .. .. 1,476.4 1,478.5 1,512.0 Number of diluted shares (in 000s) ..................... .... .. . . .. .......... . 1,481.7 1,478.5 1,524.9

•consolidated with Marketing & Distribution in 2010

Source: Ryanair Annual Report 2010.

nal charges, 9 million to n fuel prices ed to hedge 2008. Then,

1st rocketing ::ir 80 percent ·-just as oil ; that period. 1.9 million to l0. (Ryanair's 1, and operat-

uend .rch 31, wos moo

2,225.7 488.1

2,713.8

(285.3) (176.0) (791.3)

(56.7) (17.2) (72.7)

(259.3) (396.3) (122.0)

(2,176.8)

537.l

83.9 (97.1)

(5.6) (91.6)

~ ~ 438.9 (48.2)

390.7 25.84

25.62 1512.0 i'.s24.9

Case 2-2: Ryanair-The Low Fares Airline: Whither Now? PC 2-19

Exhibit lb Ryanair Consolidated Balance Sheet

Non-current assets Property, plant, and equipment ................................. . Intangible assets .... ........... .... .. .............. . ............ ... . . Available for sale financial assets ........ .... .......... ......... . Derivative financial instruments ... ... ......... ... . .... ......... .

Total non-cun-ent assets ............. . ... ...... . ........... .. .. ...... .

Current assets Inventories .... ..................... ................................... . Other assets ........................... ................................ . Current tax ...................... ...... .... , ................. . ....... . . Trade receivables ..................... . ..... .............. ... ....... . Derivative financial instruments ................................ . Restricted cash ..... ............... . .. ........ .... ................... . Financial assets: cash > 3 months ... .. ... .... . ..... .. ........ . .. Cash and cash equivalents .. .... .. ................. .. ....... .. .. . .

Total current assets ................. , ... ............. ... ........ ...... .

Total assets ............................ ..... , ....... ..... .. .............. .

Current liabilities Trade payables ............................... .. ............ .. , ...... . Accrued expenses and other liabilities .... ........ .. ..... .... . Current maturities of debt .................. .... ... . .. ..... .... .. . Current tax ...................................... ... . .. .. .... .. . .. .. .. . Derivative financial instruments ..... ..... ....... ... .... ...... .. .

Total current liabilities .. ......... . ............ ..................... .

Non-current liabilities Provisions ........... ................ ....... ...... ... ........ .. ....... . . Derivative financial instruments .......... ............ ..... .... . Deferred tax .... ................... . ............. ..................... . Other creditors ..... .......... .. ... ... ............ ..... ... .......... . . Non-current maturities of debt ... .. ....... . , ................... .

Total non-cu1Tent liabilities ........... . .. .... ... .. .... .... .. ..... . .

Shareholders' equity Issued share capital ........... .. .............. ........ ... .......... . Share premium account ....................... ................. ... . Capital redemption reserve ................. .... ................. . Retained earnings .................. .. ......... ........... .......... . Other reserves .................................. .. ................... .

Shareholders' equity ............................. ... ... .... ... .... ... .

Total liabilities and shareholders' equity .. ... .. ..... .... ... ... .

Source: Ryanair Annual Report 2010.

March 31, 2010

€M

4,314.2 46.8

116.2 22.8

4,500.0

2.5 80.6

44.3 122.6

67.8 1,267.7 1,477.9

3,063.4

7,563.4

154.0 1,088.2

265.5 0.9

41.0

1,549.6

102.9 35.4

199.6 136.6

2,690.7

3,165.2

9.4 631.9

0.5 2,083.5

123.3

2,848.6

7,563.4

March 31, 2009

€M

3,644.8 46.8 93.2 60.0

3,844.8

2.1 91.0

41.8 130.0 291.6 403.4

1,583.2

2,543.1

6,387.9

132.7 905.8 202.9

0.4 137.4

1,379.2

72.0 54.1

155.5 106.5

2,195.5

2,583.6

9.4 617.4

0.5 1,777.7

20.1

2,425.1

6,387.9

Ancillary Revenues

~Yanair provides various ancillary services connected with ts airline service, including in-flight beverage, food, and :erch~ndise sales and Internet-related services. Ryanair

80 distributes accommodation, travel insurance, and

car rentals through its Web site. Providing these services through the Internet enables Ryanair to increase sales wpile reqµcing unit costs. In 2010, Ryanair's Web site ranked 12th by number of visits for e-tailers in the United Kingdom (behind EasyJet, which ranked 10th). Ancillary

PC 2-20 Business-Level Strategies

Exhibit le Ryanair Selected Operating Data

2010

Average Yield per Revenue Passenger Mile ("RPM") (€) .... .... .... .... ......... .... 0.052

Average Yield per Available Seat Miles ("ASM") (€) ............... ........ 0.043

Average Fuel Cost per U.S. Gallon(€) .... .... .............. ... ... .. ...... .. 1.515

Cost per ASM (CASM) (€) ... .. ........... .. . 0.047

Breakeven Load Factor ........................ 73%

Operating Margin ..................... ..... ... . 13%

Average Booked Passenger Fare(€) ..... ..................... ...... .. ........ 34.95

Ancillary Revenue per Booked Passenger(€) ...... ... .......... .... 9.98

Other Data

2010

Revenue Passengers Booked ................................ .......... 66,503,999

Revenue Passenger Miles ........ .. ........... 44,841

Available Seat Miles ........... . ... .... ..... ... 53,470

Booked Passenger Load Factor .. ......................... .... .. .......... 82%

Average Length of Passenger Haul (miles) ............ .. .. ..... ...... ... .. .. . 661

Sectors Flown ......................... .... . ...... 427,900

Number of Airports Served .. . ... . .. .. .. .. ... 153

Average Daily Flight Hour Utilization (hours) ............ .. ........ .. ... 8.89

Employees at Period End ..... .... ... .. .. .. ... 7,168

Employees per Aircraft ....... ..... ......... ... 31

Booked Passengers per Employee .................. .. . .. . .......... 9,253

Source: Ryanair Annual Report 2010

services accounted for 22 percent of Ryanair's total op­ erating revenues, compared with 20.3 percent in 2009. However, it might be that ancillary revenue generation could have its limits, as they had, in fact, dropped from €10.20 in 2009 to €9.98 per passenger in 2010.

Ancillary revenue initiatives were constantly being introduced by Ryanair, such as onboard and online gam­ bling and a trial in-flight mobile phone service in 2009. A poll of Fi11a11cial Times' readers had produced a 72 percent negative response to the question, "Should mobile phones be allowed n aircraft?" Among the comments was "Just another reason not to fly Ryanair."5 However, O'Leary

2009 2008 2007

0.060 0.065 0.070

0.050 0.054 0.059

2.351 1.674 1.826

0.058 0.051 0.054

79% 79% 77%

5% 20% 21%

40.02 43.70 44.10

10.21 9.58 8.52

2009 2008 2007

58,565,663 50,931,723 42,509,112

39,202 34,452 26,943

47,102 41,342 32,043

81% 82% 82%

654 662 621

380,915 330,598 272,889

143 147 123

9.59 9.87 9.77

6,616 5,920 4,462

36 36: 34

8,852 8,603 9,527

declared, "If you want a quiet flight, use another airline, Ryanair is noisy, full, and we are always trying to sell you something."6 In March 2010, despite a promising trial on 50 aircraft, Ryanair announced the suspension of its on board telephone service due to a failure to reach an agre ment with the Swiss provider, OnAir, on a plan to roll 011

the service to Ryanair's entire fleet.

1 Ryanair was the first airline to introduce charg • · 1· s ha\' for check-in luggage. Virtually all budget air ine

followed suit, as they have with other Ryanair initiatl\' It has continued to find ways of charging pa se~s: for services once considered intrinsic to an airline tic

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Case 2-2: Ryanair-The Low Fares Airline: Whither Now? PC 2-21

Passengers were charged extra for checking in at the airport rather than online (which also incurs a charge), al­ though those with hold luggage did not have the option of checking in online. While avoiding pre-assigned seats, an extra charge procures "priority boarding." Interestingly, Aer Lingus took up a similar idea by enabling passengers to book seats online for a charge of €5.

Some of Ryanair's revenue-generating ideas have provoked controversy-and publicity. One of the most talked about was its intention to charge passengers a £1 charge to use the lavatory by installing a coin slot on its aircraft. While it has not implemented this concept, (it may contravene security rules), the idea generated much pub­ licity. Another idea mooted by Ryanair was a "fat tax" for overweight passengers. (In fact, several U.S. airlines already require obese passengers who spill over into neighboring seats to buy a second seat.) In an online poll of more than 30,000 respondents, the fat tax idea was approved by one in three. However, the airline later announced that it would not implement the surcharge because it could not collect it without disrupting its 25-minute turnarounds and online check-in process. The same online poll, supposedly to gen­ erate ideas for additional revenue, also gained 25 percent approval for a €1 levy to use onboard toilet paper with O'Leary's face on it.

Investor Perspectives

,Since its flotation in 1996, Ryanair had never declared or paid dividends on its shares. Instead, Ryanair retained its earnings to fund its business operations, including lhe acquisition of additional aircraft required for entry into new markets, expansion of its existing services, and routine replacements of its fleet. However, thanks lo a healthy balance sheet and the suspension of its aircraft-buying program when negotiations with Boeing broke down, the no-dividend policy changed in 2010. 1I'he company declared a special €500 million dividend With the possibility of a further similar dividend in 2013. Previously, its healthy cash position had caused the com­ pany to seek alternative ways of improving the liquidity 8hd marketability of its stock through a series of share b~y-backs of the equivalent of about 1.2 percent of the is- SUl\d share capital between 2006 and 2009. Ryanair shares reached a high of €6.30 in April 2007 and plummeted to €1,97 in October 2008 as global equity markets were reel­ l9g, By mid-2009, the shares were trading in the €3.20 ~Q €3.40 range, with an expected medium term target of ,~·20, based on expected earnings and a PE ratio of 13. ; Tttid-2009, its rival EasyJet shares had a PE ratio of 29. ¥~nair had often underperformed other budget airline

peers on its PE ratio. However, this offered an upside potential for capital gains, according to Davy, the com­ pany's stockbrokers.

'

Ryanair's Operations

O'Leary said, "Any fool can sell low airfares and lose money. The difficult bit is to sell the lowest airfares and ~ake profits. If you don't make profits, you can't lower your airfares or reward your people or invest in new aircraft or take. on the really big airlines like BA (British Airways) and Lufthansa."7 Certainly, Ryanair had stuck closely to the low-cost/low-fares model. Ever-decreasing costs was its theme, as it constantly adapted its model to the European arena and changing conditions. In this re­ spect, Ryanair differed in its application of the Southwest Airlines budget airline prototype and its main European ri­ val, EasyJet, as they were not as frill-cutting. One observer described the difference between EasyJet and Ryanair: "EasyJet, you understand is classy cheap, rather than just plain cheap."8

The Ryanair Fleet

Ryanair continued its fleet commonality policy, using Boeing 737 planes, to maintain staff training and aircraft maintenance costs as low as possible. Over the years, it purchased new, more environmentally friendly aircraft, reducing the average age of its aircraft to 3.3 years, among the youngest fleets in Europe. The newer aircraft produced 50 percent less emissions, 45 percent less fuel burn, and 45 percent lower noise emissions per seat. Winglet modifica­ tion provided better performance and a 2 percent reduction in fleet fuel consumption, a saving the company believed could be improved. Despite larger seat capacity, new air­ craft did not require more crew. In 2009, in aircraft buying mode, Ryanair sought to repeat its 2002 coup when it placed aircraft orders at the bottom of the market. However, in late 2009, talks with Boeing for the purchase of 200 aircraft be­ tween 2013 and 2015 broke down. Notwithstanding strict adherence to Boeing 737 planes, in an attempt to extract ever greater disco\mts from Boeing, Ryanair invited Airbus, the European aircraft manufacturer, to enter into prelimi­ nary bidding for a multimillion-dollar order for 200-plus short-haul aircraft. However, Airbus rebuffed the Ryanair invitation, declaring this sales campaign would be too expensive and time consuming. Yet Ryanair hinted that it had an interest in Airbus's new generation of fuel-efficient aircraft and, moreover, that it had the economies of scale to run a mixed fleet between Boeing and Airbus models.

PC 2-22 Business-Level Strategies

Staff Costs and Productivity

Ryanair refuses to recognize trade unions and negotiates with Employee Representative Committees (ERCs). Its 2010 employee count of 7,032 people, composed of more than 25 different nationalities, had doubled over the previous three years. This was accounted for almost entirely by flight and cabin crew to service expansion. Ryanair's employees earned productivity-based incentive payments, consisting of 39 percent and 37 percent of total pay for cabin crew and pilots respectively. By tailoring rosters, the carrier maxi­ mized productivity and time off for crew members, com­ plying with EU regulations that impose a ceiling on pilot flying hours to prevent dangerous fatigue . Its passenger­ per-employee ratio of 9,457 was the highest in the industry. After a series of pay increases for cabin staff and pilots, in late 2009, staff agreed to a one-year pay freeze .

Passenger Service Costs

Ryanair pioneered cost-cutting/yield-enhancing measures for passenger check-in and luggage handling. One was pri­ ority boarding and Web-based check-in. More than half of its passengers availed of this, thus saving on check-in staff, airport facilities, and time. Charging for check-in bags en­ couraged passengers to travel with fewer and, if possible, zero check-in luggage, thus saving on costs and enhancing speed. Before Ryanair began to charge for checked-in bags, 80 percent of passengers were traveling with checked-in luggage; two years later this had fallen to 30 percent of passengers. From October 2009, it adopted a 100 percent Web check-in policy, enabling a reduction in staff numbers, calculated to save €50 million per year. Ryanair claims that "passengers love Web checkin. Never again will they have to arrive early at an airport to waste time i~ a useless check­ in queue. As more passengers travel with carry-on luggage only, they are delighted to discover that they will never again waste valuable time at arrival baggage carousels either. These measures allow Ryanair to save our passen­ gers valuable time, as well as lots of."9 A natural next step announced by Ryanair was a move to 100 percent carry-on luggage. Additional bags would be brought by passengers to the boarding gate, where they would be placed it in the hold and returned as passengers deplane on arrival. These efficiencies would allow more efficient airport terminals to be developed without expensive check-in desks, bag­ gage halls, or computerized baggage systems "and enable Ryanair to make flying even cheaper, easier and much more fun again," claimed the company.10 The feasibility of the proposals to require passengers to carry hold baggage through security to the aircraft was yet to be tested.

Airport Charges and Route Policy

Consistent with the budget airline model, Ryanair's routes were point-to-point only. This reduced airport charges by avoiding congested main airports, choosing second­ ary and regional destinations, eager to increase passen­ ger throughput. Usually these airports were significantly further from the city centers they served than the main airports, "from nowhere to nowhere" in the words of Sir Stelios Haji-Ioannou, founder of EasyJet, Ryanair's biggest competitor.11 Ryanair uses Frankfurt Hahn, 123 kilome­ ters from Frankfurt; Torp, 100 kilometers from Oslo; and Charleroi, 60 ·kilometers from Brussels. In December 2003, the Advertising Standards Authority rebuked Ryanair and upheld a misleading advertising complaint against it for attaching "Lyon" to its advertisements for flights to St Etienne. A passenger had turned up at Lyon Airport, only to discover that her flight was leaving from St Etienne, 75 kilometers away.

Ryanair continued to protest at charges and condi­ tions at some airports, especially Stansted and Dublin, two of its main hubs. The airline was "deeply concerned by continued understaffing of security at Stansted which led to repeated passenger and flight delays ... management of Stansted security is inept, and BAA has again proven that it is incapable of providing adequate or appropri­ ate security services at Stansted. This shambles again highlights that BAA is an inefficient, incompetent airport monopoly."12 When BAA appealed its break-up, ordered by the UK Competition Commission in 2009, Ryanair se­ cured the right to intervene in the appeal in support of the Commission and later applauded the loss of the appeal by BAA. Meanwhile, Ryanair bemoaned a €10 tourist tax be­ ing levied in Ireland, along with a 40 percent price increase at Dublin Airport, largely to pay for a second terminal costing €1.2 billion, initially commissioned in the heyday of the Irish Celtic Tiger and derided by Ryanair as a white' elephant. Ryanair acted against Dublin and various UK airports by cutting its capacity and shifting its aircraft to countries, such as Spain, with cheaper airports and lower or nonexistent passenger taxes.

Marketing Strategy

Following the introduction of its Internet-based reservA· tions and ticketing service, enabling passengers to make reservations and purchase tickets directly through the We~ site, Ryanair's reliance on travel agents had been elirn1•

nated. It had promoted its Web site heavily through news· paper, radio, and television advertising. As a result, Internet bookings accounted for 99 percent of all reservations.

1ir's routes 1rt charges :i.g second­ tse passen­ ignificantly n the main rords of Sir tir's biggest l23 kilome­ Cl Oslo; and ember 2003, Ryanair and gainst it for lights to St \.irport, only , St Etienne,

, and condi­ Dublin, two

oncerned by ~d which led 'management :1.gain proven or appropri­ tmbles again Jetent airport <-up, ordered ~, Ryanair se­ mpport of the the appeal by; tourist tax be­ price increase cond terminal in the heyday n.air as a white d various U.I< , its aircraft to , orts and lower,

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d been elil"fll' la ~ , through new t a result, Jnterne

1ervation5·

Case 2-2: Ryanair-The Low Fares Airline: Whither Now? PC 2-23

Ryanair minimized its marketing and advertising costs, relying on free publicity, by its own admission, "through controversial and topical advertising, press con­ ferences and publicity stunts." Other marketing activities include distribution of advertising and promotional ma­ terial and cooperative advertising campaigns witl:t other travel-related entities and local tourist boards.

As referred to earlier, one of Ryanair's public­ ity stunts was its unauthorized use of a photograph of Spanish Queen Sofia after she took a £13 flight from Santander Northern Spain to London. When it incurred the Queen's displeasure, Ryanair apologized and prom­ ised to donate €5000 to a charity of her choice. In another instance of controversy over using pictures of the rich and famous, in 2008, Ryanair was forced to pay a fine of €60,000 to President Sarkozy of France and his Italian bride, Carla Bruni, for using their images with the slogan, "With Ryanair, all my family can come to my wedding." It also used the face of Spanish Prime Minister Zapatero in an advertisement depicting him supposedly musing over its offers.