International Business Case Study

Ryanair

Table of Contents

AIRLINE INDUSTRY ANALYSIS 3 RYANAIR’S HISTORY AND BACKGROUND 4 FINANCIAL PERFORMANCE 6 STRATEGY 7 Current Strategy 7 Responding to Market Challenges 7 Future Strategy 7 COMPETITION 8 easyJet 8 Lufthansa 8 Air France 8 British Airways (*) 9 Aer Lingus (*) 9 Iberia (*) 9 Ryanair versus its competitors 10 RISKS FACED BY RYANAIR 11 Changes in Fares and Costs 11 Acceptance of Low-cost Airlines 11 European Union and the ‘Brexit’ Referendum 11 Environmental Risks 11 Regulatory Authorities 11 CORPORATE SOCIAL RESPONSIBILITY 12 Labour Management and Social 12 Corporate Governance 12 Appendix 1: Company timeline 14 Appendix 2: Article from The Guardian, February 2016 17 Appendix 3: Extracts from Ryanair’s Annual Report 2016 18 Appendix 4: Article from The Guardian, May 2014 21

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According to the International Airline Transport Authority (IATA), customers were forecast to spend at least 1% of the world GDP on air transport in the year 2016. It forecast that air passenger numbers would double to seven billion by 2034. At the same time, customers will demand a more personalised self- service experience that uses technology fully and thus makes the customer experience seamless, efficient and hassle-free. The target is to offer at least 80% of passengers fast travel complaint procedures by 2020; however, there have been some challenges, as modern technology is more advanced in some countries than in others.

Flying safety is still the number one priority in the industry despite a number of incidents that have cast a shadow on the industry’s safety performance. The industry has reacted to these events by increasing security measures that include airline tracking following the disappearance of a number of aircraft and safety audits aimed at preventing terrorist attacks. The result was a drop in the number of fatal accidents from twelve in 2014 to four in 2015.

Environmental awareness is also a fundamental issue with tackling carbon emissions at the top of the agenda. Flights generate noise and air pollution and therefore, a number of standards and targets have been set as a way of preventing any further damage to the environment. This has resulted in the introduction of environmental management systems and assessments that include the Fuel Reporting & Emissions Database (FRED) and the Environmental Noise Directive (END) among others.

Regulations have also increased. While regulations are viewed as ‘stifling’ creativity, the IATA believes that poorly constructed and inefficiently enforced regulations increase the cost of doing business while reducing efficiency. Regulations that include passenger rights, dealing with unruly passengers, airline liability in the case of death, fairer airport charges and appropriate taxation levels have been introduced.

Economic development worldwide is getting a significant boost from air transport. This wider economic benefit is generated by increasing connections between cities - enabling the flow of goods, people, capital, technology and ideas and falling air transport costs. The number of unique city-pair connections was expected to reach more than 18,000 in 2016, double the connectivity by air twenty years ago. The price of air transport for users continues to fall, after adjusting for inflation. Compared to twenty years ago, real transport costs have more than halved.

Governments have also gained substantially from the good performance of the airline industry. Airlines and their customers were forecast to generate $118 billion in tax revenues in 2016. Growth in employment was strong in 2015. Airlines are expecting to continue the strong pace of hiring in 2017, with an estimate that total employment by airlines would reach 2.61 million in 2016, a gain of almost 3% compared to 2015.

An analysis of regional performance shows that in 2016, North American Airlines performed better than any other Airline in the world with a forecast 10.8% post-tax profit margin. Africa was the weakest with a loss of 3.5%. Break-even load factors are highest in Europe, caused by low yields due to the competitive open aviation area, and high regulatory costs. Latin American airlines have faced a harsh environment, with weak home markets and currencies, despite a degree of consolidation and some long-haul success.

The following table shows a summary of the industrial economic performance of the aviation industry.

( AIRLINE INDUSTRY ANALYSIS )

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(Source: IATA Industry Forecast June 2016)

Ryanair is an ultra-low fare passenger airline that operates short-haul, point-to-point routes between Ireland, the UK, Continental Europe, Morocco and Israel. Incorporated on 28 November, 1984, Ryanair Limited pioneered a low-fares operating model in Europe based on a model pioneered by Southwest Airlines Co. in the United States. This was achieved by standardising its fleet by purchasing used Boeing 737-200A aircraft to replace substantially all of its leased aircraft. The company decided to adopt this strategy in 1994 and, by 1997, the company was listed on the stock market as Ryanair Holdings. Since that time, the company has grown into a worldwide airline with more than 2,000 routes across the world including an increase in the frequency of its principal European routes.

The number of booked passengers has since increased from approximately 4.9 million in 1999 to approximately 106.4 million in 2016. As of June 2016, it had a principal fleet of over 350 Boeing 737-800 aircraft serving approximately 200 airports with 2,000 scheduled short-haul flights per day. Furthermore, it expects to have approximately 546 aircraft in its operating fleet by March 2024.

For a timeline of the company’s existence, see Appendix 1.

The company’s low fare strategy is driven by allocating a majority of its seat inventory to lowest fare categories and a specific number of seats on each flight to other fare categories to accommodate projected demand for seats at each fare level. This is supplemented by the provision of ancillary services and other activities connected to its core air passengers service. These services include non-flight scheduled services, internet-related services, and the in-flight sale of beverages, food and merchandise. Ground service providers are also offered incentives to levy correct excess baggage charges for any baggage that exceeds the published baggage allowance. These charges are recorded as non-flight scheduled revenue.

In addition, Ryanair sells accommodation services and travel insurance through its website in collaboration with Booking.com and receives commission on any sales. It also sells bus, rail tickets, car parking, attractions, gift vouchers and activities onboard its aircraft and through its website. All these services are available through an Electronic Point of Sale (EPOS) device on board the aircraft.

In May 2009, it started to offer passengers the possibility of receiving an SMS (text message) when booking to inform them of their flight confirmation details. It also offers passengers the option to reserve seats with extra legroom and, in February 2014, it introduced fully allocated seating on each of its flights. These services require an extra fee to be paid. In the event a passenger does not wish to purchase an allocated seat, a random seat will be allocated during the booking process. In November 2013, the company launched a new website, which reduced the number of clicks to make a booking.

( Table 1: Economic Performance of Airline Industry )

These factors have contributed to the successful implementation of Ryanair’s strategy. The establishment of a single type of aircraft that saves on training costs, point-to-point flights with fast turn-around times and flights primarily to secondary airports that save on airport fees, have been key to this strategy.

In addition, the charismatic leadership of Michael O’Leary, the company’s CEO, drove the strategy with his innovative leadership style. Despite receiving a Businessman award from Fortune magazine and becoming wealthy through the sale of his five billion shares in Ryanair, he still lives ‘a modest life’. He introduced a low-cost culture among Ryanair’s workforce and this determines how it operates and conducts business. O’Leary persuaded Ryanair to adopt its strategy from Southwest Airlines and introduce charges for online check-in. He was also able to promote Ryanair by doing thought-provoking stunts and curious adverts, which always seem to attract the attention of the media.

This is not to say that Ryanair has not had some problems along the way. One of the main issues Ryanair has faced is that of bad publicity mainly due to its ‘bad customer service’. In January 2015, the budget airline was fined by the Italian competition watchdog AGCM, ‘following a flood of complaints received from passengers over its premium rate customer service phone lines’ (The Telegraph, 23 January 2015). This came after a similar fine had been issued in February 2014, where the airline was fined €850,000 (£635,000) for the ‘lack of transparency in its travel insurance policies’ and the ‘obstacles created in case of refund’ during the online purchase of airline tickets. The airline was accused of not supplying adequate information or providing misleading information to consumers regarding travel insurance. In 2013, the airline was also fined £350,000 by the Italian competition watchdog Codacons for failing to provide a clear price at the very start of the booking procedure. (The Telegraph, 23 January 2015)

It has also faced bad publicity from its customers. Several websites have been created by customers to discuss and share their frustrations with the airline. These websites discuss problems that include being charged extra for baggage, Ryanair’s use of secondary airports, poor customer service and the lack of professionalism with its dealings. In February 2016, an investigation revealed that Ryanair, who is perceived by most as the airline offering the lowest seat prices, was found to be the most expensive when it came to on-board snacks, charging £2.34 for a bottle of water and £1.56 for a chocolate bar (kayak.co.uk).

In May 2016, Ryanair appointed Kenny Jacobs as Chief Marketing Officer by way of efforts to convince the public that the Irish airline’s customer service had changed. In addition to his appointment, which was viewed as necessary to help improve Ryanair’s reputation through his good reputation, Ryanair also made more efforts to improve how customers viewed it by starting mainstream advertising, and using its own media – like airports, aircraft and websites – to do a lot more communication. This was Ryanair’s reaction to the complaints it received that included a campaign by thousands of people on Facebook who supported a passenger complaining about being charged £236 to print four boarding passes. See Appendix 2.

In 2007, the company acquired 25.2% of Aer Lingus increasing it to 29.8% in 2009 at a total aggregate cost of €407.2 million. In 2006 and 2012, Ryanair made offers to acquire the entire share capital of Aer Lingus, but the European Commission on competition grounds prohibited both of these offers. The UK Competition Authority then investigated Ryanair’s minority stake in Aer Lingus from 2010 to 2013 and issued its decision in which it found that its shareholding ‘gave it the ability to exercise material influence over Aer Lingus’ and ‘had led or may be expected to lead to a substantial lessening of competition in the markets for air passenger services between Great Britain and Ireland’, and thus ordered Ryanair to reduce its shareholding in Aer Lingus to no more than 5% of Aer Lingus’ issued ordinary shares. On 19 June 2015, IAG issued a formal offer for Aer Lingus Group plc and in July 2015, the offer was accepted for cash consideration of €398.1 million.

€866.7 million in 2015. This increase of approximately 80% was primarily attributable to an increase in revenues of approximately 16% from €5,654.0 million to €6,535.8 million partially offset by an increase of approximately 10% in operating expenses from €4,611.1 million to €5,075.7 million.

( FINANCIAL PERFORMANCE )

Table 2: Financial Highlights

2016

€ m

2015

€ m Change

(Source: Ryanair 2016 Financial Reports)

Expanding passenger volumes and capacity, high load factors and aggressive cost containment have enabled Ryanair to continue to generate operating profits despite increasing price competition and increases in certain costs. In addition, in 2015 the company disposed of its 29.8% shareholding in Aer Lingus for €2.50 per share resulting in a gain of €317.5 million primarily due to the reclassification of unrealised gains from other comprehensive income and reserves to the income statement.

Ryanair generated an average booked passenger load factor of approximately 93% in 2016, compared to 88% in 2015, and average booked passenger fare of €46.67 per passenger in the 2016 year, down from

€47.05 in the prior year. The company has focused on maintaining low operating costs (€47.69 per passenger in the 2016 year, a decrease from €50.92 in 2015).

Table 3: Key Statistics

2016 2015 Change

(Source: Ryanair 2016 Financial Reports)

For more financial data, including exchange rates, see Appendix 3.

Ryanair’s objective is to firmly establish itself as Europe’s biggest scheduled passenger airline, through continued improvements and expanded offerings of its low-fares service. In the highly challenging current operating environment, the company seeks to continue offering low fares that generate increased passenger traffic while maintaining a continuous focus on cost containment and operating efficiencies.

According to Ryanair, the key elements of long-term strategy are:

1. Low fares

2. Customer Service

3. Low Operating Costs

Management believes that the company’s operating costs are among the lowest of any European scheduled passenger airline. Ryanair strives to reduce or control four of the primary expenses involved in running a major scheduled airline:

· aircraft equipment costs;

· personnel costs;

· customer service costs; and

· airport access and handling costs.

Apart from the three main elements of strategy (1-3) above, the company uses other factors to drive its strategy. One of these elements is taking advantage of the internet, which has seen the company introduce a new mobile app and increase the use of the internet for bookings. The company is also committed to quality and safety and it pride itself in its 31-year ‘accident-free’ history.

In recent periods, and with increased effect in 2012, 2013 and 2014, Ryanair’s low-fares business model faced substantial pressure due to significantly increased fuel costs and reduced economic growth (or economic contraction) in some of the economies in which it operates. The company has aimed to meet these challenges by:

· grounding aircraft during the winter season (approximately 40 in 2016, 50 in 2015, 70 in 2014 and 80 in 2013);

· disposing of aircraft (eight in 2014, none in 2015 and eleven in 2016);

· controlling labour and other costs, including through wage freezes for non-flight crew personnel, selective redundancies and the introduction of internet check-in;

· renegotiating contracts with existing suppliers, airports and handling companies.

Ryanair is implementing a series of strategic initiatives that are expected to have a significant impact on its customer service offering. It has introduced a series of customer-service related initiatives under the ‘Always Getting Better’ customer experience program, including a new, easier-to-navigate website with a fare finder facility, a mobile app, reduced penalty fees, allocated seating and more customer-friendly baggage allowances and change policies. It has also introduced several important products that improve its offer to customers. Family EXTRA offers families travelling with Ryanair a set of bundled ancillary discounts and 20% off a third booking. Business PLUS offers business travellers a flexible ticket, airport fast track and priority boarding. Leisure PLUS gives customers a discounted bundle of ancillaries including a 20kg bag allowance, priority boarding and a reserved seat. Ryanair Groups is a dedicated booking service designed for groups travelling together and this year Ryanair launched a new bonded travel service for school travel.

( STRATEGY )

easyJet is the other major European low fares airline in terms of passenger numbers, aircraft and revenue. It is larger than Ryanair by a small margin, but it is not as successful in making a profit as Ryanair. The company provides high frequency services on short-haul and medium-haul point-to-point routes within Europe from its three airport bases at easyland in London, Liverpool, and Geneva. It offers a simple no-frills service aimed generally at both the leisure and business travel markets at fares which are, on average, significantly below those offered by traditional full-service or ‘multi-product’ airlines. In addition, the company has airline hubs in over 16 airports and covers Europe, Middle East and North Africa with its flight destinations.

It is also considered as one of the first airlines to embrace the opportunity of the internet, having sold its first seat online in April 1998. Now approximately 95% of all seats are sold over the internet, making easyJet one of Europe’s biggest internet retailers. The company’s mission is to provide its customers with safe, good value, point-to-point air services, and to effect and offer a consistent and reliable product and fares appealing to leisure and business markets on a range of European routes.

In 2016 its total revenue was £4,669, marginally lower than £4,686 million in 2015. The company has over 9,800 employees, with passenger numbers reaching 73.1 million, driven by disciplined capacity growth.

The company has a market capitalisation of £3.66 billion as of 2016 with a return on shareholder’s funds of 30.50%. Its profit before tax for 2016 was £495 million, a 27.8% drop compared to £686 million in 2015.

Deutsche Lufthansa AG, commonly known as Lufthansa, is the largest German airline and, when combined with its subsidiaries, also the largest airline in Europe, both in terms of passengers carried and fleet size. It has over 600 aircraft, 55,255 employees and an average of 107.7 million passengers per year. The airline group operates a global route network of 297 destinations in 89 countries. The Lufthansa Group is the world’s leading aviation group. Its portfolio of companies consists of hub airlines, point-to- point airlines and aviation service companies. The group is divided into four distinct business segments, namely: Passenger Airline Group, Logistics, Maintenance Repair and Overhaul (MRO) and Catering.

Passenger transport is the largest business segment in the Lufthansa Group. The Passenger Airline Group includes the airlines Lufthansa Passenger Airlines (including Germanwings and Eurowings), SWISS and Austrian Airlines.

In 2016 it reported revenue of €31,660 million which was a 1.2% fall from €32,056 million in 2015. Reported net profit was €1,776 million in 2016, a 4.6% rise from €1,698 million in 2015.

Air France is the French flag carrier headquartered in Tremblay-en-France. It is a subsidiary of the Air France–KLM Group and a founding member of the SkyTeam global airline alliance. Air France-KLM operates up to 2,200 daily flights enabling its customers to travel to 320 destinations in 114 countries. The Group’s fast-developing low-cost leisure activity is operated by Transavia in France and the Netherlands with destinations in Europe and the Mediterranean. In 2016, the Group carried a total of 93.4 million passengers and 1.1 million tons of cargo on board its 534 aircraft. Air France-KLM and its partners Delta Air Lines and Alitalia operate the biggest transatlantic joint venture with 270 daily flights. Moreover, Air France-KLM is member of the SkyTeam alliance which groups together 20 airlines, offering access to a global network of more than 16,270 daily flights to 1,057 destinations in 179 countries. In 2016 it reported revenue of €24.8 billion, a 2.9% drop from €25.7 billion in 2015. Reported profit was €1,049 million in 2016, up from €780 million in 2015 and this was due to a 0.7% increase in passenger numbers.

( COMPETITION )

The company has over 43,550 employees and made operating profits of £1,264 million in 2015 (£975 million in 2014). Revenue for that year was £11,333 million, down 3.3% over the previous year. This included a decrease in passenger revenue of £288 million, or 2.8%, driven by increased competition on key North Atlantic routes and a drop in corporate customers on key oil routes as a result of the continued fall in oil prices.

Aer Lingus is the national airline of Ireland, founded in 1936, whose primary mission is to connect Ireland with the world by offering the best product with award winning customer service at low fares. It is headquartered at Dublin Airport, Ireland. Aer Lingus operates a fleet of 47 modern Airbus aircraft and carries over 10.6 million passengers per annum on mainline and Regional franchise services and operates from central airport locations in the UK, Continental Europe and North America on over 100 routes, providing global connectivity with its partner airlines. The company has over 4000 employees and made operating profits of €124 million in 2015. Revenue for that year was €1,718 million.

Founded in 1927, Iberia is today the leading airline between Europe and Latin America, where it launched regular services in 1946. It is also the air group offering better connections from Spain to the rest of the world. Together with its low-cost carrier Iberia Express and its franchise partner Iberia Regional/Air Nostrum, Iberia operates some 600 flights each day to some 120 destinations in 43 countries, with a fleet of 136 aircraft. Under code-sharing arrangements with other airlines, it offers flights to another 255 cities in 57 countries. 75 of these cities are in Latin America. Iberia operates 250 flights each week to 19 Latin American destinations, with connections at its Madrid T4 hub to more than 80 cities in Europe, Africa, and the Middle East. Iberia is now implementing its Plan de Futuro to ensure the company’s growth and sustainability. It is also applying a new commercial policy and improving customer experience with new long-haul seating sections, new routes, new aircraft and new services. In 2015, Iberia was the most punctual airline of Europe and the second one of the world, according to the list made by FlightStats. The Spanish company operated 187,538 flights last year, 88.97 % of which landed on time.

In 2016 its revenue was €4,454 million, down 2.5% from €4,5467 million in 2015. The profit before tax in 2016 was €214 million, down 64.5% from €602 million in 2015.

(*) British Airways, Aer Lingus and Iberia are all part of International Airline Group (IAG), formed in 2011.

( British Airways (*) )

2016 Airline Punctuality (% of flights that arrived on time)

Every year, airlines keep records of the punctuality of their flights. In 2016, Ryanair was number one in terms of punctuality with records showing that at least 90% of its flights were on time.

Table 4

(Source: Ryanair 2016 Financial Reports)

Sustainability

According to Brighter Planet, Ryanair was the most sustainable airline globally in 2011. The investigation was conducted on 20 of the largest airlines in the world and it involved comparing the sustainability of the airlines based on efficiency in the load factor (the portion of available seats filled on a flight), fuel economy, seating density, distance and freight share.

Passenger Load Factor

Passenger load factor measures the capacity utilisation. It is generally used to assess how efficiently a transport provider fills seats and generates fare revenue. The load factors for Ryanair and its competitors are shown below:

Table 5

(Source: Ryanair 2016 Financial Reports)

Competition over flight routes

In November 2016 Ryanair made announcements to launch its first ever flight from Frankfurt. This sparked a response from Lufthansa, which vowed to fight back against Ryanair’s presence at German’s biggest hub. Lufthansa pledged to react appropriately by setting up Eurowings as an in-house discounter, which depends on taking over routes away from Frankfurt, with short-haul flights feeding passengers onto longer trips. It aims to achieve this by introducing new routes and plans to start services in Munich in 2017. New routes attract a discount of as much as 50% in the first year. Ryanair’s strategy includes increasing its presence in Germany following Britain’s decision to exit the European Union. It intends to target major airports and appeal more to business travellers. Ryanair’s previous advantage over its competitors has been the low-fee Hahn Airport in Frankfurt, an airfield 100 kilometres from the city.

( Ryanair versus its competitors )

The company faces challenges when it comes to the control of costs and fares. As international prices are denominated in US dollars, fuel costs and fares fluctuate in line with changes in exchange rates.

Furthermore, the increase in instability in oil-producing countries, such as international terrorism, has continuously affected the availability of oil. In addition, the large aircraft fleet, which is expected to be approximately 546 by 2024, would need an investment of funds. A variety of factors, including but not limited to Ryanair’s profitability and its seasonal grounding policy, may make it difficult for Ryanair to avoid increases to salary levels and productivity payments. Since the business depends on a low-cost strategy, these challenges could see the company make some losses in the future.

While the company has a very good safety record, history shows that accidents or other safety related incidents involving certain other low-cost airlines have had a negative impact on the public’s acceptance of such airlines. Ryanair, along with other budget airlines, has faced criticism over its customer services and the high in-flight and excess baggage charges. Budget airlines are now viewed as unsafe, following recent security failures in the airline industry. Any adverse event potentially relating to the safety or reliability of low-fares airlines (including accidents or negative reports from regulatory authorities) could adversely affect the public’s perception of low-fares airlines like Ryanair.

In 2008, the world faced a global economic crisis that affected many industries and the airline industry was affected. This is caused a great deal of unfavourable reactions such as government austerity measures, the uncertainty relating to the Europe and the rest of the world, high unemployment rates, constrained credit markets and increased business operating costs. This could lead to reduced spending by both leisure and business passengers. In 2016, the United Kingdom voted to exit the European Union (EU), a process called ‘Brexit’. Ryanair operates from Ireland, a country that is still in the EU, and this has the potential of causing a number of problems. In 2016, approximately 28% of revenue came from operations in the UK. This has caused, and may continue to cause, both significant volatility in global stock markets and currency exchange rate fluctuations, as well as creating significant uncertainty among UK businesses and investors. In particular, the pound sterling has lost approximately over 10% of its value against the US Dollar. Brexit could also present Ryanair with a number of potential regulatory challenges. Brexit could lead to potentially divergent national laws and regulations, as the UK determines which EU laws to replace or replicate. If this does not happen, there is still the possibility that laws in the EU would also change. For example, the European Parliament passed legislation governing the payment of employee and employer social insurance costs in May 2012. The legislation governs the country in which employees and employers must pay social insurance costs.

The airline industry has become increasingly concerned with the impact that it has on the environment. As such, aviation was added to the Emissions Trading Scheme (ETS) in 2012. Under the legislation, airlines are granted initial CO2 allowances based on historical performance and a CO2 efficiency benchmark. In 2010, there were concerns over the safety of passengers, because of emissions of ash from an Icelandic volcano. The authorities reacted by closing a significant portion of the airspace over northern Europe. This closure forced Ryanair to cancel 9,490 flights. A similar Icelandic volcano saw the cancellation of 96 flights in 2011. There are also a number cases where the public has been concerned about travelling in times of disease epidemics. Past outbreaks of Ebola, MERS, SARS, foot-and-mouth disease, avian flu and the Zika virus have been seen to affect the demand for airline travel.

The regulatory environment in Ireland, EU and the rest of the world is characterised by high sensitivity to safety and security issues, which is demonstrated by intensive reviews of safety-related procedures, training, and equipment by the national and EU regulatory authorities. Airlines are subject to international,

( RISKS FACED BY RYANAIR )

national and, in some cases, local noise regulation standards. EU and Irish regulations have required that all aircraft comply with Stage 3 noise requirements since 2002.

As an international airline, Ryanair is subject to a number of authorities including local tax authorities of the countries in which it operates. This exposes the company to the risk of increases in tax and other duties that cannot be estimated. In addition, the Irish corporation tax, which is lower than most countries at 12.5%, has been subject to debate by the government, and therefore might increase.

Ryanair is subject to a number of regulatory bodies that include the following:

· Irish and EU regulation

· US Federal Aviation Administration (FAA)

· Department of Transport, Tourism and Sport (DTTAS)

· Irish Aviation Authority (IAA)

· European Organization for the Safety of Air Navigation (Eurocontrol)

· European Commission

· Commission for Aviation Regulation (CAR)

· Irish Aviation Authority

· European Aviation Safety Agency (EASA)

Ryanair views itself as Europe’s greenest, cleanest airline. According to Brighter Planet, it was the most sustainable airline globally in 2011. It seems the low fare growth is being delivered in an environmentally sustainable way through investing in new aircraft and engine technology while adopting efficient operations and commercial procedures to minimise its impact on the environment. Ryanair’s Environment, Social and Governance (ESG) Policy comprises six key components:

1. Safety and Quality

2. Energy Efficiency

3. Environment and Carbon Emissions

4. Labour Management and Social

5. Ethics and Transparency

6. Corporate Governance

Ryanair considers itself an equal opportunities employer. According to the management, ‘The company remains committed to being an equal opportunities employer regardless of nationality, race, gender, marital status, disability, age, sexual orientation and religious or political beliefs’.

Ryanair has 11,458 aviation professionals from over 40 different nationalities who crew and support Ryanair’s aircraft fleet. It has created over 80,000 indirect jobs based on Airport Council International figures.

Ryanair states that it supports numerous charities and the company has recently partnered with SOS Children’s Villages and ChildLine as its chosen charities for 2016. It also donates to various charities through the proceeds of sales of its onboard scratch cards, including the Jack & Jill Foundation and the GROW Organisation in Ireland. In November 2015 it faced criticism over the scratch cards scheme, which offered passengers the chance to win €1 million by purchasing a €2 scratch card. In a Facebook campaign, a user accused Ryanair of only donating a marginal proportion of the proceeds and Ryanair issued a statement in its defence.

The Board is responsible for the leadership, strategic direction and oversight of management of the Group. The Board’s primary focus is on strategy formulation, policy and control. The Board is made up of twelve members (Chairman, CEO, Senior Independent Director, company Secretary and non-executive directors) who are independently appointed. The Chief Executive Officer, Michael O’Leary, is the only

executive director. It is the practice of Ryanair that a majority of the Board comprises non-executive directors, considered by the Board to be independent, and that the Chairman is non-executive.

The directors have overall responsibility for the company’s system of risk management and internal control and for reviewing its effectiveness. To ensure that this is done effectively, it has a number of committees: Audit Committee, Safety Committee, Remuneration Committee, Executive Committee and Nominations Committee. In accordance with the provisions of the 2014 Code, the directors review the effectiveness of the company’s system of internal control including Financial, Operational, Compliance and Risk Management. There is a clear division of responsibilities between the Chairman and the Chief Executive, which is set out in writing and has been approved by the Board. The Chairman, David Bonderman, has served as the chairman of the Board since December 1996.

In conclusion, Ryanair looks set to continue its low fares approach with an intention to gain market share and taking advantage of the effects of any market instability, recession or uncertainty by tapping into new markets where it does not have a presence. It seems like this strategy is working well for Ryanair and it might continue using it, as it seems to be working for the company.

Adapted from:

· Ryanair’s Corporate Website, company accounts and RF20

· Brighter Planet

· Harvard Business Review

· IAG Investor Relations

· Air France Investor Relations

· easyJet Investor Relations

· Lufthansa Investor Relations

· The Guardian

· The Telegraph

· Independent Ireland

· Kayak.co.uk

· International Air Transport Association (IATA)

· Business Human Rights Ireland

( 6IBCS0617 ) ( 13 )

( 6IBCS0617 ) ( 14 )

( 15 )

(Source: https://corporate.ryanair.com/about-us/history-of-ryanair/)

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Low cost airlines are hiking up the price of snacks and drinks by more than 1,000% compared with everyday prices, according to research that shows that a £0.12 cup-a-soup sachet can cost passengers as much as £2.50.

A comparison of six major budget airlines serving the UK market found huge price increases on basic refreshments, with most carriers charging £2.60 for a tea and £1.80 for a 500ml bottle of water.

Ryanair, perceived by most as the airline offering the lowest seat prices, was found to be the most expensive when it came to on-board snacks, charging £2.34 for a bottle of water and £1.56 for a chocolate bar.

Passengers on a Ryanair flight could find themselves paying £1.96 for a 200ml can of cola, and £2.34 for a 160g bag of gummy sweets.

However, Ryanair is by no means alone in charging high prices. The price comparison snapshot, by travel search engine Kayak.co.uk, found airlines routinely charged triple the supermarket price for chocolate bars, compared with supermarket prices.

Alcoholic drinks also saw huge mark-ups. On Jet2 flights, a 330ml can of continental lager costs £4.20, while a 440ml can in a supermarket can cost less than a pound; a mark-up of more than 500%.

Frank Brehany, consumer director of Holiday Travel Watch said: ‘Airlines will argue it’s market forces – you have a choice to buy, or not. But it’s not like this. An airport is a sealed environment and airlines have a captive market. Once you’re through security you’re basically held hostage.’

He adds: ‘A couple with young families have to get rid of liquids before security, after that, if their children want a drink, they have to pay extortionate prices whether they’re in the airport or the plane.’

He called on passengers to take up the issue with their local MP or the Civil Aviation Authority.

‘MPs often raise questions about living costs – why should travelling, particularly people travelling on a budget, be any different,’ he said.

easyJet hit back at claims it was overcharging customers, saying that it was unfair to compare airline prices with those found in supermarkets.

In a statement the airline said: ‘We believe that our products offer value for money when compared to similar outlets and in particular when compared to airport cafes. For example, we charge £1.80 for a 330ml soft drink which is served to our customers in their seat with a glass and ice. This is comparable to a coffee shop, bar or restaurant and should not be compared to a supermarket.’

Ryanair said: ‘Customers are free to buy our on-board snacks or bring their own if they so wish. Either way, everybody saves time and money flying with Ryanair.’

(Source: Article by Will Coldwell, The Guardian, 26 February 2016)

( Appendix 2: Article from The Guardian , February 2016 )

The past year has been a successful one for our airline. Highlights of the year include:

· We grew our traffic by 18% to 106.4m customers as load factors rose from 88% to 93%;

· We delivered Year 2 of our ‘Always Getting Better’ (‘AGB’) customer experience program;

· We opened seven new bases and more than 100 new routes;

· We became the first airline to carry over 100 million international customers in a calendar year;

· We launched our new website and mobile app in October;

· We agreed five year pay and conditions deals with all 84 pilot and cabin crew bases;

· We returned the Aer Lingus proceeds (€398 million) to shareholders in November;

· We launched our seventh share buy-back program in February and completed it in June 2016; and

· We increased profit after tax by 43% to €1,242 million (before an exceptional gain of €317.5 million on the sale of our 29.8% shareholding in Aer Lingus)

Financial Data

Table 6a: Income Statement Data (Fiscal year ended March 31)

(in millions, except per-Ordinary Share data)

( Appendix 3: Extracts from Ryanair’s Annual Report 2016 )

( Table 6b: Balance Sheet Data (as of March 31) )

2016(a)

$m

2016

€m

2015

( 4,431.60 3,083.60 3,498.30 3,625.20 )€m

2014

€m

2013

€m

2012

€m

Table 6c: Cash Flow Statement Data (Fiscal year ended March 31)

2016(a)

$m

2016

€m

2015

€m

2014

€m

2013

€m

2012

€m

( 653.30 -856.10 -669.40 -154.90 )(Source: Ryanair Financial Reports)

(a) Dollar amounts are initially measured in euro in accordance with IFRS and then translated to US Dollars solely for convenience at the Federal Reserve Rate on March 31, 2016 of €1.00 = $1.1390 or $1.00 = €0.8780

Exchange Rates

Table 7a: US dollars per €1.00

Table 7b: UK pounds sterling per €1.00

(Source: Ryanair Annual Report 2016)

There is a curious anticipation about meeting the heir to Michael O’Leary as the public face of Ryanair: like watching the Incredible Hulk in reverse, all raging monster before a glimpse of mild-mannered scientist Bruce Banner.

The appointment of Kenny Jacobs as chief marketing officer was enshrined as part of the Ryanair revolution when O’Leary, the chief executive, decided he himself was getting in the way of efforts to convince the public that the Irish airline’s customer service had changed. Step forward digital evangelist Jacobs, 40, to present a smoother version of the Irish charm.

Jacobs, a native of Cork, hired from Moneysupermarket and formerly at Tesco, is suitably deferential to the boss. ‘He gets great headlines, long may that continue. But we’ve got a broader mix, we’re starting mainstream advertising, and using our own media – like airports, aircraft and websites – to do a lot more communication.’

The airline’s customer service rebirth, announced as a decision to ‘stop unnecessarily frustrating people’ last July [2013], has included ditching a website that deterred casual visitors in favour of an all-embracing online strategy.

The O’Leary of 2012 – dismissing the thousands of people on Facebook who supported a passenger complaining about being charged £236 to print four boarding passes – might have raised a disbelieving eyebrow, but Jacobs insists: ‘It’ll be you and me putting stuff on Google+, Facebook, Instagram. Content meets social meets mobile, that trinity is what it’s going to be about.’

The relaunch hasn’t been without hiccups – a botched revamp saw the website disappear from many Google flight searches – but Jacobs is confident the blip will not affect them, with the power of the Ryanair brand meaning only a fraction of potential passengers arrive online via generic searches. A website that works fully on mobile devices, along with a new app and electronic boarding passes, will arrive in late June [2014].

Starting to register its massive customer base – 81 million passengers last year – will be ‘the fulcrum on which the whole platform will turn’.

So why did it take Ryanair so long? ‘There was a bit of “if it isn’t broke don’t fix it”. But the competition changed and the customer changed. It’s down to digital: there’s full transparency of information, everyone’s going mobile, and customers want you to make it easier for them. There was a big need to respond.’

His arrival has seen the airline’s first TV advertising campaign in decades, three 20-second clips backed by an old Marvellettes track, which Jacobs claims to have had heard described with the accolade ‘classy’. Ryanair will significantly increase marketing spending, but the ads do not signal a wholesale loosening of the tight purse strings. ‘There is relentless focus on low cost. We used our own staff in the ads, we shot them in Stansted and we did it in one day.’

Anyway, he insists: ‘I’m a bigger believer in making the product itself better. That’s more important than just doing ad campaigns saying we’ve fixed everything, please forgive us.’

A section of the flying public may still feel Ryanair has much to be forgiven for, but Jacobs says: ‘The Ryanair’s-not-nice story is one that’s principally UK and Ireland – but the brand is perceived in different ways across the 30 European markets. Some of the national flag carriers are incredibly inefficient and unreliable, and consumers in those markets love Ryanair.’

Hours after we meet, a new Ryanair headline appears: Crew ‘encouraged passengers to play rowdy toilet roll throwing game to win free booze’ on a flight to Tenerife. Not, perhaps, the brand experience Jacobs had in mind; but while he cracks on with the digital makeover, he can rest assured the headlines can take care of themselves.

( Appendix 4: Article from The Guardian , May 2014 )

On rivals: ‘Attacking BA is like kicking a dead sheep - there is not much point any more. We need to have someone to attack. It is always helpful to have an enemy out there.’ April 2003

On Ryanair’s green credentials: ‘We can put more passengers in our planes, we have a fleet of new aircraft that are more fuel-efficient, we take less weight. Entire Brazilian rainforests of waste come off BA’s aircraft with all that extra packaging, the ancient planes, the waste of space in business class.’ June 2008

On the brand: ‘It keeps being peddled [that] Ryanair’s the most hated brand. What are you surveying? 99% of people don’t think what’s my favourite brand, they look for the cheapest fares.’ November 2013