Wednesday, April 05, 2006

Ryan Air - Flying for free?

"We want to be known as the Wal-Mart of flying,"

Michael O'Leary, Chief Executive of Ireland's Ryanair (Research), Europe's most profitable airline, wants to make air travel free.Ryanair has grown massively since its creation in 1985, from a small airline flying the short hop to London from Ireland into one of Europe's largest carriers.Michael O'Leary quickly learnt that the key to low fares was a quick turn-around time, no frills, and no business class, as well as operating only one model of aircraft.

Last year it flew 35 million passengers to more than 100 European destinations, while its customers paid an average fare of just $53. The airline enjoyed revenues of $1.7 billion, up 20 percent over 2004, at a time when most competitors were stuck in a holding pattern.

Here is a look at some of the things they have been doing to grab the market share:
-The Irish airline puts a price on virtually everything except tickets, from baggage check-in to seat-back advertising space. As a result, last year Ryanair collected $265 million--15.6 percent of overall revenues--from sources other than ticket sales.

-Ryanair embraced a single type of aircraft--the venerable Boeing (Research) 737. Likewise, it focused on smaller, secondary airports and began to offer open (unassigned) passenger seating.

-Ryan air removed seat-back pockets to reduce weight and cleaning expense--O'Leary passes the savings along to customers in the form of lower fares.

-It charges passengers for practically every amenity they might consume. There are no free peanuts or beverages on Ryanair flights; 27 million passengers bought in-flight refreshments on the airline last year, generating sales of $61 million, or an average of $2.25 per person.

-Ryanair does not employ an advertising agency, instead producing all its advertising material in-house.

-On March 16, Ryanair eliminated its free checked-bag allowance and began charging $3.50 per piece--a "revenue-neutral" fee that was offset by cutting ticket prices by an average of $3.50. Ryanair expects the move to save $36 million a year by reducing fuel and handling costs.

-Today, 98 percent of Ryanair's passengers book their flights online, and the company's website sees roughly 15 million unique visitors a month--making it Europe's most popular travel site.

-The airline uses that traffic as a marketing tool for related services; each time a passenger books a rental car or a hotel room, Ryanair earns a percentage of the sale. Linking customers to such services brought in more than $100 million during 2005.

-O'Leary is also starting to turn his planes into media and entertainment plays. He's offered advertisers the opportunity to repaint the exteriors of Ryanair's planes, effectively turning them into giant billboards. (Hertz, Jaguar, and Vodafone ) have purchased space on the fuselages of Ryanair's 737s.

-For passengers seeking distraction, Ryanair intends to offer in-flight gambling in 2007, with the airline earning a tiny cut off of each wager. O'Leary thinks gambling could double Ryanair's profits over the next decade, but he's not stopping there.

-He also envisions a day when the airline can charge passengers for the ability to use their cell phones at 35,000 feet.

-And he's expressed interest in partnering with operators of airport parking lots and concession stands to capture a bigger slice of the cash that passengers spend on the ground getting to and from his planes.

Ryan Air criticism
-The airline has come under heavy criticism in the past for its poor treatment of disabled passengers

-Ryanair also refuses to refund taxes and fees when passengers cancel their tickets.

Business 2.0 Magazine
Ryan on Wiki
Case Study


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