As every new owner of a company knows, there are different ways of signing yourself in and making your presence felt. In 1985, Tony Ryan, the creator of Guinness Peat Aviation, a major aircraft leasing company, founded Ryanair. In its early days Ryanair positioned itself as the shy alternative to the duopoly of Aer Lingus and British Airways (BA) between Ireland and Britain. But from its initial bases in Dublin and London-Stansted, Ryanairs aggressive expansion never ceased. By 1997 it had become the first low-cost carrier to fly between continental Europe and the British Isles, systematically offering fares 50% lower than the cheapest rates of the flag-carriers. Development was accompanied by rapid passenger growth in the 1999 financial year it carried 4.9 million passengers and the figure shot up to 24 million in 2002.
Throughout its growth Ryanair maintained strong profitability. On 4 February 2003, Michael OLeary, its new CEO, announced the acquisition of Buzz Airline for a gross sum of 24 million. Also based at Stansted, Buzz was seen to be complementary to Ryanairs network and the merger would safeguard Ryanairs position at Stansted. OLeary was confident that Ryanair would transform the European airline industry completely, but was it enough simply to safeguard? Was Ryanair seeing the bigger picture? Where was the future? Three weeks after Ryanairs acquisition of Buzz, OLeary announced that 400 of the 600 Buzz staff were to be made redundant. Was this par for the course in the fast-changing airline industry? Was there simply no room to carry anyone or anything surplus to requirement? Was this the best approach for the company which had shaped the low cost market and maintained consistently strong profitability? What were the other challenges to be faced by Ryanair in a cut-price but also cut-throat market?
This case, written by Javier Gimeno, Associate Professor of Strategy and Management at INSEAD, Karel Cool, BP Chaired Professor of European Competitiveness at INSEAD, Herman Fung, INSEAD MBA 2002, and Alessandro Buccella of Roland Berger Strategy Consultants, examines the defining influences and deciding factors in the increasingly complex and competitive airline industry. The study charts its history and scrutinizes the strategy, processes, risks and opportunities for Ryanair and its rivals. How big can Ryanair become with its current strategy, and what strategy will it need to go beyond that? What is the growth potential in its niche and beyond? Is it time to think about the next move?
The authors take the reader through a step-by-step evaluation of the industry and the competition with full background data on the companies, their products, results and technologies. The case is particularly appropriate for managers, executives and MBAs and is a companion piece in a series on the airline industry to "Note on the European Airline Industry (07/2003-5123) and European Airline Industry: Lufthansa in 2003 (07/2003-5125).