Case Study – Ryanair
In 2015 ryanair, based in dublin, reported that it had carried over 90 million passengers in the 12 months to the end of March, 11 per cent more than in the previous year. revenue had grown by 12 per cent and profit by 66 per cent. It believed this growth reflected managers’ efforts to improve passengers’ experience, such as renewing the website and allowing them to take on board an extra small item.
Tony Ryan (1936–2007) founded the company in 1985 with a single aircraft flying passengers from Ireland to the UK. Ryan, the son of a train driver, left school at 14 to work in a sugar factory, before moving in 1954 to work as a baggage handler at Aer Lingus, the state-owned Irish airline. By 1970 he was in charge of the aircraft leasing division, lending Aer Lingus aircraft and crews to other airlines. This gave him the idea, which he quickly put into practice, to create his own aircraft leasing company. As Guinness Peat Aviation this became a world player in the aviation leasing industry, and is now part of GE capital.
In 1985 he founded ryanair, to compete with his former employer. Southwest Airlines in the US inspired this move by showing that a new business could enter the industry to compete with established, often state-owned, airlines. Tony ryan turned ryanair into a public company in 1997 by selling shares to investors.
In the early years the airline changed its business several times – initially competing with Aer Lingus in a conventional way, then a charter company, and at times a freight carrier. The Gulf War in 1990 discouraged air travel and caused the company financial problems. Rather than close the airline he and his senior managers (including Michael o’Leary, who is now chief executive) decided it would be a ‘no-frills’ operator, discarding conventional features of air travel such as free food, drink, newspapers and allocated seats. It would serve customers who wanted a functional and efficient service, not luxury.
In 1997 changes in european union regulations enabled new airlines to enter markets previously dominated by national carriers such as Air France and British Airways. Ryanair management saw this as an opportunity to open new routes between Dublin and continental Europe, which they did very quickly. Although based in Ireland, 80 per cent of its routes are between airports in other countries – in contrast to established carriers, which depend on passengers travelling to and from the airline’s home country (Barrett, 2009, p.80). the company has continued to grow, regularly opening routes to destinations it thinks will be popular. It refers to itself as ‘the world’s largest international scheduled airline’, and continues to seek new bases and routes.
In May 2015 the chairman of the board presented the company’s results for the latest financial year.
Measures of financial performance in recent financial years (ending 31 March)
|Revenue (Millions of Euros)||5654||5037|
|Profit after tax (Million of Euros)||867||523|
|Earning Per Share (Euro Cents)||62.59||36.96|
Case questions 1.1
- Identify examples of the resources that Ryanair uses, and of how managers have added value to them (refer to Section 1.2)
- give examples of three points at which managers changed the focus of the company and how it works.