The Challenges Ryanair Airlines Faces in the Maintenance of High Customer Satisfaction and Morale of Its Employees

Most common form of negotiation between airports and airlines is price rebate on input charges. Since this practice results in downstream competition between airlines it often leads to legal proceedings by authorities. EU has alleged Ryanair of obtaining illegal state aids possibly offered by Charleroi Airport, Brussels (Francis et al. 2003). In proceedings Ryanair was ordered to pay 4 million euros. However, on appeal the decision was overturned and Ryanair got the refund of whole amount (D’alfonso and Nastasi 2014). Also, Ryanair faced legal actions from Spanish Ministry of Public Works as five Ryanair flights required emergency landing as they were running low on fuel. On investigation Spanish Civil Aviation Accident and Incident Investigation Commission found that Ryanair flights commonly land on minimum required fuel (Ryerson et al. 2015). Ryanair has also faced various legal challenges in respect of staff’s terms and conditions of employment and poor working conditions (Budd and Ison 2017).

Internal Organisational Environment Analysis

Internal environment of organisation includes the firm’s portfolio of resources and its strategic capabilities. Resources are a collection of assets which include organisational, individual & social characteristics and competences are the ways those assets can be deployed for organisational advantage (Jhonson et al. 2011).

Resources can be tangible or intangible (Volberda et al 2011). Tangible resources are one that can be quatified i.e financial, organisational, physical, or technological resources (Volberda et al 2011). Ryanair initially focussed on cost leadership strategies. Thus, with the help of aggressive cost cutting strategies and its tariffs Ryanair was able to declare itself as Low-cost operator. However, during the phase of expansion the strategy was changed and ryanair tried to become a leader of low tariffs as well (Diaconu 2012). The type of airplanes used, charging for some services which were free initially, sub-contracting costly operations, airport charges & flight governing policies, the staff costs and productivity, and cost of marketing & advertising are the six main aspects of Ryanair’s cost strategy. The strategy of rapid gate turnaround also helped Ryanair in managing cost efficiency as it allowed maximum aircraft utilisation. No meals, no seat assignment, no baggage transfer, and no congestion at secondary airports were the factors that helped in this strategy efficiently (Lawton 2000). For market stimulation ryanair used the strategy of giving free tickets. For example: in 2003, ryanair gave 100,000 free tickets to celebrate the opening of new base at Bergamo (O’Connell and Williams 2005).

Ryanair focused on economic advantage of tradability by using secondary airports for operating their flights (Nwagbara, 2011) instead of hub airports due to various reasons like airport congestion, airport charges and taxes.The use of secondary airports played a big role in defining the success for ryanair airlines (Barret, 2004) as they not only meet the criteria of technical and geographical requirements but also gives advantage financially by charging lower fee as compared to primary congested airports (Albers et al. 2010). According to Barret (2004) its not only the airlines who is benefitted with secondary airports, passengers also get ample of benefits like easy baggage claim, decreased stress & confusion, and walking short distances. Ryanair works on minimum fuel policy which means that it pushes its pilots to fly in a fuel- conserving mode and encourages them to turn off the engines as early as possible and even try to persuade them to decrease passenger ventilation in order to carry less fuel on board (Hüttinger and Giedraitis 2010). The airlines try to decrease aircraft weight in order to reduce fuel consumption. The amount of fuel present on board makes up a large fraction responsible for increase in weight of aircraft (Ryerson et al. 2015). Charges for checked-in baggage also motivates customers to carry less baggage which in turn helps the airlines in minimising handling time at airport and also allows to negotiate for lower ground handling fee (Hüttinger and Giedraitis 2010) on one hand and on other hand decreases the weight of aircraft. Also, it reduced customer service costs by outsourcing the baggage handling and ground passenger services (Lawton 2000).

In order to increase the service aspect and further reduce ticket fares many airlines achieve added value through providing ancillary products and services like travel insurance, car hire, hotel accomodation, console entertainment sales, paid meals and drinks on flight. Ryanair grabbed the opportunity of providing ancillary products along with extra baggage charges and pre assigned seats (Budd and Ison 2017). According to the case study, ryannair’s dependency on ancillary income can be confirmed by the fact that in 2012 revenues earned from all ancillary categories were much higher than the revenues from passenger bookings. Ryanair works on policy that if base ticket fare is competitive then passengers willingly adopt the benefit of various add-on services in order to arrive at a value based fare (O’Connell and Warnock-Smith 2013). Ryanair also urges various organizations to advertise on boarding cards, overhead bin, seat backs and tray table by stating that these advertisements remain in passenger’s memory for a long time (Warnok-Smith et al. 2017).

Intangible Resources are human or reputational resources which get accumulated over time and are difficult to duplicate (Volberda et al 2011). Ryanair successfully convinced passengers that low priced tickets in no way compromise the saftey standards (D’Alfonso et al 2011). As the profits went high ryanair’s public image dropped gradually (Thomas 2015). However, passengers value ryanair for low priced tickets and eagerly sacrifice the issues like free meals, primary airports,chekin baggage services in order to avail the same. Ryanair also have policy of one way tickets which allows passengers to change travel plans if needed at low cost. Ryanair focuses on standardizing the norms for simpler operations in respect to perceptions about quality or reliability. It offers single class of seating in all planes. It also uses same fleet of aircrafts which reduces the passengers concern and comparison about comfort (Hüttinger and Giedraitis 2010).

The organisational culture can be defined as the relationship between an organisation and its employees (Aras & Crowther, 2009). The orgnaisational culture of Ryanair is very weak due to high staff turnover and poor employee relationships (Bridoux and Stoelhorst 2014). The staff constantly suffers from lack of motivation and increased stress due to autocratic nature of leadership (Nortilli & Wong, 2014). The company fails to motivate its employees in a proper manner which results in lower morale and less job satisfaction among the staff (Nortilli & Wong, 2014). Ryanair focussed mainly at personnel cost while working on cost reduction techniques. It initiated performance based incentives schemes in order to hold down the employee cost and maximise productivity (Lawton 2000). According to Nortilli & Wong the employees work in a mechanized way, following the instructions given by higher management. Also, the organisation charges its employees for services like trainings, uniforms, health-checks and airport passes (Bridoux and Stoelhorst 2014). Moreover, the strike actions are quite uncommon as the company refuses union recognition constantly (Budd and Ison 2017). However, Ryanair Ltd. 2019 says that staff is one of the important assets and investment is made heavily in training and recruitment.

Internationalization

Internationalisation refers to operations of any organisation outside its country of origin (Jhonson et al. 2011). In 2012 when many EU airlines like Malev, Spanari,OLT were closing down due to recession and rising oil prices, Ryanair took a strategic move of internationalization and opened a new base at Budapest along with expansion of bases in Spain, Scandinavia and the UK(Albers et al 2010). Ryanair dominated the market both in terms of number of seats offered and number of flights flied (Coles et al. 2011). Any organisation that opens an office or plant in different countries refer themselves as international organisations which differs from globalization in terms of degree of integration between internationally dispersed economic activities (Markovic 2008). Internationalization can be achieved either by forming internalized market entry strategies or by cooperation based strategies (Albers et al 2010).Ryanair adopted the strategy of internalized market entry by expanding its route network and establishing independent bases in UK and then into european destinations and european bases giving a competitive edge to the company(O’Gorman and Curran 2017). The expansion strategy of ryanair allowed it to hold dominant position in the european and non-european market due to which it received the award of largest airline in world in 2007 from IATA( International Air Transporters Association)( Diaconu 2012).

Leadership of Michael O’Leary

Alan Ruddock (2007) in his biography on Michael O’Leary mentioned that in the starting O’Leary advised Tony Ryan to shut down the carrier. However, in few years time O’Leary himself built it from a hopeless business to highly profitable airlines first by standing behind Tony Ryan as a personal enforcer and then as a CEO. Strategy not only defines an organisation’s position in external environment but also explaines what a firm will be in future (Montgomery 2008). Strategic leadership focuses on an executive who has complete responsibility of organisation, their charecteristics, what and how they do it, and how they affect organisational outcomes (Carter and Greer 2013). Strategic leader is capable of anticipating and interpreting the opportunities and threats, challenging their own and others assumptions (Schoemaker et al. 2013), forming strategies and has ability to put those strategies in action in allignment to people and organisation to gain competitive edge and advantage (Davies and Davies 2004). As the case with Ryanair, when ryanair entered dublin-london route with half prices the leaders of ryanair didn’t anticipate the ferocity with which competitors would react.

The resulting fare war bought ryanair to knees but under the ruthless, abrasive and focused leadership of O’Leary (Ruddock 2007) ryanair revamped the strategies effectively and transformed the company into a leading low cost no-frill airline (Montgomery 2008). Michael O’Leary is a visible and strong leader who focused on strategies that kept as much autonomy as possible for his company. For example he focused on setting up international bases rather than adopting cooperation based strategies like contractual cooperation or joint ventures (Albers et al. 2010). Michael O’Leary works on the notion that passengers would keep travelling irrespective of whatever negative things they say only when the company ensures low ticket fares and minimum required airline safety (Thomas, 2015). According to Mintzberg and Waters (1985) ideological strategies are the ones where an individual or organisation follow a vision so strongly that it changes to ideology. Ryanair does not have a structured vision or mission (Box and Byus 2007). However, Michael O’Leary’s main focus as communicated in public statements is to decrease the cost and provide the least possible ticket tariff to the passengers (Nortilli & Wong, 2014). This strategy was rooted since past by a charismatic leader. One person’s vision became organisation’s ideology and people resist changing it, making it delibrate in nature (Mintzberg and Waters 1985).

Conclusion

To conclude with, it can be said that ryanair is the true clone of USA based airlines named Southwest Airlines. In order to gain competitive edge in european airline system and remain low fare-low cost airline ryanair devised and followed various strategies like use of standardised fleet of aircrafts, use of exclusive secondary airports, providing point to point service, offering a cheap, no frill service (no meals, no drinks, no seating preference, no checking), generating ancillary income from the services not offered complimentary, focus on effective utilisation of aircrafts, performance based pay schemes, reducing various commissions by using technology and outsourcing some facilities (Lawton 2000).

However, ryanair puts a very little emphasis on customer satisfaction and employee morale and has a strong resistance towards unions (Bridoux and Stoelhorst 2014). If Ryanair tries to change the culture by considering its employees as its assets and starts motivating them, the staff turnover would decrease to a great extent. This would help in retaining the knowledge within the company to achieve its long term goals in an efficient manner (Urbancová and Linhartová 2011). Ryanair follows a typical autocratic style of leadership (Nortilli & Wong, 2014). Michael O’Leary being a charismatic leader inspired others to share a common vision and put a strategy in action to fulfill that vision (Carter and Greer 2013). O’Leary is embodiment of intellectual stimulation, idealised influence, individualised consideration, inspiration and motivation (Nwagbara 2011) and backbone to ryanair who bought airlines to top ranked airlines of Europe (Ruddock 2007).