Chartered Postgraduate Diploma in Marketing (Level 7) © The Chartered Institute of Marketing 2018

561 – Analysis and Decision

Case Study

April 2018

Ryanair Ltd

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Analysis and Decision – Case Study Important guidance notes for candidates regarding the pre-prepared analysis The examination is designed to assess knowledge and understanding of the Analysis and Decision syllabus, in the context of the relevant case study. The examiners will be marking candidates’ scripts on the basis of the tasks set. Candidates are advised to pay particular attention to the mark allocation on the examination paper and plan their time accordingly. The role is outlined in the Candidate’s Brief, and candidates will be required to recommend clear courses of action. Candidates should acquaint themselves thoroughly with the case study and be prepared to follow closely the instructions given to them on the examination day. Candidates are advised not to waste valuable time collecting data outside of this case study. The cases are based upon real-life situations and all the necessary information about the chosen company is contained within the case study. No useful purpose will therefore be served by contacting companies in the industry, and candidates are strictly instructed not to do so, as it may cause unnecessary confusion. As in real life, anomalies may be found in the information provided within this case study. Please state any assumptions, where necessary, when answering tasks. The Chartered Institute of Marketing is not in a position to answer queries on case data. Candidates are tested on their overall understanding of the case and its key issues, not on minor details. In preparation for the examination, candidates need to carry out a detailed strategic marketing audit of the case study. The audit allows candidates to demonstrate their ability to: • apply the appropriate models and techniques to analyse information on a

company/sector facing particular circumstances • interpret the results of this audit to provide insights into the current situation and the

conclusions they are able to draw • utilise their own ideas and create their own models for interpreting the data. When compiling their audit, candidates should only use the information found within the case study, supported by their knowledge and understanding of the syllabus. Candidates are expected to bring individuality to their audit and submit their own work. In doing so, they must not attach essay-style descriptive work that could be considered as an attempt to gain unfair advantage whilst responding to the examination tasks. The copying of pre-prepared ‘group’ answers, including those written by consultants/tutors, or by any third party, is strictly forbidden and will be declared null and void. The tasks will demand analysis in the examination itself and individually composed answers are required in order to pass. Candidates will need to condense their strategic marketing audit into a SIX-page summary (a maximum of six sides of A4, no smaller than font size 11. The content of tables, models or diagrams must be in a minimum of font size 9). The six sides must contain a summary of the audit only. It should not contain decisions, objectives or plans. The pages of the audit should be numbered for ease of reference when answering the examination tasks.

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Although no marks are awarded for the audit itself, candidates will be awarded marks for how the audit summary is used and referred to in answering the tasks set. Candidates are advised not to repeat or copy the audit summary when answering the exam tasks. It is important that candidates refer the examiner to the audit summary, where and when appropriate, when answering the tasks. Candidates must hole-punch and staple their summary audit in the top left-hand corner. They should write their CIM membership number and examination centre name in the top right-hand corner of each page of the audit. It should then be attached to the answer book on completion of their examination, using the treasury tag provided. Candidates must take their copy of the case study and summary audit into the examination room. The case study may be annotated with ideas for possible decisions or courses of action. Candidates may not attach any other additional information in any format to their answer book. Any attempt to introduce such additional material will result in the candidate’s paper being declared null and void. The Chartered Institute of Marketing reserves the right not to mark any submission that does not comply with these guidelines.

Important Notice The following data has been based on real-life companies, but details have been changed for assessment purposes and do not necessarily reflect current management practices of the industries or the views and opinions of The Chartered Institute of Marketing. Candidates are strictly instructed NOT to contact individuals or companies mentioned in the case study or any other companies in the industry. Copies of the case study can be downloaded from the CIM student website https://my.cim.co.uk/login/.

© The Chartered Institute of Marketing 2018. All rights reserved. This assignment, in full or in part, cannot be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of The Chartered Institute of Marketing.

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Contents Low-cost airlines: Background

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Ryanair DAC 8-10

Market trends and challenges 10-11

Customer behaviour and preferences within the sector 11-12

Vision, mission, organisational culture and strategic direction 12-14

Ryanair’s current and past business approaches 14-16

Changes in value proposition 16-18

Competition 18-20

Ryanair’s constraints and challenges 20-21

Global issues 22-23

Outlook 23

Appendices 24-43

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Appendices

1 Airline types flown in the last 12 months, June 2016 and June 2017

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2 Attitudes towards flight services I, June 2017 25

3 Attitudes towards flights, July 2017 26

4 Passenger numbers uplifted at UK airports, 2012-22 27

5 Top 10 countries visited by UK residents, by air travel, 2015 VS 2016

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6 Ryanair Ltd financial highlights 2016/2017 29

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‘Nice’ is more than a destination: what Ryanair can teach United Airlines

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8 The customer is king 31-34

9 Cancellations and staffing crises – is Ryanair losing height at last?

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10 Ryanair CMO: Brands don’t need to be loved to win over consumers

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11 Ryanair applies for UK licence as airline braces for hard Brexit 35

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ANALYSIS AND DECISION

CASE STUDY Candidate brief Scenario You are employed as a Marketing Consultant working for Ryanair Ltd, with a specific remit to assist in increasing the company's value, profitability and market share within the low-cost airlines sector. You have been asked by Ryanair to undertake a strategic marketing audit in relation to core competences, capabilities, strengths and weaknesses, value creation and brand development, in the context of changing customer behaviour, regulatory and technology factors. In particular you should analyse the company's approach to brand development, organisational culture and responsiveness, stakeholders, competition and long-term sustainability. You should consider the potential impact of strategic uncertainty and strategic risks upon Ryanair in developing its business and brand strategy. Consideration should be given to the company’s strategic intent, mission and values, its financial position, organisational constraints, risk assessment tools and mitigation strategies to overcome risks.

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Low-cost airlines Background Over the last few decades, a new business model has emerged, whereby low-cost airlines compete aggressively against the traditional scheduled airlines. The low-cost airlines (also known as ‘no-frills’, ‘discount’ or ‘budget’ carriers) forego most of the more traditional customer services, resulting in lower fares and fewer comforts. Low-cost airlines may charge for extras such as food, priority boarding, seat allocating, and baggage storage. Most low-cost carriers operate aircraft configured with a single passenger class, and most operate just a single aircraft type, so cabin and ground crew will only have to be trained to work on one type of aircraft. These airlines tend to operate short-haul flights. Low-cost airlines often offer a simpler fare scheme, such as charging for one-way tickets (half the price of round trips). Typically, fares increase as the plane fills up, which rewards early reservations. In Europe, luggage is not transferred from one flight to another, even if both flights are with the same airline. This saves on costs and is thought to encourage passengers to take direct flights. Often, the low-cost carriers fly to smaller, less congested secondary airports, and/or fly to airports in off-peak hours to avoid air traffic delays and take advantage of lower landing fees. This is why Ryanair Ltd, one of Europe’s most recognised low-cost airlines, flies to Gatwick, Luton, and Stansted airports in the London area, rather than Heathrow (the main and biggest London airport). Ryanair DAC Ryanair DAC is an Irish low-cost airline founded in 1984, headquartered in Dublin, Ireland, with its primary operational bases at Dublin and London Stansted airports. In 2016, Ryanair was the largest European airline, measured by the number of scheduled passengers flown. It also carried more international passengers than any other airline in Europe. Ryanair operates 412 Boeing 737-800 aircraft, the world’s best-selling commercial airliner. The airline has been characterised by its rapid expansion, a result of the deregulation of the aviation industry in Europe in 1997, and the success of its low-cost business model. Ryanair's route network serves 34 countries in Europe, Africa (Morocco), and the Middle East (Israel). Ryanair is one of the biggest and best-known low-cost airlines in the European market. Its operating costs are among the lowest of any European airlines operating scheduled passenger flights. The company focuses on reducing and controlling 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. Ryanair keeps aircraft purchasing costs down by operating a single aircraft type with a high seat density of 189 all-economy seats. These factors give Ryanair advantages in controlling costs associated with personnel training, maintenance, and the purchase and storage of spare parts for its fleet of aircraft. It also offers the company greater flexibility in the scheduling of crews and equipment. Similarly, the company's approach with regard to employees emphasises productivity-based pay incentives, including commissions for flight attendants for on-board sales of products, and payments for pilots and flight attendants based on the number of hours or sectors flown.

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Ryanair operates its own internet booking facility, thus cutting out travel agent commissions and third-party reservation systems costs. Also, Ryanair attempts to control airport access and service charges by focusing on airports that offer competitive prices. Ryanair's record of delivering a consistently high volume of passenger traffic growth at many airports has allowed it to negotiate favourable contracts with such airports for access to their facilities. Ryanair is involved in various lawsuits, claims and other legal proceedings, arising in the ordinary course of its business. Many of the proceedings concern state aid support for Ryanair at smaller European regional airports, such as Dusseldorf, Pau and Angoulême. Adverse rulings in these matters could be used as precedents by competitors to challenge Ryanair's agreements with other publicly-owned airports, and may affect Ryanair’s growth strategy in relation to public or state-owned airports across Europe. The global tourism industry is booming: according to the World Tourism Organization (UNWTO), international tourist arrivals grew by 3.9% in 2016, to reach a total of 1,235 million.1 This was over 46 million more than in 2015. Such trends represent good opportunities for exploiting the growing tourism industry to enhance revenues and markets share. Ryanair has continued to expand bases and add new routes to enhance its competitiveness and grow business. For instance, in February 2017, the company launched its Israel winter 2017 schedule, with 15 new routes, and in April 2017, Ryanair announced the start of five new London Stansted winter 2017 routes. Ryanair intends to continue to expand its fleet and add new destinations and flights. Hence, a continued focus on network and fleet expansion is helping the company expand its market reach and customer service, in turn helping to grow its customer base and improve financial performance. The European airlines industry is expected to grow positively in the period up to the year 2020. That industry generated total revenues of $135.04 billion in 2016, an increase of 4.1% over the previous year. Furthermore, the industry is expected to grow by 7% in the 2016-20 period, to reach a value of approximately $178.648 billion in 2020.2 As one of Europe’s leading airlines, this positive growth could provide increased business opportunities for Ryanair. Growing security concerns in the wake of major airline accidents in the recent past may impact passenger traffic volumes. In 2015, major accidents resulted in approximately 136 fatalities. Furthermore, major accidents in 2013 and 2014 resulted in 462 and 376 fatalities3, respectively. Although Ryanair was not involved in any major accidents over this period, the growing safety concerns about air travel may impact overall passenger traffic volume, which could affect its financial position and future growth prospects. The airline industry is highly competitive. Airline profits are sensitive to even slight changes in average fare levels and passenger demand. Some competitors are state-owned or state-controlled flag-carriers – unlike Ryanair – and may have received, or may receive in the future, significant amounts of subsidies and other state aid from their respective governments. A relatively small change in pricing or in passenger traffic could have a disproportionate effect on an airline's operating and financial results. Therefore, intense

1 Ryanair Holdings Company Profile, Marketline, April 2017 2 Ryanair Holdings Company Profile, Marketline, April 2017 3 Ryanair Holdings Company Profile, Marketline, April 2017

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competition can affect low-cost airlines’ ability to grow passenger volumes and expand operational networks, potentially impacting on their market share. The airline industry is highly fragmented, especially in Europe. In domestic European traffic, the five largest airline groups have a combined market share of less than 50%. In the more profitable US market, the figure is around 90%.4 In the US, consolidations have produced large corporations with substantially greater financial resources, including more favourable hedges against fuel price increases and lower cost structures than Ryanair. The creation of large competitors, particularly due to consolidation in the airline industry, may affect Ryanair’s business performance. Market trends and challenges There were 226.3 million passengers carried overseas from UK airports in 2016, 7.6% higher than the 210.4 million uplifted in 2015 (5.6% growth on 2014). However, while domestic air travel grew by 4.7% in 2015, growth dropped to 1.8% in 2016. With two strong years of growth leading up to the UK’s referendum vote to leave the European Union (EU), market forecasts suggest a slight slowdown in growth over the next two years as the UK negotiates its EU exit (or ‘Brexit’).5 Appendix 46 shows the number of passengers who flew from UK airports internationally, domestically and in total. Because the number of passengers travelling overseas accounts for 91% of all passengers uplifted from UK airports, any changes in this segment will have a pronounced effect on the overall passenger market. The number of passengers flying from UK airports to international destinations rose sharply as the country recovered from the last major recession in 2008. Over the five-year period 2012-17, industry research estimates that the number of passengers travelling overseas by air rose by 29.9%. 2016 was a good year for flights to the overseas market, despite concerns about a slowdown in the second half of the year following the Brexit result. The number of passengers carried overseas from UK airports rose by 7.6% to 226.3 million in 2016 (compared to 5.6% growth in 2015).7 Cheap fuel and more efficient aircraft have allowed airlines to keep fares low, which has encouraged travel despite the weak pound and higher inflation in 2016-17. In 2017, industry forecasts suggest continued growth in passengers carried overseas, although at a slightly slower rate of 5.1%, to 237.9 million. Over the following two years, passenger growth is expected to slow with the ‘Brexit effect’. However, it is expected to pick up from 2020 onwards, with passenger numbers forecast to increase by 16.5% to 277.1 million by 2022.8 Between 2012 and 2017, domestic air passenger numbers grew by an estimated 13.9%, to reach 22.5 million. Data from VisitBritain’s Great British Tourism Survey shows that domestic business trip growth slowed from 3.8% in 2015 to 1.7% in 2016.9

4 Ryanair Holdings Company Profile, Marketline, April 2017 5 Airlines UK, Mintel, August 2017 6 Airlines UK, Mintel, August 2017 7 Airlines UK, Mintel, August 2017 8 Airlines UK, Mintel, August 2017 9 Airlines UK, Mintel, August 2017

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In July 2015, the UK Airports Commission recommended expanding Heathrow airport by building a third runway. In October 2016, plans for a new northwest runway at Heathrow were given the go-ahead. However, construction has been scaled back, as plans to build the previously proposed Terminal 6 building were dropped. The new 3,500-metre runway is due for completion by 2026, at a cost of approximately £17.6 billion.10 There were some concerns about the rise of landing fees to cover construction costs. Landing fees at Heathrow airport are currently around £22 per passenger. A concern is that any increase may result in airlines passing the extra expense onto passengers in the form of higher airfares. However, the Airports Commission has predicted that construction costs will not increase fares, because demand currently exceeds supply. The new runway will increase supply, which will increase competition between airlines as they compete for passengers with lower airfares. Customer behaviour and preferences within the sector The proportion of UK consumers taking flights in the year to June 2017 remained at 53%. While 87% of the UK population say they caught a flight at some point in the past, 13% say they have never flown at any point in their lives.11 Younger consumers are more likely to fly than older counterparts. 45% of the total population took a flight to their holiday destination; however, this rose to 54% for 16-24s and 53% for 25-34s. In comparison, 36% of over-45s caught a flight to their holiday destination.12 Evidence suggests that the 25-34s are treating air travel as less of a commoditised product, trading up for extra in-flight services and comforts, especially on long-haul routes, spending their money on experiences rather than tangible items. Many younger passengers are willing to spend a little bit extra to make the flight more comfortable; 19% of 25-34s have paid for extra services on a long-haul flight, compared to 14% of the total flying population. In addition, 73% of 25-34s say that they would pay a little bit extra for added comfort on a long-haul flight, compared to 61% of 16-24s. As airfares are kept low by cheap oil and budget carrier pricing strategies, many older Millennials (in their 30s) are willing to trade up to enhance the flight experience, especially on long-haul routes.13 The vast majority of passengers from UK are short-haul flyers; 85% of those who took a flight in the 12 months to June 2017 travelled within Europe, while 32% of passengers flew outside of Europe. This is reflected in the numbers carried by budget airlines, which mainly fly short-haul. In 2016, Ryanair uplifted 117 million passengers. This figure is considerably larger than that of full-service rival British Airways, which carried 44.5 million passengers in 2016. The 25-34s group is far more likely to take a domestic flight than any other age group. While 24% of all passengers took a flight within the UK, this jumps to 40% for 25-34s. This group travels on more business trips than any other age group; while 6% of all passengers flew for business in the 12 months to June 2017, this rose to 17% for 25-34s, almost three times as many.14

10 Airlines UK, Mintel, August 2017 11 Airlines UK, Mintel, August 2017 12 Airlines UK, Mintel, August 2017 13 Airlines UK, Mintel, August 2017 14 Airlines UK, Mintel, August 2017

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The proportion of people using budget carriers has increased from 55% to 59% in the 12 months to July 2017. Meanwhile, the proportion of those using full-service airlines has fallen from 48% to 42% in the same period. The proportion of those using charter airlines fell from 29% to 21% between July 2016 and June 2017. There is a noticeable generational divide when it comes to usage of charter carriers; while just 17% of under-45s used a chartered service, this rises to 29% amongst over-45s. Older consumers tend to opt for all-inclusive package deals and family-oriented holidays, products that charter tour operators like TUI and Thomas Cook specialise in.15 While full-service airlines still dominate on long-haul routes, low-cost carriers are gaining a foothold, presenting a significant challenge to the traditional full-service model. One of the main reasons for the growing popularity of budget airlines are no-frills long-haul carriers like Norwegian Air and WOW Air, based in Iceland. Passengers with the latter were able to fly from London Gatwick to Reykjavik on 13 September 2017, with a few days’ stopover, before taking a connecting flight to Los Angeles. The return flight on 21 September was direct from Los Angeles to London. This brought the total cost of flights to $575.28, compared with a direct flight from London Heathrow to Los Angeles costing $788.80 with Virgin Atlantic. 51% of under-45s say they would happily use a budget carrier to fly long-haul, compared to 39% of over-45s. The same report found that 50% of under-45s agree that it is worth stopping over on a long-haul flight if it saves them money.16 Vision, mission, organisational culture and strategic direction Ryanair’s vision is ‘to firmly establish itself as Europe’s leading low-fare scheduled passenger airline through continued improvements and expanded offerings of its low-fare service’. The company’s mission is ‘to offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost containment and efficiency operation’.17 Ryanair has been extremely successful in gaining customers and growing rapidly since its inception in 1985. The airline industry is competitive, but because Ryanair has been able to keep fares extremely low, it has survived the turbulent times that others have not. Ryanair has positioned itself as a functional brand – a brand that is trusted by customers and seen as brutally efficient and awesome on price.18 Ryanair’s operational and financial success has not always been matched by its customer perception. By September 2014, Ryanair was ranked the second worst brand in the world. One passenger stated in the survey that Ryanair has ‘complex booking with all the onus on the passenger’. Another stated it is ‘irritating and generally misleading’.19 Ryanair admitted then that the time had come to reform its ‘abrupt culture’. Speaking to shareholders at the company’s AGM in late 2013, Chief Executive Michael O’Leary said: ‘We should try to eliminate things that unnecessarily annoy customers’.20 Speaking about regular complaints, such as about customers being fined for hand luggage that exceeds size limits by a fraction, O’Leary said: ‘A lot of those customer services elements don't cost a lot of money. I am very happy to take the blame or responsibility if we

15 Airlines UK, Mintel, August 2017 16 Airlines UK, Mintel, August 2017 17 Ryanair corporate website: https://corporate.ryanair.com 18 Irish Times online: https://www.irishtimes.com/business/personal-finance/should-reputational-damage-at-ryanair-scare-off-investors-1.3229220 19 2014 Global Brand Survey, Siegel and Gale 20 BBC news online: http://www.bbc.co.uk/news/business-24177834

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have a macho or abrupt culture. Some of that may well be my own personal character deformities’. So, in 2014, Ryanair launched a four-year strategy to improve customer perception. called ‘Always Getting Better’. At its heart was a Customer Charter which made eight promises: 1. to always get better by listening to customers, being open to change and continuing

to improve the customer travel experience 2. to always find ways to lower costs through business operations and pass the savings

on to customers 3. to offer the best choice of destinations across 30 European countries, and increasing

the number 4. to promote safety through offering the ‘newest, greenest and cleanest’ fleet of planes

in Europe 5. to make travel an enjoyable experience, courtesy of well-trained, passionate

professional staff, better luggage arrangements and greater in-flight menu and gift choice

6. to be more punctual than any other airline 7. to be transparent with customers about flight details, changes in passenger itineraries

and channels through which to complain 8. to innovate, to make travel exciting yet simple by, for example, allowing customers to

arrange everything about their travel through mobile phone apps. These focus on Ryanair’s core competencies, to ensure it offers exceptional value in a saturated airline market. By continuously providing the best value, the company expects to maintain growth in future years. According to some industry analysts, Ryanair's Always Getting Better Program has turned out to be a success as its profits have soared since 2013, the share price has more than tripled and, its load factor (a measure of how much it is able to fill its aircraft with paying passengers, has hit 97 per cent in recent times.21 However, managing corporate reputation is an ongoing challenge for Ryanair. For any business to grow in the long term, it is crucial to have a highly satisfied customer base. Consistent bad publicity over a long period of time can potentially damage the corporate reputation particularly if the airline is seen as unreliable and less punctual. Such perceptions have the potential to deter future bookings and put off the time-sensitive segments such as business travellers.22 Ryanair has not only had to manage problems with its customer perception in recent years, but also with how they manage their staff. As recently as 2017, pilots, cabin crew and support staff criticised the way they were treated. One pilot went on record to say that ‘dire working conditions mean the airline can’t replace pilots as fast as they quit. ‘Ryanair’s strategy of control is based on very old divide-and-conquer tactics, keeping contracts and even methods of employment diverse among personnel in the same job,’ said the pilot, who remained anonymous. Fatigue was another issue, he claimed: ‘When I was there, I was regularly sent out of my base to fly on my days off, and without pay. Once there, I would report for duty, fly a heavy flight schedule for five consecutive days, then face the arduous journey back to my home base. It was a soul-destroying experience.’23

21 Irish Times online: https://www.irishtimes.com/business/personal-finance/should-reputational-damage-at-ryanair-scare-off-investors-1.3229220 22 Irish Times online: https://www.irishtimes.com/business/personal-finance/should-reputational-damage-at-ryanair-scare-off-investors-1.3229220 23 ‘Unless Ryanair treats pilots like me better, this crisis will be a long haul’ The Guardian, September 2017

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Back in 2013, a ‘former member of Ryanair's cabin crew’ claimed her working conditions at the airline were 'a total nightmare'. She said she was ‘only paid for “in the air” hours, not for pre-flight briefings, sales meetings, turn-around times and time spent on the ground during delays.’ Further, she claimed she was told she had to take three months of compulsory unpaid leave each year, was forbidden from taking another job during that time and had to pay £1,800 for compulsory training.24 Ryanair have regularly contested these and similar versions of events that have appeared in the UK press in recent years. Despite this, the stories remain live and published. Ryanair’s current and past business approaches Ryanair was founded in 1984 as Danren Enterprises, and shortly thereafter renamed Ryanair, after one of its founders. It began operations in 1985 with a 15-seat turboprop aircraft, flying between Waterford in Ireland and London Gatwick, with the aim of breaking the duopoly on London-Ireland flights at that time, held by British Airways and the Irish national carrier Aer Lingus. In 1986, the company added a second route, flying Dublin to London Luton in direct competition with the Aer Lingus/British Airways duopoly for the first time. Under partial EU deregulation, airlines could begin new international intra-EU services, as long as at least one of the two governments gave approval. The Irish government at the time refused its approval, to protect Aer Lingus, but Britain, under its deregulating Conservative government, approved the service. With two routes and two planes, the fledgling airline carried 82,000 passengers in one year. In 1986 the directors of Ryanair took an 85% stake in London European Airways, and from 1987 provided a connection with the Luton Ryanair service onward to Amsterdam and Brussels. Ryanair passenger numbers continued to increase, but the airline generally ran at a loss and, by 1991, was in need of restructuring. New Deputy Chief Executive Michael O´Leary was charged with the task of making the airline profitable. O’Leary quickly decided that the key to profitability was low fares, quick turn-around times for aircraft, ‘no frills’ and no business class, as well as operating a single model of aircraft. This approach was Ryanair’s bid to make huge inroads into the European air market, at that time dominated by national carriers, subsidised to various degrees by their home countries. Flights were scheduled into regional airports which offered lower landing and handling charges than larger, established international airports. In 1995, Ryanair celebrated its 10th birthday by carrying 2.25 million passengers. The European Union's 1992 air industry deregulation gave carriers from one EU country the right to operate scheduled services between other EU states and represented a major opportunity for Ryanair, which launched services to four more European countries. In 1998 the airline placed a massive US$2 billion order for 45 new Boeing 737-800 series aircraft. Ryanair launched its website in 2000, with online booking initially said to be a small and unimportant part of the software supporting the site. Increasingly, booking contributed to the aim of cutting flight prices, by selling directly to passengers and excluding travel agents’ costs. Within a year, the website was handling three-quarters of all bookings.

24 www.dailymail.co.uk/news/article-2326003/Ryanair-air-hostess-blows-whistle-contract-staff-forced-months-unpaid-leave-buy-uniforms.html, May 2013

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In April 2003, Ryanair acquired its ailing competitor Buzz from KLM. During 2004, Ryanair predicted a cut-throat battle during the winter, from which it expected only two or three low-cost airlines to emerge, including itself and easyJet. A loss of €3.3 million in the second quarter of 2004 was the airline's first recorded loss for 15 years, but it became profitable soon after. The enlargement of the European Union on 1 May 2004 opened the way to more new routes for Ryanair, elevating it to among the largest carriers on European routes. For the six months ending 30 September 2006, passenger traffic grew by more than a fifth to 22.1 million passengers, and revenues rose by a third to €1.256 billion. In October 2008, Ryanair withdrew operations from a base in Europe for the first time, when it closed its base in Valencia, Spain, costing 750 jobs. In February 2009, Ryanair confirmed it was planning to close all check-in desks by the start of 2010. O'Leary, now CEO of Ryanair, said passengers would be able to leave their luggage at a bag drop, but everything else would be done online. In June 2009, Ryanair reported its first annual loss, of €169 million. In December 2009, the company announced that negotiations with Boeing to buy 200 aircraft had failed, mainly because Ryanair had wanted to carry forward certain conditions from its previous contract. As of February 2010, Ryanair had an average fare of €32, less than half competitor easyJet's €66. In April 2010, after a week of flight disruption in Europe caused by eruptions of the volcano Eyjafjallajökull in Iceland, Ryanair decided to end refusals to comply with EU regulations; these stated that airlines were obliged to reimburse stranded passengers. In a company statement released on 22 April 2010, Ryanair described the regulations as 'unfair'. In August 2010, Ryanair announced its first ever Bulgarian destination, connecting Plovdiv with London Stansted. The service started in November 2010 with two flights weekly. In late 2010, Ryanair began withdrawing all its routes from its smallest base, Belfast City, in Northern Ireland and Shannon in Ireland, due to rises in airport fees. In the last three months of 2010, Ryanair made a loss of €10.3 million, compared with a loss of €10.9 million in the same period the previous year. In this time, more than 3,000 flights were cancelled. Ryanair blamed the losses on strikes and flight cancellations due to severe weather. Ryanair cut capacity by grounding 80 aircraft between November 2011 and April 2012, due to the high cost of fuel and continuing weak economic conditions. On 19 June 2012, O'Leary announced his intentions to make an all-cash offer to buy Aer Lingus, following two previous takeover attempts. The Irish government said it was looking to sell its 25% stake in Aer Lingus; however, it was made clear that it would not sell its share to Ryanair due to competition concerns. In 2015, IAG purchased Ryanair's shareholding in Aer Lingus, ending Ryanair's attempts to buy its oldest competitor. Ryanair confirmed plans to open an operating base at Milan Malpensa Airport from December 2015, initially with one aircraft. In March 2016, the company launched a corporate jet charter service, offering a Boeing 737-700 for corporate or group hire. In November 2016, Ryanair launched a new package holiday service named Ryanair Holidays, in Ireland, the UK and Germany, partnering with Spain-based tour operator, Logitravel, and accommodation provider World2Meet. In early February 2017, Ryanair

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suspended its Ryanair Holidays service, stating that one of its software providers breached contract conditions. In April 2017, Ryanair started issuing tickets with connecting flights, allowing customers who had missed connections to rebook without extra cost and be compensated according to the EU Flight Compensation Regulation. Plans are underway to add 50 new aircraft to Ryanair's fleet every year for the next five years, in a strategy to reach 160 million passengers by the early 2020s, up from 120 million passengers today. In recent years, Ryanair has looked to combine traditional and digital marketing into a single approach to brand strategy. For example, the company has invested in its own in-house digital expertise and spends little on TV and internet advertising. It claims to have the world’s most searched for airline website without spending anything on online advertising. ‘It’s because everyone knows what we stand for’, said Ryanair’s Chief Marketing Officer Kenny Jacobs. ‘We maximise earned and owned media as effectively as anybody can and as a result we can invest less in paid media, be it TV advertising, be it Google. We’re good on social, we say controversial things, we talk to the press and we’re very accessible and outspoken.’25 Instead of investment in advertising, Ryanair has concentrated on improving Search Engine Optimisation (SEO) and content marketing, and driving traffic to its website. Ryanair views digital marketing and traditional marketing activity as ‘just marketing’ and is looking to recruit senior staff who pursue this approach. Ryanair is focusing its brand development on having one very strong point of differentiation in the marketplace – not necessarily to be liked or admired but instead to be the market leader on cost. Jacobs has summed up the overall Ryanair marketing strategy as ‘to be like Aldi in the air, like Amazon on digital and to innovate faster than anyone else. It’s about having the best schedule, the cheapest flights and being very good at execution’.26 Ryanair’s bid to diversify and become the ‘Amazon of travel’ has led to the company offering tailored packages on hotel rooms, holidays and car hire services to its 20 million My Ryanair members. This has seen a more personalised marketing approach. So, for example, rather than send car hire customers to a separate website, Ryanair now offers customers tailored car hire options at their destination. It encourages them to talk to each other online about their experiences, in a bid to increase personalised web content. Changes in value proposition Since being established in 1984, Ryanair has grown from a small airline flying the short journey from Waterford to London into Europe's largest carrier. Ryanair now has over 11,000 people working for it, mostly employed and contracted by multiple agencies to fly on Ryanair aircraft. In the case of pilots, the vast majority are either agency employed or self-employed and their services are contracted to Ryanair. After the rapidly growing airline went public in 1997, the money raised was used to expand into a pan-European carrier. Revenues rose steadily, from €231 million in 1998 to €1.843 billion in 2003 and €3.013 billion in 2010. Net profits have increased from €48 million to €339 million over the same period.

25 (see Appendix 11) 26 (see Appendix 11)

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Most recently, Ryanair revenues were €6.6 billion in the year to 31 March 2017, up 2% on the previous year. The company’s profit after tax was €1.3 billion in the year ending 31 March 2017, up 6% on the previous year. Ryanair expanded its fleet in 2016/17, taking delivery of 52 new Boeing 737s, and intended to have 427 aircraft by March 2018, to reach its target of 130 million customers. Last year it launched 206 new routes and opened 10 new bases at primary airports in Bucharest, Corfu, Frankfurt Main, Hamburg, Ibiza, Nuremburg, Prague, Sofia, Timisoara and Vilnius. In terms of current changes in customer preferences, there are signs that premium economy class is beginning to convince as a more affordable alternative to business class. The majority of passengers choose the most basic class available. In the 12 months to June 2017, 84% of passengers travelled in economy, while 19% travelled in premium economy. Premium economy usage is heavily skewed towards younger consumers; usage rises to 27% amongst 25-34s and falls as low as 12% amongst over-65s. The main reason for this is that premium economy is popular amongst business travellers, who tend to be aged 25-34. In addition, 37% of business travellers say that their employer is using premium economy flight services more now than they did in the past. However, this figure jumps to 52% for 16-34-year-old business travellers, suggesting that companies are opting for premium economy services to fly their younger employees. Many companies are looking to reduce spending following the Brexit result, and may choose premium economy over business class. Just 8% of passengers say they have booked a trip using Google Flights, which allows consumers to search, compare and buy air travel from a range of different suppliers. With Google dominating the search engine market, this is perhaps surprising, although less so when considering that Google generates large sums of money from travel metasearch giants like Priceline, Expedia and Skyscanner. Usage of Google Flights could grow over time, seeing as twice the number of 25-34-year-olds say they are using the service, more than double the amount of usage when looking across all ages. Currently, only a relatively small number of travellers use Google Flights, although this could be set to grow. More passengers are saying they are open to using mobile airport apps. 47% say that they would use an app that provided a detailed map of the airport they were passing through. As with most technology and software, willingness to use such a service is skewed towards younger generations, rising to 58% for 16-34s, and falling to just 26% for over-55s. Developers of such an app could encourage downloads by partnering with retail outlets, or giving travellers a much-coveted free WiFi pass. This also opens the door for brands to reach consumers in transit with other commercial offers via their mobile. This could be especially effective in the high-end and luxury goods market, as high-income consumers were the most receptive to such a map app; 64% of more affluent customers say they would use an airport map. LocusLabs, a start-up founded in 2015 in San Francisco, is one company looking into developing such a service. Using depth cameras, lasers and other sensors, it claims to have developed centimetre-accurate interior maps of over 70 airports across the globe, as well as detailed interior maps of retail outlets and the location of services like restrooms and ATMs. Just over half of passengers say they would like the option of locking in a fare at today’s price for a later booking. Women appear significantly keener on this idea than men; while 47% of men would like access to such a service, this rises to 59% for women. This is one technological service where older consumers are more interested than their younger counterparts. While 44% of 16-34s are keen, this jumps to 62% for 45-54s and 59% for

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over-55s. Such a service can be useful when the traveller is unsure if they will actually book their trip, but still wants to lock in low fares before they rise. Flyer is one company that caters to these needs. Its ’fare lock’ product gives travellers the option of booking a ticket at today’s price next week. Working with a range of airlines, travel agents and corporate travel management companies, such a tool would be useful for business travel plans that are prone to last-minute cancellations. However, in terms of revenue generation, this could lose airlines money on certain busy routes, as it could potentially rule out last-minute purchases of tickets that are priced high. If there is a strong probability of all the tickets being sold, it makes little sense for airlines to offer such a service. Alternatively, the fare lock service could be advertised for use on routes that have low load factor rates; for example, if a particular route is often one third empty at certain times of the year, encouraging people to lock in a low fare now before it rises could help drive bookings. Competition easyJet is a British low-cost airline, based at London Luton Airport. It operates domestic and international scheduled services on over 820 routes in more than 30 countries.

easyGroup Holdings Ltd (the investment vehicle of the airline's founder Stelios Haji-Ioannou and his family) is the largest shareholder, with a 34.62% stake. The company employs nearly 11,000 people, based throughout Europe but mainly in the UK. easyJet has expanded since being established in 1995, having grown through a combination of acquisitions and base openings, fuelled by consumer demand for low-cost air travel. The airline, along with associate companies easyJet Europe and easyJet Switzerland, operate more than 200 aircraft, mostly Airbus A319s. It has 28 bases across Europe, the largest being London Gatwick. In 2014 the airline carried more than 65 million passengers, making it the second-largest airline in Europe by number of passengers carried, behind Ryanair. Flybe is a low-cost airline and the largest independent regional airline in Europe, based in Exeter, UK, and operating more UK domestic flights than any other airline. It flies seven million passengers a year on 149 routes, from 62 destinations in nine countries, connecting to long-haul hubs in Manchester, Birmingham, Paris, Dublin and Amsterdam.

Flybe first launched in 1979 as Jersey European Airways, following the merger of Intra Airways and Express Air Services. In 1983 the airline was sold to Walker Steel Group, which also owned Spacegrand Aviation, and the two airlines were merged under the Jersey European name in 1985. Jersey European was renamed British European in 2000 (shortened to "BE"), adopting its current brand in 2002. The company recorded revenues of $842 million in the fiscal year ending March 2016, an increase of 8.7% compared to fiscal 2015. Its net income was $9 million in fiscal 2016, compared to a net loss of $48 million in the preceding year. Jet2.com is a British low-cost airline based at Leeds Bradford Airport, and is the fourth largest scheduled airline in the UK. It has further UK bases at Manchester, Belfast International, Edinburgh, Newcastle, East Midlands, Glasgow, Birmingham and London Stansted airports, and at Alicante, in Spain. Jet2.com also offers a charter service through its Jet2charters brand. Sister company Jet2holidays offers package holidays with accommodation, transfers and Jet2.com flights to 47 city and sun destinations. Jet2.com had around 4,000 employees as of April 2015.

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Jet2.com’s supporting services include travel, car hire, airport car parking and onboard shopping services; in-flight champagne, and flight ticket bookings. Jet2.com also provides baggage allowance, in-flight dining, extra legroom, gift vouchers, holiday packages, beach holidays, and city breaks. The company has more than 50 aircraft, travelling to destinations in more than 15 European countries. As a privately-owned company, Jet2.com is not obliged to publish its financial results. However, its parent company – Dart Group – published an annual report for the 2016 financial year, showing revenues of $1.703 billion for its Leisure Travel segment, consisting of Jet2.com and Jet2holidays. International Consolidated Airlines Group (IAG) is the parent company to four retail airline brands - British Airways, Iberia, Vueling, and Aer Lingus – providing air cargo and scheduled passenger services. The company operates a fleet of 529 aircraft and provides services at 274 locations. IAG is the third largest airline operator in Europe and sixth largest in the world, based on revenue. It serves 95 million passengers annually. British Airways and Iberia belong to the Oneworld alliance and have code-sharing agreements with several airlines worldwide. British Airways offers premium passenger airline services worldwide, connecting 1,000 destinations in 70 countries. It operates a fleet of 280 aircraft and serves 40 million passengers annually. The company conducts its operations through three major bases: Heathrow International, Gatwick and London City airports. British Airways offers other services including line and aircraft maintenance, and material, component, avionics, interior, ground handling and training services. Iberia, along with its low-cost carrier Iberia Express and its franchise airline Iberia Regional Air Nostrum, offers scheduled airline services to 120 destinations in 43 countries. It maintains a fleet of 135 aircraft and operates over 600 flights on a daily basis. It also operates 250 flights weekly to 19 Latin American destinations. The company provides air cargo, aircraft maintenance and airport handling services in Spain. Vueling operates over 285 routes and provides services at more than 131 destinations across Europe, the Middle East and Africa. Vueling maintains a fleet of 90 aircraft from 21 bases. Aer Lingus provides services from central airport locations in the UK, continental Europe and North America, with a fleet of 50 aircraft. It operates over 100 routes, carrying 11 million passengers annually. IAG recorded revenues of $24.965 billion in the fiscal year ending December 2016, a decrease of 1.3% compared to fiscal 2015. Its net income was $2.136 billion in fiscal 2016, compared to a net income of $1.677 billion in the preceding year. Virgin Atlantic is a UK airline with its head office in Crawley, in southern England, close to Gatwick airport. The airline was established in 1984 as British Atlantic Airways, originally planned by its co-founders to fly between London and the Falkland Islands. It soon become part of Sir Richard Branson’s Virgin empire, as Virgin Atlantic Airways, and launched its maiden flight from London Gatwick to Newark Liberty International Airport on 22 June 1984. The airline’s parent company, Virgin Atlantic Limited, is 51% owned by the Virgin Group and 49% by Delta Air Lines. Virgin Atlantic operates to destinations in North America,

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the Caribbean, Africa, the Middle East and Asia from its main bases at London Heathrow and London Gatwick, and its secondary base at Manchester, UK. In 2012, Virgin Atlantic carried 5.4 million passengers, making it the seventh-largest UK airline in terms of passenger volume. In the year to 31 December 2013, it reported a $87 million group pre-tax loss; however, the airline reported a return to pre-tax profit of £14.4 million in the following year. During July 2017, Virgin Atlantic announced its intention to form a joint venture with Air France-KLM. Under the agreement, Air France-KLM will acquire a 31% stake in Virgin Atlantic, currently held by Virgin Group, for £220 million. The company says it is now two thirds of the way through its three-year £300 million investment into its customer experience reforms. The investment goes towards improving the airline’s food and beverage offering, refurbished cabin interiors, as well as improving in-flight entertainment systems across some aircraft. Ryanair’s constraints and challenges In 2013, Ryanair was considered to have ‘the worst customer service out of Britain’s 100 biggest brands’. In the same year, two profit warnings showed Ryanair failing to keep up with its rivals, including easyJet, whose friendlier image had attracted flyers. In the final three months of 2013, Ryanair recorded a £28.7m loss. 27 By 2014, CEO Michael O’Leary had come to the conclusion that Ryanair needed a new corporate philosophy: ‘If I’d only learned in college that being nice was good for business, I’d have done it years ago’.28 As a result, Ryanair introduced allocated seating, thus ending passengers’ familiar scramble at the gate, and what it called ‘quiet flights’ before 8am and after 9pm, during which time there were no crew promotions or public address announcements. Ryanair also introduced many new features benefiting both adults and children. Before long, its profits jumped, with a 66% leap in profits to €867m (£623m) in 2015.29 In September 2017, Ryanair wrote to 400,000 passengers telling them that their flight was cancelled, after it admitted to a ’mess-up’ on pilot rostering that left 18 million ticket holders unsure about their booked holiday plans. The company proceeded to cancel 40 to 50 flights each day in October 2017, promising to focus the cuts on routes where alternative flights were more easily available. For example, it cancelled one flight a day on its Stansted to Dublin route, which operates 12 flights a day. Combining regret and defiance, Chief Executive Michael O’Leary apologised ‘unreservedly’ for ‘a mess of our own making’. He blamed a one-off rostering issue over pilot holidays which, if not tackled immediately, would have sent the airline’s on-time punctuality below 50%, adding that it would cost Ryanair about €25m (£22m) in compensation and other costs.30

27 Which magazine, 2015 28 (see Appendix 7) 29 (see Appendix 7) 30 ‘Cancellations and staffing crises – is Ryanair losing height at last?’, The Observer, Sept 2017

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But O’Leary also said that angry travellers vowing never to fly Ryanair again would almost certainly return to the airline because its prices are lower. ‘Our booking engine is full of passengers who have sworn they will never fly with us again,’ he said. He also said that 75% to 80% of passengers would be re-routed free of charge within a day of their expected departure date, and that compensation of €240 to €400 would be paid, depending on the length of the journey. That still left as many as 100,000 ticket holders seriously delayed, with possible weekend getaways cancelled. Ryanair said it would not book passengers onto rival airlines to get them to their destination on time. ‘We will not pay for flights on other airlines,’ said O’Leary. ‘We cannot afford to pay the high costs of our competitors.’ But he admitted the way Ryanair had issued its first cancellation warning had unnecessarily left millions of travellers in the dark. ‘We did not focus on the concern we were causing to the 18 million passengers flying with us over the next six weeks,’ O’Leary said at the time. ‘I say sorry to them.’

Following the cancellation affair, Ryanair began to offer a fare sale and payments to pilots willing to waive vacation days. In an attempt to avert future issues, Ryanair said it would spend €20-30 million in 2018 hiring additional crew.31 This included signing bonuses and poaching from insolvent Alitalia SpA and Air Berlin Plc. Conversely, Ryanair found itself under attack from the Nordic carrier Norwegian Air Shuttle ASA, which claimed to have hired about 140 pilots from Ryanair since the start of 2017. Ryanair claimed that its rival’s business model was unsound financially, but did pledge to ‘tactically respond’ by offering ‘loyalty bonuses’ to prevent captains being lured away. By January 2018, this move had progressed to a formal 20% pay offer to all Ryanair pilots, as well as a new agreement to recognise unions. Ryanair confirmed that secret ballots by workers had led to an acceptance of the 20% pay increase offer. This includes Stansted and five other bases where pilots had previously rejected the company’s overtures. Ryanair will now pay pilots 20% more than Norwegian and Jet2.com, rival airlines which use the same 737 aircraft, the company claimed. Discussions with the UK pilot union BALPA are currently ongoing about the recognition of a unionised workforce.32 By January 2018, following Ryanair’s flight cancellations problem, Germany’s Lufthansa had once more become Europe’s largest airline by passenger numbers. The Lufthansa group as a whole carried 130 million passengers in 2017, with the equivalent figure for Ryanair being 129 million. Ryanair had overtaken Lufthansa on this measure as recently as 2016. Lufthansa has grown rapidly, having taken over Brussels Airlines at the end of 2016, and is now on course to grow its budget brand Eurowings to become Europe’s third largest point-to-point carrier. The Lufthansa group, which also includes Swiss and Austrian Airlines, also benefited from the collapse of German rival Air Berlin in the latter part of 2017. Air Berlin, Germany’s second largest carrier, ceased flying in October.

31 ‘Ryanair Scrambles to Contain Damage from Cancellation Fiasco’, Bloomberg, Sept 2017 32 ‘Ryanair agrees 20pc pay rise for UK pilots in bid to ease tensions’, Telegraph Sept 2017

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Global issues Across the world, scheduled airlines carried 'a new record' of 4.1 billion passengers in 2017. According to figures from the International Civil Aviation Organisation, this represented an increase of 7.1% over the previous year and compares with 6% growth in 2016.33 ‘The sustainability of the tremendous growth in international civil air traffic is demonstrated by the continuous improvements to its safety, security, efficiency and environmental footprint,’ said ICAO Council president Olumuyiwa Benard Aliu of the 2016-17 period. 2017 was also the safest year for civil aviation since plane crash statistics were first compiled in 1946. A total of 10 crashes of civil passenger and cargo planes claimed 44 lives, said the Aviation Safety Network, with no major airline suffering such an accident during the year. The budget airline sector ‘consistently grew at a faster pace compared to the world average growth, and its market share continued to increase, specifically in emerging economies,’ ICAO said. It added that air travel demand growth has been supported by improving global economic conditions. All regions showed stronger growth, except the Middle East, where factors including competition between hubs, low oil prices and a strong dollar led to ‘a significant decline in growth,’ to 6.9% from 11.8% a year earlier, the agency said. Europe remained the largest international market, with a 37% share of world international revenue passenger kilometres (RPKs), up 8.1%, according to the ICAO. Latin American and Caribbean airlines saw the strongest RPK growth, with 10%, while Asia-Pacific grew 9.6% and Africa 7.6%. North America was slowest, at 4.9%. Increasing jet fuel prices may push airfares higher in 2018 as oil prices increase, signalling a potential end to years of cheap flights. Global airfares at the start of 2017 were at their lowest levels for several years. 2018 could see a return to higher airfares as airlines reduce capacity and raise ticket prices to offset higher fuel costs, on the back of rebounding oil prices.34 Brent crude oil, the global benchmark, briefly touched above $70 a barrel in January 2018, for the first time since December 2014. Globally, jet fuel prices rose 21 per cent in calendar 2017 to around $67 per barrel, and ended the year at $81 per barrel, according to the International Air Transport Association. This group, which warned last December that airline profits were starting to be hit by rising costs, has forecast jet fuel prices will trade at an average of $73.80 per barrel this year. With the negotiations concerning the UK leaving the EU in mind, Ryanair scaled back its growth projections for 2017 to 6%, compared to the 12% growth posted in 2016. One issue for Ryanair and other airlines is the future impact for the UK of the EU–US Open Skies Agreement, which allows any European airline to fly between the EU and the US. Depending on negotiations, airlines may be forced to reduce their capacity in the UK.

33 Global Air Traffic at New Record, News 18, Jan 2-18 34 Financial Review, Oct 2017

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Ryanair has applied for a British air operating licence, to ensure its domestic UK routes can keep flying after Brexit. The company has repeatedly warned that flights could be grounded after March 2019 unless a new framework for aviation is agreed between Britain and the EU. A British licence would guarantee the airline could continue to operate routes between London, Northern Irish and Scottish airports, as it could otherwise be classified as a ‘foreign’ airline in the UK after Brexit. Outlook Business travel is expected to grow in the future, but the airline industry will face challenges due to intense competition and geopolitical factors impacting the airline industry. With the air travel market seeing more passengers travelling on more planes to more destinations – requiring more highly-trained pilots and support staff – new technologies to allow aircraft to be flown remotely are being developed, with pilotless planes possible by as early as 2025. Airbus recently completed a successful test of Sagitta, a crewless aerial vehicle, which flew autonomously for seven minutes on a pre-programmed course in Overberg, South Africa. These advances could make flying safer by minimizing human cockpit errors, as well as allowing greater fuel efficiency through optimized operations. The demand for, and supply of, passenger flights over the next 20 years will be affected by factors such as demographics, income, trade and commodity prices. The pace and nature of technological change could play a significant role in four main ways: through airline operating costs, security, airspace management and communications technology. Technology may contribute to incremental increases in fuel efficiency and reductions in costs; however, opportunities for large changes by the mid-2030s, such as the use of biofuel, may be limited. On the other hand, significant developments in communications technology are highly likely, which could reduce some of the need for long-distance travel. Consumers’ perception of safety will be a big factor influencing their ongoing willingness to fly. Others include the ease and cost of air travel, as well as levels of service provided by carriers. Aviation is likely to continue to be the only practical way for most passengers to travel over long distances, but these factors could make alternative modes over shorter distances more attractive. Environmental issues may increase costs for the aviation industry, for example through the introduction of taxes or the implementation of operating and capacity restrictions at airports. Meanwhile government policy towards aviation will affect both the competitive dynamics within the industry and the cost of travel.

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APPENDIX 1 Airline types flown in the last 12 months, June 2016 and June 2017 “Which type(s) of airlines have you flown with in the last 12 months?”

Base: 1,050 internet users aged 16+ who have travelled by air in the last 12 months Source: Mintel Report, ‘Airlines – UK’, August 2017 © Mintel 2017

2

2

21

42

59

1

2

29

48

55

Don’t know/can't remember

Private

Charter (eg Thomas Airways, Thomas Cook Airlines)

Full-service (eg British Airways, Virgin Atlantic)

Budget (eg easyJet, Ryanair)

Jun-16 Jun-17

%

Charter (eg Thomson Airways, Thomas Cook Airlines)

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APPENDIX 2 Attitudes towards flight services I, June 2017 “Which of the following apply to you?”

Base: 1,050 internet users aged 16+ who have travelled by air in the last 12 months Source: Mintel Report, ‘Airlines – UK’, August 2017 © Mintel 2017

45

46

46

47

68

42

47

42

41

24

14

7

13

12

8

I'd be interested in booking tours/holiday activitiesvia an airline's app

I'm just as happy to book a flight on a smartphone asa laptop/desktop

I'm more likely to fly with an airline with a rewardsscheme

I would use an app that provided a detailed map ofthe airport I was passing through

I would pay a little extra for added comfort on a longhaul flight

% Yes % No % Don’t know

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APPENDIX 3 Attitudes towards flights, July 2017 “Do you agree or disagree with the following statements?”

Base: 1,050 internet users aged 16+ who have travelled by air in the last 12 months Source: Mintel Report, ‘Airlines – UK’, August 2017 © Mintel 2017

28

29

35

39

44

51

52

35

40

47

40

37

38

42

37

31

18

21

18

11

6

Downloading an airline's mobile app is an essentialpart of travelling

Access to an airline's lounge is important when flyingto a holiday destination

Premium economy is more suitable for businesstravellers than holidaymakers

Spending extra on a premium economy seat adds tothe "holiday experience"

Stopovers are a great way to see multiple locationson holiday

Reclaiming financial compensation for a delayed flightis a lot of hassle

Booking a flight during the week is cheaper thanweekends

% Agree % Neither agree nor disagree % Disagree

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APPENDIX 4 Passenger numbers uplifted at UK airports, 2012-22

International passenger

uplift (m)

Change

%

Domestic passenger

uplift

Change

%

Total passenger

uplift (m)

Change

%

2012 183.2 - 20.2 - 203.4 -

2013 190.1 3.8 20.6 2.0 210.7 3.6

2014 199.2 4.8 21.1 2.4 220.3 4.6

2015 210.4 5.6 22.1 4.7 232.5 5.5

2016 226.3 7.6 22.5 1.8 248.8 7.0

2017 (estimate) 237.9 5.1 23.0 2.2 260.9 4.9

2018 (forecast) 245.0 3.0 23.6 2.6 268.6 3.0

2019 (forecast) 249.9 2.0 24.0 1.7 274.0 2.0

2020 (forecast) 256.2 2.5 24.4 1.7 280.6 2.4

2021 (forecast) 265.2 3.5 24.9 2.0 290.0 3.3

2022 (forecast) 277.1 4.5 25.5 2.4 302.6 4.3

% change 2012-17 29.9 13.9 28.3

% forecast change 2017-22 16.5 10.9 16.0

Source: Mintel Report, ‘Airlines – UK’, August 2017 © Mintel 2017

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APPENDIX 5 Top 10 countries visited by UK residents, by air travel, 2015 VS 2016

Visits by air 2015 (000)

Visits by air 2016 (000)

% of total 2015

% of total 2016

% change

1 Spain 12,802 14,442 23.7 24.2 12.8

2 Italy 3,260 3,790 6.0 6.4 16.2

3 US 3,494 3,566 6.5 6.0 2.1

4 France 3,114 3,502 5.8 5.9 12.4

5 Portugal 2,570 2,755 4.8 4.6 7.2

6 Greece 2,302 2,470 4.3 4.1 7.3

7 Irish Republic 2,117 2,448 3.9 4.1 15.6

8 Germany 2,079 2,217 3.9 3.7 6.6

9 Poland 1,768 2,153 3.3 3.6 21.8

10 Netherlands 1,768 2,067 3.3 3.5 16.9

Total (of all

countries) 53,937 59,583 100.0 100.0 10.5

Source: Mintel Report, ‘Airlines – UK’, August 2017 © Mintel 2017

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APPENDIX 6 Ryanair Ltd financial highlights 2016/2017 Operating revenue

2016 2017 Change

€6,536m €6,648m +2

Adjusted profit after tax (*)

2016 2017 Change

€1,242m €1,316m +6

Adjusted earnings per share (euro cent) (*)

2016 2017 Change

92.59 105.30 +14%

Scheduled traffic (m)

2016 2017 Change

106.4 120.0 +13%

Year-end fleet

2016 2017 Change

341 383 +12%

Average no. of people

2016 2017 Change

10,926 12,438 +14%

(*) FY16 excludes an exceptional accounting gain of €317.5m on the sales of Aer Lingus shareholding.

Source: Redacted from Ryanair Ltd Financial Annual Report 2017 © Ryanair Ltd 2018

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APPENDIX 7 ‘Nice’ is more than a destination: what Ryanair can teach United Airlines The budget Irish carrier had a terrible reputation for customer service until its notorious boss had a change of heart. Then the profits took off … Jeffries, S. (2017) ‘Nice’ is more than a destination: what Ryanair can teach United Airlines. The Guardian, 11 April. [online] https://www.theguardian.com/world/2017/apr/11/nice-more-than-a-destination-what-ryanair-teach-united-airlines

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APPENDIX 8 The customer is king Passenger experience is increasingly a top priority for low-cost carriers as they strive to regain customer loyalty. Emma Kelly reports. THE OLD ADAGE “THE CUSTOMER IS KING” has new meaning for the world’s low-cost carriers (LCCs). When LCCs first emerged, the priority was to get passengers from A to B as cost-effectively as possible, with the customer getting exactly what they paid for and few frills attached. But the old “no-frills” airlines have largely disappeared and a new breed of hybrid or new world carriers has emerged, offering everything from in-flight entertainment and connectivity to Business Class, frequent flyer programmes and personalised services— all at a price, of course. The customer is indeed king and is becoming a much more satisfied one as a result and returning to these LCCs time and time again. Even Ryanair, an original no-frills carrier, which once appeared to almost scorn its customers, has had a massive about turn and is focusing far more on the needs and wants of its customers. Ryanair is in the fourth year of its Always Getting Better (AGB) programme, which is focused on improving all aspects of the customer experience. The 2017-18 customer experience improvement plan includes service, digital, ancillary and in-flight developments, the airline recently announced. Initiatives under the AGB programme to be rolled out this year include, for the first time, the ability to connect flights on Ryanair’s network and later this year with other carriers; lower fares; new bases (Frankfurt Main and Naples) and improved schedules; the second phase of the My Ryanair customer account programme includes improved profiles, offers and incentives; Ryanair Holidays is being rolled out across all markets. Also included is the expansion of the Ryanair Rooms accommodation service; new travel search functions; Into the Blue bespoke travel content; express booking with pre-saved preferences; and auto check-in. Since its launch in 2014, the AGB programme has seen the introduction of customer service and digital enhancements, including a new website and app, new cabin interiors, allocated seating and tailored business, leisure and family products. All this is a far cry from the Ryanair of old, which once considered charging passengers to use the on-board toilets, charged them for failing to print their boarding passes and boarding was a free-for-all- thanks to no allocated seats. The AGB programme is paying off for the airline. “The success of the Always Getting Better programme over the past three years has been reflected in ever increasing load factors and record passenger numbers, which has seen our traffic grow by over 50 percent,” says Kenny Jacobs, Ryanair chief marketing officer. “In a year when Ryanair became Europe’s largest airline, carrying 120 million customers, and Ryanair.com became the world’s most visited airline website, we are pleased to launch Year 4 of AGB today, with an exciting range of initiatives in digital, product and ancillary,” Jacobs said at the launch of Year 4 earlier this year. Despite the changes, Ryanair remains committed to its low-fare principles, which are at the heart of LCCs, with Jacobs saying: “While we continue to innovate, the one thing that won’t

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change will be our low fares, and European customers will still enjoy the biggest and best choice of destinations, with the most on-time flights and a fantastic on-board experience, as we grow our fleet, traffic and routes.” Ryanair isn’t alone, with other so-called LCCs around the world rating highly with their passengers and therefore ensuring they return. In the United States, where airlines are not renowned for their customer service, LCCs top the league when it comes to satisfaction. In a recent report from the American Customer Satisfaction Index (ACSI), JetBlue, Southwest Airlines and Alaska Airlines topped the list. JetBlue leads the US industry with a 2 percent improvement to an ACSI score of 82, with Southwest in second place with 80. “JetBlue’s low-cost business model and cabin upgrades appear to be paying off. Southwest continues to please passengers with policies like no charge for flight changes and no hidden extras fees. And, unlike legacy carriers, the two airlines have a better track record for compensating passengers on overbooked flights,” says ACSI. JetBlue was launched in 2000 with the mission of “bringing humanity back to air travel” and has been one of the most innovative airlines since its launch. JetBlue passengers have come to expect a superior experience compared with traditional LCCs— and even a lot of legacy, full-service carriers. JetBlue has been a trailblazer for LCCs in everything from in-flight entertainment and connectivity to self-service options on the ground and customer service. The airline pioneered live television on-board aircraft, with DIRECTV available at every seat, and now it offers broadband Wi-Fi connectivity on every aircraft from gate-to-gate. JetBlue’s Fly-Fi offers passengers an on-board Wi-Fi experience similar to the one they experience on the ground and includes Amazon Video streaming entertainment delivered to customer devices, as well as web surfing, social media and messaging. The service was first launched on a single aircraft in December 2013 and is now available on its entire fleet of 227 Airbus A320s, A321s and Embraer 190s. Its Mint Business Class is gradually being rolled out across the airline’s services, offering customers a premium service featuring fully-flat seating, private suites, 15-inch flat screen entertainment and a more personal in-flight service. By the end of this year, the airline expects that one in every 14 JetBlue flights will offer Mint. “When we set out to reinvent premium travel nearly three years ago, we knew we were on to something revolutionary,” says Marty St George, executive vice president. On the ground, JetBlue is also aiming for a premium customer experience and has innovated with faster and more efficient self-service options. At its recently opened Terminal 5 at Los Angeles International Airport, for example, there is a self-service lobby with 10 check-in positions and 10 interactive self-service kiosks, with the latter featuring self-bag tagging and bag drop capabilities designed to increase efficiency and reduce lines. JetBlue continues to work on future service developments through its JetBlue Technology Ventures, which invests in, incubates and partners with start-ups in technology, travel and hospitality. The initiative is designed to “serve as a launch pad for innovations that improve customer and crewmember experiences, increase the airline’s operational efficiency and expand the JetBlue brand to new markets”, says the airline. “Innovation has always been part of JetBlue’s DNA and JetBlue Technology Ventures builds on our history of staying a step ahead of the status quo,” according to Bonny Simi, president of JetBlue Technology Ventures. And in Asia, LCCs like Scoot and AirAsia have transformed the region’s air travel network and in-flight service. Scoot, for example, recognises that one size doesn’t fit all when it

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comes to LCCs and offers seating options on its Boeing 787 fleet, including standard seats, SuperSeats and StretchSeats with more legroom, a ScootinSilence zone where children under 12 years aren’t allowed, as well as ScootBiz with leather seats, more legroom, more baggage allowance, boarding priority, drinks and a meal included, in-seat power and complimentary entertainment. Wi-Fi and in-flight entertainment is also available in the rest of the cabin, but at a price. Scoot prides itself on the friendly service of its personnel thanks to their “Scootitude” can-do and positive attitude. Likewise, AirAsia is expanding its coverage throughout the region at the same time as working to improve the total customer experience. On-board it provides entertainment and Wi-Fi through its ROKKI portal, with this set to improve following a recent commitment by the group to use Inmarsat’s broadband GX Aviation connectivity solution across the fleet from next year. “Our guests will be able to enjoy extra fast Internet connectivity as well as free movies, music, articles and games on our ROKKI IFEC platform. Not only that, they can shop for meals, merchandise and duty-free from the comfort of their own seats, which also allows us to better understand what our guests want so we can continue to improve on our in-flight offering,” says Tony Fernandes, AirAsia Group CEO. AirAsia’s long-haul offshoot, AirAsia X, pioneered the flat-b[e]d in the LCC sector and the group is installing the new Hawk SR (short range) and LR (long range) slimline seat from Mirus Aircraft Seating across its fleet. LCCs in Asia-Pacific, in particular, have become well known for the standard of their in-flight catering, with passengers increasingly willing to pay for local and seasonal dishes that exceed the quality of those available on the region’s full-service carriers in economy class. AirAsia is also catering to its growing business clientele, opening its first Premium Red Lounge at Kuala Lumpur International Airport last year, offering “an elevated travelling experience with 24-hour services and facilities such as a buffet spread, wireless Internet, lounge areas, workstations, showers facilities and more”. The lounge is available free of charge to its Premium Flatbed and Premium Flex guests while other passengers can pay RM79 (US$18). “As the LCC pioneer in the region, we are determined to raise the bar for low-cost travel and maintain our position as the world’s best low-cost airline. The AirAsia Premium Red Lounge, one of the first LCC airline lounges in the world, is our commitment in creating exceptional value for our guests through innovative products and differentiated services,” Kamarudin Meranun, executive chairman for AirAsia, said at the opening. “We receive a significant number of at least 5,000 transit guests per day who would find services such as the AirAsia Premium Red Lounge an added convenience and a plus point to their travelling experience,” he adds. Most recently, AirAsia has launched the MyCorporate suite of products aimed at the business traveller. It comprises three bundle options— Fare Only, Corporate Lite and Corporate Full Flex. “With our extensive network and frequency across the group, we have seen a rise in the number of those travelling for business on AirAsia. With the launch of MyCorporate, we believe we have a programme that serves the needs of both the traveller and the company to further capture our share of this important segment,” says Fernandes. Among the leading airline players around the world, low-cost definitely doesn’t equate to low-service.

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APPENDIX 9 Cancellations and staffing crises – is Ryanair losing height at last? The quixotic Irish carrier is handling a humiliating problem badly. But it is also the largest airline in Europe, and has the resources available to put things right Davies, R. (2017) Cancellations and staffing crises – is Ryanair losing height at last? The Guardian, 23 September. [online] https://www.theguardian.com/business/2017/sep/23/ryanair-losing-height-cancellations-staffing-crises APPENDIX 10 Ryanair CMO: Brands don’t need to be loved to win over consumers Ryanair’s outspoken CMO Kenny Jacobs admits to being “a bit of a bad boy in the industry” but believes brands don’t need to be loved, they just need to stand out enough and retain a healthy dose of common sense. Rogers, C. (2017) Ryanair CMO: Brands don’t need to be loved to win over consumers. www.marketingweek.com, 9 May. [online – registration required] https://www.marketingweek.com/2017/05/09/ryanair-cmo-brand-love/ APPENDIX 11 Ryanair applies for UK licence as airline braces for hard Brexit Irish carrier seeks permit to ensure it will be able to continue operating domestic UK flights after March 2019 Topham, G. (2018) Ryanair applies for UK licence as airline braces for hard Brexit. Guardian, 2 January. [online] https://www.theguardian.com/business/2018/jan/02/ryanair-applies-uk-licence-airline-braces-hard-brexit

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