THE RYANAIR OPERATIONS
Ryanair’s operation, put simply, is just fast as Ryanair does nothing slowly to ease the customer’s progress through the service. The Ryanair service appears very efficient. The most striking part of the service is the speed at which the older 737-200 aircraft are turned around. It is here that Ryanair makes a difference with its aircraft, spending approximately 50 per cent of its time in the air compared with around 25 per cent for short-haul British Airways flights. The efficiency of the Ryanair service depends upon the effective execution of the turn around operation. (Aer Rianta, 1999) Failure to achieve this time can have a serious impact upon the low fare carrier’s schedule. A network carrier presently chooses to allocate between 45 minutes and one hour for an identical operation. The Ryanair turn around operations watched from the departure lounge have an inevitable look of chaos but nearly always result in the desired push back time being achieved. In choosing the 737-200 Ryanair have not simply chosen to buy older aircraft, but assets which are generally reliable and good for the quick turn around operation and takes five to ten minutes longer to turn around the newer 737-800. (BNP Paribas Equities, 2004)
In general, the approach taken by Ryanair is to: (Ryanair Conservative accounting policies, Davy stockbrokers, 2003)
Ø seek to reduce delays
Ø reduce the time taken at all stages of the operations
Ø to emphasise the importance of the airline’s presence to Dublin airport whilst negotiating airport charges
The low level of charges paid to Aer Rianta by Ryanair allows the airline to break one of the “rules” of being a low-fare carrier in that it operates from a primary airport. In fact the charges for parking aircraft are so low that aircraft often fly in from overseas to park overnight. In common with Ryanair essentially wants to be left to move people around according to its own needs rather than in line with the airport’s needs. It can do this best through dedicated facilities and through controlling the speed at which each phase of the service is delivered. Recently, Ryanair made proposals to Aer Rianta to secure a long-term position at Dublin airport. The proposals ranged from the creation of a dedicated Ryanair terminal to the construction of a dedicated Ryanair pier at the existing terminal (Ryanair Conservative accounting policies, Davy stockbrokers, 2003) In essence, these airlines are not prepared to pay for the growth that may be necessitated by their own activity. In the past, both Emirates Airlines and Ryanair have threatened to move operations from their current hubs in disputes with the airport owners over the provision of facilities. Ryanair’s objective has been to establish itself as Europe’s leading low-fares scheduled passenger airline through continued improvements and expanding offerings of its low-fares service. Ryanair aims to offer low fares that generate increased passenger traffic. (Barter, 1992) A continuous focus on costcontainment and operating efficiencies is a vital part of the Ryanair way of doing things. Ryanair sells it seats on a one-way basis unlike most traditional carriers this change came into effect in November 2001. Ryanair sets its fares on the basis of the demand for particular flights and by reference to the period remaining to the scheduled date of departure. 70 percent of seats on a flight are sold at the minimum available fare assigned for the route, once these are filled the price per seat rises. (Barter, 1992) Ryanair provides frequent point-to-point service on short-haul routes to secondary and regional airports in and around major population centers and travel destinations. The average flight time has been 1.1 hours with an average route length of 746 kilometres in 2003. Ryanair’s flew an average of approximately 1.94 round trips daily per route. The choice of only flying short-haul routes allows Ryanair to offer frequent service, while eliminating the necessity to provide “frill” services otherwise expected by customers on longer flights (Mahoney and Pandian, 1992).
Point-to-point flying (as opposed to hub-and-spoke service used by the traditional carriers) allows Ryanair to avoid the costs of providing through service for connecting passengers, including baggage transfer and transit passenger assistance costs. This is one of the key differences between Ryanair and Emirates carriers. The fast turnaround is a key element in Ryanair’s efforts to maximize aircraft utilization. Ryanair’s average turnaround time for the fiscal year ended March 31, 2003 was approximately 25 minutes that allows Ryanair to not only save on costs but also adds tremendously to revenues. Management believes that Ryanair’s operating costs are among the lowest of any European scheduled passenger airline. (Civil Aviation Authority, 1998) There are four main expenses which Ryanair is able to control and/or reduce and therefore works hard to do so: (i) aircraft equipment costs; (ii) personnel expenses; (iii) customer service costs; and (iv) airport access and handling costs: (i) Aircraft Equipment Costs: Ryanair’s initial strategy for controlling aircraft acquisition costs was to purchase used aircraft of a single type, however this no longer became viable. Ryanair endeavours to control its labour costs by continually improving the productivity of its already highly-productive work force. Ryanair has entered into agreements on competitive terms with third party contractors at certain airports for passenger and aircraft handling, ticketing and other services that management believes can be more cost efficiently provided by third parties. (Civil Aviation Authority, 1998)
THE EMIRATES AIRLINE OPERATIONS
The experience of Emirates in developing processes to integrate sales, revenue management and schedule planning to achieve revenue objectives. The focus of Emirates has been in ensuring that the sales force is armed with revenue management acumen while pursuing revenue opportunities. There were difficulties faced by the various stakeholders in aligning their objectives towards the airline’s revenue objectives and the potential conflicts and hurdles they face in their day-to-day implementation. The solutions evolved in Emirates from 1997 have significantly sharpened its competitive skills, improved its internal synergies and enhanced its corporate IQ for better decision-making (Rosenberg, 2005). It has enabled Emirates to practice revenue management philosophy as an enterprise-wide competency instead of being a specialized proficiency. Emirates Airlines based in Dubai, is preparing to increase its initial order of 58 jumbo jets from Airbus and Boeing at a total value of 15 billion Euros. In comparison with Ryanair and other airlines that have suffered as a result of September 11, 2001 and the looming conflict in Iraq, Emirates has grown and is expecting to double its net profit and will announce its decision to increase its order as it stands, Emirates Airlines has ordered 22 Airbus A380, three A330, eight A340-600, and 25 Boeing 777 jumbo jets. (Rosenberg, 2005 p. 13)
In advance of introducing the Airbus A380 to its fleet, Dubai-based Emirates airline will deploy the Ultramain maintenance and logistics software as its primary management program to schedule and track maintenance tasks. The management of human factors within the multicultural environment of the Emirates Airline is reviewed with emphasis on safety procedures adopted in the Engineering and Maintenance division. A discussion of recent improvements in flight safety covers air safety reports, confidential data exchange, ground proximity warning system, traffic collision and avoidance system, quick access recorders, ground safety improvement program, crew resource management, and human factors and error reduction (Knight Ridder/Tribune Business News, 2005). Emirates is among the world’s fastest-growing, five most profitable and 20 largest international airlines. It is based in Dubai, a city that pursues an open-skies policy, with more than 110 airlines in free and fair competition. The airline operates services to more than 75 cities in 54 countries in Europe, North America, the Middle East, Africa, Indian subcontinent and Asia-Pacific, including two daily flights to New York’s JFK. Since its launch in 1985, Emirates Airline has received more than 280 international awards in recognition of its efforts to provide unsurpassed levels of customer service. The airline has experienced rapid and consistent growth, above 20 per cent a year on average and has been profitable for the last 17 years. (Knight Ridder/Tribune Business News, 2005) The airline plans to more than double its size by 2012. Emirates presently has 93 aircraft pending delivery, worth nearly US billion in list prices. This includes 45 Airbus A380s (two of them freighters), 25 Boeing 777-300ERs, 20 Airbus A340-600 HGWs, one A340-500 and two A310-300F freighters. Emirates announced the largest order in commercial aviation history at the 2003 Paris Air Show, when it added 71 new Airbus and Boeing aircraft worth US billion to its order book. It also was the first airline to order the revolutionary A380-800 double-decker and will be the main launch carrier for the innovative A340-600 HGW. Emirates airline was founded in 1985, it’s doubled in size every three to four years. (Hill, 2002) The carrier has been profitable for 18 consecutive years. The Maktoum family’s airline has prospered with fuel-efficient aircraft and a union-free workforce drawn from more than 100 countries. It’s made its reputation with a flair for promotion and amenities, such as private cabins in first class and 500-channel in-flight entertainment systems. The carrier has rapidly expanded its home airport, also under Sheikh Ahmed’s chairmanship, it is the key to Dubai’s strategy of becoming a well-heeled playground hosting as many as 50 million tourists per year. (Hill, 2002)
Sheikh Ahmed said the government invested just million to launch the airline, flying two planes between Dubai and Pakistan, and hasn’t put money into the carrier since. Long flights, low costs Despite whispers from rivals that the carrier must receive some form of continuing government subsidies, airline consultant Robert Mann credits the airline’s business model for its success. Put simply, Emirates flies large aircraft long distances, rather than smaller planes in a busy domestic network. “Emirates also gains a competitive edge over U.S. carriers through lower labor costs. Labor accounts for 20 percent of Emirates’ operating costs, while U.S. legacy carriers are saddled with payrolls as high as 42 percent of costs “absolutely unsustainable,” said Emirates executive vice chairman Maurice Flanagan. (Pitt and Brown, 2000) Emirates doesn’t gain any special advantage from working in the geographic center of the world’s oil supplies, said Mr. Flanagan. Emirates Airline relies on a consultant in Houston to cut down on its fuel costs. Working with Emirates’ fuel committee, the consultant was able to save the carrier 9 million last year. Emirates is building special terminals in Dubai and elsewhere that will unload both decks of the planes simultaneously. The company is talking with Boeing about orders for its new 787s, which are expected to be the most fuel-efficient airliners in the sky.
Emirates has consistently bucked industry trends to post record profits for the past 17 years. It is also investing in future growth with firm orders for 92 new wide-bodied aircraft including 45 super-jumbo Airbus A380s. Dubai grows at around 17 percent annually, and by 2010 it expects to have five million residents and some 15 million visitors. Emirates needs to be ready to support and tap into this growth, and that is why we are investing heavily in our fleet, in technology and support infrastructure, as well as in recruiting and training the right people.” To support its fast-expanding fleet, which increases by one new aircraft per month on average, Emirates is constructing a US3 million engineering centre and a new jet engine testing facility. When completed next year, Emirates’ engineering centre will be one of the biggest civil aviation maintenance facilities in the world with eight hangars fully equipped to handle heavy and light maintenance for the airline’s entire fleet including the soon-to-be-delivered A380 (Sull, Ghoshal and Monteiro, 2005). Sheikh Ahmed said: “The future looks bright for Emirates, with opportunities brought about by Dubai’s development as well as the steady growth in demand for air travel globally. We will continue to focus on innovation, quality and customer service; expand and strengthen our network to provide more air connections that will facilitate trade and tourism flows; and invest in advanced aircraft which are not only efficient to operate but will also allow our passengers to travel further, in great comfort.” (Sull, Ghoshal and Monteiro, 2005 p. 4).
Emirates has honed its skills and abilities to stay at the cutting-edge of customer service. It also challenges the airline to keep finding new ways of operating more efficiently while delivering a superior experience to its customers. Emirates will have launched services to a dozen new cities and increased frequencies to more than 30 existing destinations. (Sull, Ghoshal and Monteiro, 2005).Emirates operations as in comparison to Ryanair, never received direct subsidies or relied on government handouts. Dubai’s open skies policy granted foreign airlines the same access and privileges as Emirates. Competing under Dubai’s open skies policy from its onset toughened the fledgling carrier, and according to Flanagan “has helped us to become a carrier which can compete with the best of the world’s airlines”. (Sull, Ghoshal and Monteiro, 2005 p. 5) Much of Emirates’ success is due to the Al Maktoum’s sheikhdom’s ambitious strategy of reinventing Dubai as a modern hub of tourism and commerce in the Middle East. Emirates’ formula for success cannot be found in any management book. Its creativity in seizing opportunities and solving problems as they arise is the company’s strength. (Sull, Ghoshal and Monteiro, 2005).Emirates’ success has emerged from taking a non-traditional management approach, rather than relying on the industry’s conventional wisdom. Emirates is run like a family with, for example, an informal and entrepreneurial spirit. Emirates’ strategy of hiring from around the world confers economic advantages as well. The airline pegs staff salaries to the level common in their home country, which is often lower than wage rates in Europe.
FINDINGS
Emirates continued to grow significantly in the late 1990s, with ongoing but less dramatic reorganizations in the group. Surviving the perfect storm By not doing what other airlines do, Emirates has carved a niche for itself as a profitable, successful player that writes its own script, rather than copying what others do. (Pitt, 2000) The greatest test of the airline’s business model came in 2001 when Emirates, along with all other carriers, faced one of the most severe crises in the history of the airline industry: the September 11 terrorist attacks. But that was not the only challenge. (Doganis and Dennis, 1989) Emirates’ unique way of working appears to have paid off. In spite of the crisis in the industry, Emirates remained profitable. It did not reduce its workforce, as many other airlines did. It would have been forgivable to batten down the hatches, Sheikh Ahmed explains. ‘We could have slashed costs by announcing large numbers of redundancies as several other carriers did, and forget about our prognosis for another profitable year. But we did not. We did not make a single employee redundant, and paid salary increments in full’. (Doganis and Dennis, 1989) Emirates has become renowned for placing eyebrow-raising orders for new aircraft. Emirates operates one of the youngest fleets in the airline industry with an aircraft average age under four years old compared with an industry average of many years. (Mintzberg, 1983)
Executing on the global hub and spoke strategy will require Emirates to expand its route network as it is planning direct flights to San Francisco and Chicago, enabling flights from North America to the Gulf and Africa without changing planes in Europe and plans to double the number of planes operating from over 50 in 2005 to well over 100 in the year 2010. (Pitt and Brown, 2000) Management attempts to obtain competitive rates for such services by negotiating multi-year contracts at prices that are fixed or subject only to periodic increases linked to inflation. The development of its own reservations centre and internet booking facility has allowed Ryanair to eliminate travel agent commissions. Ryanair generated virtually all of its scheduled passenger revenues through direct sales, with direct telephone reservations and sales through Ryanair’s website respectively. (Pitt, 2000) Ryanair’s record of delivering a consistently high volume of passenger traffic growth at many of these airports has allowed it to negotiate favourable contracts with such airports for access to their facilities. Ryanair further endeavours to reduce its airport charges by opting, when practicable, for less expensive gate locations as well as outdoor boarding stairs rather than more expensive jetways. Ryanair has not had a single incident involving major injury to passengers or flight crew in its 19-year operating history. (Pitt and Brown, 2000)
Although Ryanair seeks to operate its fleet in a cost-effective manner, management does not seek to extend Ryanair’s low cost operating strategy to the areas of safety, maintenance, training or quality assurance. Routine aircraft maintenance and repairs is carried out in house while currently contracting heavy airframe maintenance, engine overhaul services and rotable repairs to contractors, these contracts will be under review. Increasing aircraft and routes may prove the most straightforward aspect of scaling operations. Emirates must also attract the passengers to fill the planes. (Ryanair holding plc, 2002) Emirates managers hope to do this, in part, by passing part of the savings from their lower cost base on to passengers in the form of lower prices. The A380 is estimated to reduce fuel costs by 15 per cent versus existing long-haul aircraft, and Emirates managers plan to maintain their labour cost advantage. Emirates’ expansion will require an increase in the total staff to 35,000 by 2010. Emirates has earned a reputation for thoroughness, quality and consistency of service as the airline’s planned growth could strain its ability to provide consistent service quality and jeopardize its hard-earned reputation. Emirates has steps in place to ensure service quality while growing, including systems to track problems quickly, ISO certification for certain operations, and increased standardization of certain operations to ensure consistency.
Marketing and resource-based operations strategy of Ryanair and Emirates Airline involves certain assertions as developed in strategic management theory (Barney, 1986), that the resources and capabilities possessed by the airlines may have differences in relating to the process of operations that will include the ability of those airlines to sustained competitive advantage in the following way. There could be common marketing and resource operations that will not meet the best sources of competitive parity with the system in operation of Ryanair and Emirates Airline as the system will be the source of competitive advantage for the Airline industry. The marketing and resource-based condition of such strategies becomes important in understanding those airline carriers’ resources and capabilities will be sources of sustained competitive advantage in developing, and acquiring good operation ways as compared to other airlines that has an established strategy that does not imply that the only way to gain such advantages of those strategies (Porter, 1980) like through attempting to develop their own-based operations differentiation strategies as these may help implement a wide range of strategies in operations integration (Barney, 1996).
The issue of operations methods as a marketing requirement is dealt with in a manner and is focused on the issue of whether operations management will effectively interconnect the marketing and operations management functions that needs to be addressed within the context of Ryanair and Emirates Airlines (Sower and Motwani, 1997) as those airlines can be seen that synthesizing marketing and operations management is especially crucial in the service sector along with the presence of the customer in the entire Airline operating system that may be different than the marketing function which deal with the customers and Ryanair and Emirates will enable to identify the critical determinants regarding the degree in which the strategies perform safely in the marketing and operations activities independent on the airline mode of operations service processes in various areas (Pullman and Moore, 1999) and the focus is to apply those crucial strategies in valuing airline business factors that impact the degree to which their operations in marketing and resource-based operations strategies are uniquely managed in the process linking to the essence of strategies among different unit function of those airlines within the market demands and the particular materials being utilized in terms of providing better strategy management. (Priem and Butler, 2001)
Moreover, Emirates is no stranger to growing operations. Emirates has placed some big bets on Dubai, the A380 and its global hub-and-spoke strategy and its ability to scale operations as no one would confuse the airline industry with an easy sector to make money by having a good chance of continuing to defy the odds and succeed in a tough industry along with Ryanair.
Credit:ivythesis.typepad.com
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