Ryan Air: Ups and Downs

Ryan Air was founded in 1985 by the Ryan family to provide scheduled passenger airline services between Ireland and the UK, as an alternative to the then state monopoly carrier, Aer Lingus. According to (2001) Ryan Air was the first low-cost, nor frills airline that had an impact on the European airline industry. When launched in 1985 targeted the Irish ethnic market between Ireland and the United Kingdom by offering a more or less traditional type of service with a two-class cabin but at significantly lower fares. It stimulated a rapid growth of passenger traffic across the Irish Sea, much of it diverted from the sea ferries. On the London-Dublin route, where traffic had been stagnant for three years, passenger numbers more or less doubled in the next three years in response to the low fares introduced by Ryanair and to the lower fares forced on Aer Lingus and British Airways. But Ryanair was not profitable. Its unit costs, though lower than those of Aer Lingus, were not low enough to sustain its low fares strategy. By 1991 its accumulated losses amounted to close on (Sterling) £18 million and the airline was facing serious cash flow problems. It had also gone through five chief executives. After a visit to Southwest Airlines in Texas in 1991 yet another new management decided to reinforce the low-fare strategy but to abandon all frills in order to reduce costs. It also moved its London base from Luton to Stansted airport, which was new and offered high-speed access to Central London. The new strategy slowly turned the company round and it recorded a small pre-tax profit in 1992. Subsequently traffic and profits grew steadily and in summer 1997 Ryanair was successfully floated on the Dublin and New York stock exchanges. In the financial year 1997-98 alone its profits rose by 51 per cent to US$53 million. Ryanair's sparkling financial performance was an encouragement to other European entrepreneurs to assess the low-cost, no-frills model as a way