Ryanair: Responsibility Audit Report

Ryanair: Responsibility Audit Report

A review of Ryanair's current responsible business practices and recommendations for future ethical corporate behaviour

DECEMBER 2012

EXECUTIVE SUMMARY

This work has been commissioned by Ryanair Limited ('Ryanair') in response to the increased importance placed on ethical practice in business. A responsible business is one that seeks to operate honestly, considers people and the environment when making business decisions, and tries to make a positive contribution to the local community and to wider society. As stated in the organisations 'Code of Business Conduct & Ethics 2012' Ryanair is committed to conducting business in an ethical fashion that complies with all laws and regulations in the countries in which Ryanair operates.

Using search methods of analysis including environmental scanning, this report audits the current business practices of Ryanair (a brief profile of the company can be found in Appendix I), including external influences the business is exposed to and considers to what extent these practices demonstrate the responsible corporate behaviour Ryanair strives to achieve as set out in the Code of Business Conduct. Specifically, this report recognises a significant opportunity to further demonstrate Ryanair as an ethically responsible organisation.

A REVIEW OF BUSINESS

Responsible business can be considered through internal procedures and external influences. Internal corporate practices should strive to act responsibly in all business function and towards for employees, customers and other stakeholders. External influences highlight factors that are not necessarily in the business' control but can impact the way in which Ryanair operates. By analysing Ryanair's business practices we can gain a better understanding of their pledge to be a responsible business.

INTERNAL BUSINESS FUNCTION PROCEDURES

Marketing & Brand

A key strength of Ryanair is its brand recognition and reputation for low cost flights. Ryanair's business model is driven by low variable costs, leading to high volumes and ultimately profit. Therefore the success of the business relies on positive brand image which is driven a lot by media. Various initiatives to keep such variable costs down have been publicly attacked which is harming for the brand image and can also portray the business as one which is solely driven by profits and disregards any social responsibility to its customers. For example, The Irish Times published an ethical rankings list in 2010 (based on environmental performance, corporate social responsibility and information provided to consumers) which ranked Ryanair in the bottom 10 out of 581 companies.

Ryanair's marketing strategy focuses on their famously low prices and they often use their competitors to compare product offerings. They appeal to lower income households, students and budget conscious travellers. By analysing the marketing mix we can further understand how Ryanair were able to transform itself from operating in the UK alone to being one of Europe's largest airlines.

Focussing firstly on promotions, Ryanair have historically spent little in this area. For example, most of their advertising is done online due to the low costs compared to other airlines such as British Airways who use television advertising and prepared a £20m marketing campaign in 2011. However, advertising online proves to be useful for Ryanair as over 70% of their tickets are sold on the internet. Ryanair do all marketing in house to save costs instead of outsourcing to marketing companies. Michael O'Leary oversees most marketing activity, creating simple ads which clearly highlight Ryanair's low fares.

Ryanair are known for often known for controversy and radical ideas which in creates a disadvantage for Ryanair, however it can be argued that this portrayed image may be a clever advertising scheme. For example, in 2009 O'Leary announced plans to charge customers £1 for the use of the toilet onboard. O'Leary reasoned with customers claiming that the idea stemmed from them not wanting other passengers getting up and moving around during the flight. Similar to this, one of his other less notorious plans was to charge larger passengers extra as they take up more space, indicating that Ryanair are oblivious to basic human rights, but more importantly making Ryanair vulnerable to discrimination claims. Whilst this creates publicity for Ryanair, positive or negative, it also leads to the assumption that Ryanair's pursuit of minimising costs overcomes their value for the responsibility of their customers.

Average fare from London to Madrid % > Ryanair

Ryanair €32

EasyJet €40 25%

AirEuropa €51 59.3%

British Airways €77 140.6%

Moving on to price, analysing this is somewhat simpler, as all the evidence shows that Ryanair take great pride in offering the lowest fares in Europe, proving to be 25% cheaper than rivals EasyJet. To try and prove Ryanair's reputation for being the cheapest European airline, I have conducted my own personal research by going on to these four airlines websites, and searching for flights from London to Madrid on the 25th of January 2013.

In terms of competitors, Ryanair has been accused of predatory pricing which does not demonstrate responsible behaviour to the market, industry or customers.

Although these results look favourable to Ryanair, what they have failed to mention in the past are extra charges such as boarding and check-in fees added tax and other unmentioned costs. In May 2010 Ryanair lost a case in Spain which claimed it was illegal to charge passengers €40 (£34) for forgetting to print out their boarding pass. Some may argue that this is just a fine print scam to squeeze as much money out of a sale as possible; however Ryanair argued that 99.9% of their customers used their web check-in services in 2009. Ryanair claimed that the web check-in allows passengers to avoid queues in the airport. In light of these accusations, Ryanair's responsibility when it comes to marketing is questionable. Providing the right product/service is vital for any business to succeed. Unlike most other airlines Ryanair don't provide any additional amenities