Ryanair - Accounting, finance & control project

Michela Baggio 876690
Marco Beretta 878482
Francesca Cacciani 874906
Giuseppe Cirillo 878042
Filippo Cheli 876241

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INDEX:
1. DESCRIPTION OF THE COMPANY………….…………………………….pag. 2
1.1. Short history
1.2. Ownership
1.3. Size & structure
1.4. P.E.S.T. analysis
1.5. Porter’s five forces
1.6. S.W.O.T. analysis
2. DESCRIPTION OF THE STRATEGY…………………………………….….pag. 5
2.1. Vision, mission and values
2.2. Ryanair’s business model
3. FINANCIAL ANALYSIS…………………………………………………...…..pag. 6
3.1. Ryanair’s financial performances
3.2. Benchmarking with EasyJet
3.3. Benchmarking with British Airways
4. BALANCED SCORECARD………………………………………………….pag. 14
4.1. Strategy map
4.2. Value drivers’ analysis – Financial perspective
4.3. Value drivers’ analysis – Customer perspective
4.4. Value drivers’ analysis – Internal perspective
4.5. Value drivers’ analysis – Learning & Growth perspective
5. CONCLUSION……………………………………………………………….pag. 21
6. NOTES………………………………………………………………………...pag. 22
7. BIBLIOGRAPHY…………………………………………………………….pag. 23

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1. DESCRIPTION OF THE COMPANY
1.1. Short history:
1.2. Ownership:
Ryanair keeps a close contact with its shareholders. Today the firm’s shares are mainly owned by Institutions
(61,5% of total shares, spread on 343 members) and Funds (38,5% of total shares, spread on 461 members) (Fig.
1). Because of the high number of shareholders, each of them has a small percentage of shares.
Fig. 1 - Ryanair's shareholders -
1.3. Size & structure:
With a turnover of 6.535,8 Mln € and a net profit of 1.559,1 Mln €, in 2016 Ryanair is the most successful company
of the low-cost flights industry. Today the company counts an average staff of 9.500 aviation professional
employees and 103 million customers served, increased by 10% compared to 2015. Due to this extraordinary
growth Ryanair has just ordered 283 new Boeing 737 and planned to invest, only in Italy, 1 billion €. Supporting
its size, Ryanair has adopted a typical functional organizational structure, in fact it is divided into different
departments or functional work activities, which are overseen by a level of top managers. Ryanair features a board
of directors and an 11-person board that answers to the CEO (Michael O'Leary).

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1.4. P.E.S.T. analysis:
To better understand the context Ryanair competes in, it is useful to perform an external environment analysis. The
PEST analysis (Tab. 1) is significant to highlight external factors, linked to Political, Economic, Social and
Technological aspects of the context. They are fundamental because they strongly affect the industry.
Tab. 1 - P.E.S.T. analysis -
1.5. Porter’s five forces:
The analysis of Porter’s five forces model highlights the level of attractiveness and competition within the industry.
It allows to identify those forces, close to Ryanair, that affect its ability to serve its customers and make a
considerable profit. From this analysis, as it emerges from Fig. 2, this industry is rather competitive with a reduced
attractiveness due to a low profitability, caused by the shorten concentration of the industry. The team retained
relevant to include also the sixth force, complements, in order to better analyse the independent business, which
support and facilitate Ryanair’s business model. The main factors identified are:
 The price of ground transfers between secondary airports and cities. In fact, an interesting fare could be
rejected by customers if they cannot find their way to the airport with a reasonable price. A cheap-transfer
company would highly increase the attractiveness of the market.
 The huge increase in the smartphone use and in the applications marketplace made online purchases of the
tickets much easier;
 The interaction between social networks (i.e. Facebook) and the companies’ applications simplified some
procedures, as check-in or filling up forms with personal data;

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 Presence of several international flights search engines (i.e. Skyscanner) that help travellers communities
finding low fares.
Fig. 2 - Porter’s five forces -
1.6. S.W.O.T. analysis:
The analysis in Fig. 3 helped us to highlight how Ryanair’s strengths can meet the market’s opportunities: in fact,
thanks to the stable financial situation and its cost advantage, it should be easy for the firm to exploit the market
potential growth. The main threats right now are Brexit’s consequences as they are still undetermined and depend
on the agreements between EU and UK. They could be alarming.
Fig. 3 -S.W.O.T.analysis –

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2. DESCRIPTION OF THE STRATEGY
2.1. Vision, mission and values
Ryanair’s main objective is to establish itself as the European biggest scheduled passenger airline, offering low-
fares services and following a continuous improvement approach. The two key elements the company bases its
strategy on are the two following: low fares, aimed to increase the demand and the possibility of travelling around
Europe on a low budget, and customer service, focused on punctuality and reducing lost baggage and cancellations.
2.2. Ryanair’s business model
The business model describes how a company aims to create value. In order to realise this purpose, all firms have
to identify specific customers’ needs and try to satisfy them in the best possible way. Every day Ryanair offers
flights with very reasonable prices in order to gain the loyalty of those targeted customers who look for low fares.
This segmentation allows Ryanair to meet a wider number of clients and to increment year after year its business
volume. A large volume is necessary to reach more favourable economies of scale; in fact, it would mean lowering
the unit costs thanks to a better allocation of the fixed costs. The team has decided to examine Ryanair’s business
model fully by dividing it in the following components for a clearer explanation:
1. Structure: the company chose to have very spartan headquarters in order to save up money and resources.
2. Employees: Ryanair strongly believes in the competitive advantage given by a well-motivated staff and for this
reason it offers to its personnel very challenging goals.
3. Ryanair’ s relationship with airports: since the early beginning, Ryanair focused its attention on secondary
airports, achieving low costs as well as subsidies from different national governments. This strategic decision
keeps supporting the development of several ancillary business (ex. shops, transports, restaurants).
4. Customers’ needs and expectations: Ryanair’s customer segmentation is characterized by an expectation of a
low quality service: all kind of frills in fact have to be paid separately. By doing so, Ryanair can maintain low
prices and gain additional revenues from the ancillary business and from extra services.
5. Assets management: the two guidelines followed in the management are the maximisation of the aircraft
utilization thanks to the high volume of customers, and the standardisation of the fleet, which allows the
company to considerably reduce fixed costs.
6. Bargaining power: the huge number of passengers carried every day and thereby the huge size of the firm
allows the company to obtain a considerable bargaining power with both suppliers and airports.

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3. FINANCIAL ANALYSIS
We analysed Ryanair’s financial statements with the goal of understanding the company’s achievements during
the last year but also the coherence with the business model. The analysis was conducted in two different steps:
we first studied and reported the results of Balance sheet, Income statement and Cash flow statement of every
different year. Thanks to these dissections, we had the possibility to deeply understand each year's achievements
and the impact of the different factors on these results (vertical analysis). We then compared each result and the
most relevant factors with the ones of the past years (horizontal analysis between 2015, 2014, 2013) to highlight
the differences and trends between them. The second step was to compare Ryanair with EasyJet, its main
competitor for European low-cost market, and British Airlines, a company in the same industry but with a different
strategy. To better understand the differences, we ran the comparison separately. They adopt different accounting
rules, in fact Ryanair’s financial year starts and ends in March while Easyjet’s and British Airlines’ ones are from
January to December. Since the fact that 2016 financial year was not finished yet when we conducted this analysis,
both in Ryanair’s analysis and benchmarking, we decided to compare the firms between year 2015,2014 and 2013
and not between 2016.
3.1. Ryanair financial performances
Ryanair’s overall performances have lately been pretty successful. The profitability performances have always
been satisfying, in fact on one hand the revenues are permanently growing, as a consequence of the increasing
number of routes and passengers, on the other hand the management of the operating costs has been efficient.
Concerning the financial resources, the firm is raising substantial debt financings to cover all of the aircraft
deliveries over the period from September 2014 to November 2023 (Boeing contract). Even though the company
is basing its growth mainly on debt-capital, financial institutions concede convenient interest rate thanks to
Ryanair’s stable liquidity situation and excellent risk management. The team has focused its analysis mainly on
2014 and 2015, as the overall performances of the 2013 are quite similar to the 2014, as shown in Fig 4. That’s
why only the main differences have been highlighted.
3.1.1. Shareholders’ perspective (note 1)
ROE
Ryanair ended 2013 stating a ROE equal to 17,4%; the
year after, it decreased and only in 2015 it improved,
overtaking the value accounted in the first year of our
analysis. This trend is caused by the fluctuation of the
net profit (in fact, during the time horizon considered,
the equity is slightly growing and this does not explain
ROE’s evolution). Examining in depth the numerator,
the team realised that between the 2014 and 2015 Fig. 4
Fig. 4

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revenues increased more than proportionally than costs, while in the previous period the opposite happened. The
main factor that affects this result is the “fuel and oil” cost, whose price strictly depends on the fuel industry, so it
can’t be controlled by the company. In fact, in 2014 Ryanair faced an increase in fuel’s price that led the company
to invest in new engines, which have been combined with an Advanced Technology winglets and other
aerodynamic improvements. This allowed the firm to reduce fuel consumption by up to approximately 10% per
seat in 2015 and it improved the ROE final value. The company also has reduced over the three years the “financial
expenses”, primarily thanks to the convenient interest rate of banks.
Payout ratio
From the payout ratio analysis (Fig. 5) it clearly emerged that
Ryanair’s dividends policy interchanges one year of no divided and
one year of massive amounts (almost the net profit of the previous
year). This decision affects the sustainable growth rate (= ROE ∗ (1 −
Payout ratio)) , which cannot be considered meaningful.
3.1.2. Overall company perspective (note 2)
ROI & economic margin
Moving to an operating point of view, ROI marginally increased between 2014 and 2015, while the opposite
happened between 2014 and 2013 for the same reason explained in the ROE analysis (Fig. 6). The team focused
on the analysis of the last two years and noticed that the EBIT and the invested capital were both growing. Even
though Ryanair finances its fleet mainly with debt-capital, the overall yield of capital is superior than its cost, as
the positive economic margin (note 3)
shows in Tab. 2.
In order to better understand the operative factors, the team also has conducted the analysis of ROI’ s components
(Fig. 6):
1. ROS (also called operating profit margin): this indicator allows to highlight the impact of operating costs on
revenues. As previously explained, the factor that has a huge impact on the EBIT is the “fuel and oil” cost (43%
Fig. 5
Tab. 2
Fig. 6

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of the total operating costs in 2015 and 46% in 2014 and 2013, due to fuel price fluctuation). There are some
costs that during the time horizon increase as a consequence of Ryanair’s growth plan (launch of new bases):
“marketing and distribution” costs (+18,2% between 2013 and 2015) and maintenance costs (+11,8% between
2013 and 2015). The main cost item that the company can’t completely control and exploit in his cost strategy
is the “airport and handling charges” cost, which depends on the air travel taxes that some governments apply.
The overall trend of the indicator is positive;
2. Turnover: this indicator had a quite relevant decrease between 2014 and 2015 because the capital invested in
the growing plan which started in 2013 - both in routes and in its fleet – has not yielded the expected returns
(sales) yet. This is also shown by asset turnover ratio, which decreased by 8,2% between 2013 and 2015. From
an horizontal analysis of the assets of the company, it clearly comes out how Ryanair is investing in “property,
plant and equipment” to increase its fleet. The other relevant resource item is “derivative financial instruments”,
which reflects the company’s risk management (the company uses “financial derivative instruments” to manage
exposures arising from some risks as commodity price, foreign exchange and interest rate risks). Even though
these indicators are right now decreasing, Ryanair is expecting a positive returns from its investments in the
short-term.
Quality of operating earnings
This indicator points out the link between the company’s profitability and its liquidity: in fact, it allows to clearly
evidence those cost items that do not correspond to a cash outflow. Starting from the quality of operating earnings,
our group noticed an increase in the value of the indicator due to the increment of the CFFO (Tab. 4). Therefore,
we computed the NWC in order to analyse the variation of the working cycle. As supposed, the NWC has been
decreasing (Tab. 3), which means that the suppliers were and are still conceding Ryanair longer payment terms.
In addition, another accrual item that positively affects the CFFO is “unearned revenues” (it is part of the “accrued
expenses”), which represents all the earnings already received for services that have not been fulfilled yet. Between
2013 and 2015 they increased by 65%.
3.1.3. Stakeholders’ perspective (note 4)
Debt to equity ratio & cost of debt
The amount of new debts incurred enables Ryanair to support its growth plan, in particular the acquisition of
several Boeings 737-800 and Boeings 737-MAX-200. The bank granted important financial resources and
therefore they required various and strict warranties. In contrast with this situation, Ryanair benefits of convenient
cost of debt. As shown in Tab. 6, the value of this indicator has decreased (-1,17% between 2013 and 2015). This
Tab. 3 Tab. 4

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happened because financial markets have a positive reputation of the firm, in fact both S&P and Fitch Ratings
classify Ryanair as a BBB+ stable (credit) rating. This is also reflected in the increase of the debt to equity ratio,
in fact, the company’s ability to obtain debts depends on the rating: the D/E ratio reflects the advantage that the
firm takes from lower cost of debt (Tab. 5). However, in the future it can happen that Ryanair will have to sustain
more consistent financial expenses, because of the increasing amount of debts.
3.1.4. Liquidity Analysis
From the analysis of both current and quick ratio it clearly comes out how Ryanair’s liquidity situation was stable
among the three years of analysis (Tab. 7). In fact, Ryanair managed to cover “current liabilities” with “current
assets” and “receivables”, but also with “short term investments” and “cash”. Taking into account the long term
time horizon, cash flow to debt ratio (Tab. 7) showed some improvements and Ryanair should be able to give its
current and not current debts back in two years and a half. In addition, Ryanair showed a strong liquidity capacity
also in the short term, reporting a positive increase in the short term debt coverage (Tab. 7).
3.1.5. Absolute indicators
To conclude the financial analysis, we have run the computation of the Economic Value
Added (Fig. 7), which measures the value Ryanair generates from funds investment into it.
The EVA generally increases showing how the firm is able to cover cost of capital with its
operative results, proving everything said before.
3.2. Benchmarking with EasyJet (note 5)
The first company we compared Ryanair with is EasyJet,
because they are the two main low-cost competitors in
Europe, in fact together they cover the 36% of the whole
aviation industry. They have many features in common:
cost-based strategy, short-haul routes, low service
offering and multi-channel purchasing. All these similarities lead to price wars. However, it is important to
underline the size differences, in terms of passengers, year-end fleet and number of routes served, as shown in
Tab. 7
Fig. 7
Tab. 8
Tab. 5 Tab. 6

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Tab8. Because EasyJet is smaller than Ryanair, we expect its results to be lower – assuming the perfect overlapping
business strategies.
3.2.1. Financial benchmarking with EasyJet
To understand attractiveness from a shareholders point of view, we first computed the ROE and payout ratio: from
ROE’s trend, EasyJet looked more attractive than Ryanair. However, Ryanair’s net profit was higher among the
three years, therefore the focus has been moved to the denominator. According to the team, the main factor that
affected the equity were “dividends” (Tab. 9), that reduced the equity and therefore increased the indicator, and
“retained earnings” that had the opposite effect. Our group wants to highlight how the practice of not distributing
dividends to shareholders but instead reinvesting them in the company through its equity has a positive impact in
the long term and this has been evaluated as the main reason for EasyJet superiority in ROE’s results.
Furthermore, from ROS analysis (Tab. 10), which is fundamental for a costs-based strategy, it came out how
Ryanair’s operations management was much more efficient than EasyJet’s one. In fact, computing the ratio
between each cost item over revenues to have an idea of their impact, it clearly emerged how all of them had a
lower effect except for “fuel and oil”. This is a consequence of Ryanair’s strategic choice to fly to secondary
airport, which is reflected in lower costs, particularly in landing fees.
The debt to equity ratio analysis (Tab. 11) highlights how this index was quite stable over the three years of
analysis. Generally speaking, between 2014 and 2015 EasyJet’s debt capital has increased faster than the equity
capital, while between 2013 and 2014 the company gave back some borrowings; these strategic decisions are
reflected in cost of debt’s trend. The team considered interesting the fact that, even though Ryanair is more exposed
Tab. 9
Tab. 10

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to risk than EasyJet and they both have a BBB+ rating, Ryanair had a more convenient cost of debt (especially in
2015).
For Ryanair, it is important to underline how the incurred debts aim to support investments and are not the
consequence of inefficiency in the working capital cycle as evidenced by the CAPEX (in three years it has grown
by 153%) (Tab. 12 and Tab.13). Even though the amount of investments of the two firms was similar, Ryanair had
a much higher CFFO, which means it had a higher ability to acquire long term assets.
Looking at the liquidity situation, it appears that EasyJet didn’t have not such a strong position, as shown from the
current ratio (Tab. 14). In fact, during the three years, the “current assets” kept decreasing (mainly due to “cash
and cash equivalents”) while the “current liabilities” had an opposite trend (mainly due to a steep increase in
“unearned revenues”). This makes EasyJet much riskier than Ryanair, which has an excellent liquidity
management.
3.3. Benchmarking with British airways (note 5)
The team chose British Airways for the comparison in
order to consider a company that is playing in the same
industry but with a different strategy, as the English
firm aims to the high-end customers. As a consequence
of its differentiation strategy, we expected BA to have a less efficient operational costs management than Ryanair.
Another difference is the size, in fact Ryanair is much bigger than British Airways, in terms of passengers served
and routes, as shown Tab. 15. However, the average ticket price of BA is higher than Ryanair’s, because of the
overseas routes and the customers service level, therefore the revenues of the company are bigger in terms of euro.
Tab. 11
Tab. 13
Tab. 14
Tab. 12
Tab. 15

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3.3.1. Financial benchmarking with British airways
First of all, the team analysed British Airway’s ROE noticing a considerable growth in terms of shareholders’ value
(Tab. 16). We observed that this profitability indicator had a steep increase between 2014 and 2015. Examining in
details the net profit we observed that in 2015 only half of it derives from “operating profit before exceptional
items” and that remaining part principally arises from “gain on disposal on PPE (property, plants and equipment)
and investment”. This item represents the amount of earnings the company achieves thanks to the retained
investment in AGL. The £1.5 billions gain on this disposal can’t be distributed among shareholders in forms of
dividends and this means an increase of British Airways’ “other reserves” which are part of the equity (in fact we
noticed that the equity value in the last year of our analysis increased by 87%). For these reasons, from the
shareholders’ point of view this positive result is right now only apparent.
In order to deeply analyse BA core business, we computed the ROS, which helped us understanding the increase
in ROE between 2013 and 2014. As seen in Tab. 16, Ryanair’s ROS was much higher, which means that in the
core business the Irish company was more efficient. In fact, considering the main cost items, we observed that,
even though British Airways is pushing towards cost reduction (- 6,5% for “total expenditure on operations”
between 2013 and 2015) which makes ROS increase, it is still achieving worse results compared to Ryanair.
Examining the Income statement fully, our group observed that, especially in 2015, BA was starting from much
more revenues (17’000 Mln € vs 5654 Mln €) but ended up with an EBIT not that satisfying (1860 Mln € vs 1064
Mln €). In fact, computing the ratio on revenues for each operating cost item, it emerged how Ryanair is managing
all of them more efficiently, except for “fuel and oil” cost, as reported in Tab. 17 (focus only on 2015).
Our group then decided to compare the financing structure of the two companies. From the analysis of the debt-to-
equity ratio and the cost of interest, it emerged that British Airways is much more exposed to debts (Tab. 18). This
Tab. 16
Tab. 17

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is reflected in a higher interest rate on debts. Probably BA’s decision to not distribute dividends and to keep them
into equity is aimed to better balance its financing structure. Ryanair can be considered much more stable; in fact,
it has a BBB+ rating against BA’s BB+ rating.
The team then compared British Airways’ asset policy and the investments plan with Ryanair’s one. Therefore, we
considered the capital expenditure coverage as shown in Tab. 19.
BA is following the guidelines imposed by International Airlines Group and it is running a harvesting strategy
suspending the CAPEX increase. The group adopted this strategy to face the several sources of turbulence (for
example terror attacks, ...) characterizing the industry in the last few years. The CFFO level was achieved through
a very stressing policy of the assets owned, which is reflected in an increasing index. Talking about Ryanair, its
indicator did not have a constant trend as a consequence of CAPEX growth. Aligned to its expansion plan, Ryanair
is increasing its investments and therefore the cash flow from operating activities had a positive trend.
Examining the liquidity of the two companies, the current ratio computation (Tab. 20) highlighted that British
Airways does not have such a strong financial situation. This was mainly affected by the “trade and other payable”
management (88% of the total current liabilities in 2013 and still around 75% in both 2014 and 2015). We observed
the opposite situation for Ryanair, which is much more stable, as previously exposed.
Tab. 19
Tab. 20
Tab. 18

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4. BALANCED SCORECARD (note 6)
The balanced scorecard gives us the possibility to control the alignment of the actions to the strategy of the company
and also the opportunity to measure the performance and potentially correct them if they are not consistent with
the target of the organization. Starting from the analysis of Ryanair’s strategy and its business model, we managed
to find some critical success factors the firm needs to work on to fully reach what they stated as objectives. Using
the strategy map, we understood how these CSFs are correlated by dividing them in four different perspectives of
analysis (financial, customer, internal, growth and learning) and finding the links between them. Since the main
aim of a company is to maximize the value for the shareholders, we decided to start our analysis identifying those
CSF belonging to the perspective that is more linked to this objective: the financial one. Using a top-down
approach, we then found the other factors that influence the financial ones. The further step was to switch from the
strategy to the performance measurement. Therefore, we identified for each CSF one or more indicators and we
set our targets for the future years. The values of the indicators within the Balance Scorecard come from 2015.
However, the initiatives proposed by the team take into account the nowadays situation of the firm (for example
Michael O Leary’s declaration of “free fares” was in November 2016) in order to be aligned with the market.
4.1 Strategy map
As all the companies, Ryanair’s main goal is to maximize its profitability. This goal is influenced by the amount
of revenues achieved and by the costs incurred (Fig. 8). Ryanair gets the 25% of its total sales from the ancillary
revenues (which depend on services like food, priority boarding, seat allocating, and baggage) and the remaining
75% from the scheduled revenues of the flight tickets. The substantial size of the former is partially linked to the
fact that Ryanair relies on secondary airports, which brings extra ancillary revenues. They in fact come from the
Fig. 8

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partnership with shops, restaurants and hotels which are within or around the airports but also from the cooperation
with ground transportation companies that provide services to reach those hubs. Ryanair has a strong bargaining
power over those airports because it brings massive waves of travellers every year. This aspect plus the fast
business growth give Ryanair the opportunity to increase the daily number of short routes over those airports. More
routes and the resulting increase of global enlargement will bring new revenues.
The impact of the second source of revenues instead, is strictly linked to the improvement of customer service,
which is influenced by the recent increase in employees’ competences and motivation and by the level of service
offered. To improve customer service, which is becoming the 2nd pillar of Ryanair’s strategy, a new three-years
program called ‘Always getting better’ was launched with the aim of increasing customer's experience in every
field (it will be explained later in the specific paragraph). Instead the 1st pillar is the ‘no-frills policy’, which allows
the company to maintain very low fares and thereby to become very successful in terms of tickets sold and so of
revenue. This goal can be achieved only by focusing the internal operations and efforts on the decrease of every
kind of internal costs. Ryanair’s management pursues the decrease of costs thanks to three main actions
strategically related:
1. the use of secondary airports (which gives the opportunity to exploit relevant governments subsidies, lower
handling charges and lower landing fees);
2. the increase of planes saturation, to allocate the fixed costs over more customers (load factor);
3. the use of new standardized and efficient airplanes (higher fuel efficiency, more seats).
4.2 Value drivers’ analysis - Financial perspective
Tab. 21

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4.2.1 Increase profitability:
To measure this performance of the company, we have chosen the ROS. Thanks to this indicator we can highlight
the impact of the operating activities on the revenues. In Tab.21, it emerges a positive increase compared to the
previous year (+5,4%). We also set a target for the next year that we have calculated as:
We used a weighted average because we gave more importance to the close historical data despite of the old ones.
4.2.2 Increase revenues:
The sales growth rate is an efficient index to directly measure the capacity of the company to expand its business.
Ryanair obtained an excellent result, especially if we consider the difference with the previous year (+9.13% in
total revenues, as it appears in Tab.21). Therefore, we find difficult for Ryanair to get a further large rise in sales,
but the company still expects to achieve at least a slight increase. In particular, the firm is investing a lot in
marketing and in the expansion of channels like websites, social networks and mobile to attract more young
customers, who are highly influenced by its low-fare policy.
4.2.3 Ancillary revenues:
Ryanair’s decision to fly mainly from secondary airports is strictly connected with its purpose to increase the
ancillary revenues, since it takes a percentage of the incomes generated by a huge number of services that these
airports provide. Analysing the % ancillary revenues indicator (Tab. 21), it emerges that the impact of these
revenues on the total sales was lower in 2015 than in 2014. This result is not consistent with the goals of the firm,
considering that the CEO has announced his new vision: “I plan to make air travel free within 10 years”. He bases
this purpose on the idea of sharing airports revenues with suppliers of additional services. This could be possible
thanks to the new potential deals in order to increase Ryanair’s income from airport restaurants, bars, shops and
ground transport services (to reach the terminals).
According to this analysis, we can generally conclude that in the 2015, Ryanair has reached and followed its
financial goals, with the only exception to the ancillary revenues. But, as we have already stated, the company has
several new plans for the future years.

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4.3 Value drivers’ analysis – Customer perspective
4.3.1 Low fares:
Low fares is the most important element of Ryanair’s strategy. Therefore, it is fundamental to keep under control
the performances related to this main objective. The adjusted price indicator seemed us to satisfy this need.
We use this index to highlight the difference between the Ryanair’s pricing policy and the other low-fares
companies’ one. We first calculated the average price of a Ryanair’s ticket (
revenues from tickets sold
number of customers
) and we then
divided this value by the average price of a ticket in the low-cost airline industry in EU. By doing so, we had an
idea of how lower Ryanair’s price was compared to the other companies. We expect the value to be now and in the
future < 1, which means that Ryanair is more attractive than the average in terms of fares.
4.3.2 Customer service:
Since Ryanair’s passengers number is growing faster and faster, it is important for the company not to ignore the
service offered to the customers but instead to make it more efficient and pleasant. For this reason, we have
identified three KPIs which can be helpful to monitor the performances of this CSF:
1. punctuality: the value of this indicator keeps getting better. In 2015 the percentage of flights in time was 90,5%,
that compared to the value of 2014 (89,83%) is a good result. Thanks to Ryanair’s capabilities, we think that it
could be possible to reach the value of 91,2% for the next year (same percentage increase, +0,67%)
Tab. 22

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2. lost baggage: one of the biggest worries of customers is the loss of their baggage during the loading operations.
Ryanair boasts a performance of one lost baggage for 3000 customers, it thereby leads the company to be one
of the best in the industry for this results. For this reason, it would be a good achievement to keep this value
stable.
3. % satisfied customer: a key element of the new strategy is improving the customer's satisfaction. This factor is
measured through a digital survey (‘Rate My Flight’) (Fig. 9) via phone application, offered to the passengers
at the end of every flight. They rate it from 1 to 5 according to the quality of their experience and we consider
satisfying the results of 4 and 5 stars. Ryanair does not show the results of this survey so we cannot set targets,
but we think the value will increase in the future thanks to the 3-year innovative program called ‘Always Getting
Better’ (which will be better explained later).
4.3.2 Increase global diffusion:
Ryanair’s expansion plan brought it to fly all over Europe. The management is now trying to look further, aiming
to the few EU countries that have not been reached yet, to the ones right outside of EU (North Africa, Middle East)
and even overseas. The credibility Ryanair is gaining could be a good boost to serve more and more customers all
over the world and for this reason we think the company should reach new countries every year, increasing the
value of this indicator.
4.4 Value drivers’ analysis - Internal perspective
Fig.9
Tab. 23

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4.4.1 Load factor:
For an Airline company, it is very important to fill the plane up, in fact saturating the seats helps allocating the
fixed costs of the flight over more customers. The purchase of new airplanes with more seats does not help it
objective but, if well managed, the new assets will bring more revenues. In fact, Ryanair uses a software called
‘airRM’ (developed by Revenue Management Systems) which is a digital tool that helps the company to maximize
revenues by supporting customers through the purchase process. Offering more user-friendly interfaces and graphic
tools to customers, it automatically modifies the prices of the tickets (thanks to customers profiling) , leading to a
high increase of sold tickets and thereby to a higher saturation of the plane. An improvement of the software and
its management could lead Ryanair to have better results in the future. Comparing 2014 and 2015 load factor
values we identified a rapid growth (+6,3%) up to 88,2%. We set the target for the next year (92,22%) with the
formula shown in the profitability paragraph, that does not only consider the last year but also the previous one.
4.4.2 Decrease cost:
Having low internal costs is one of the greatest Ryanair’s success factors and it permits the company to sustain its
strategy. From the costs breakdown, it comes out how the operative expenses are the majority (98%), for this reason
we decided to take them into account for the measurement of the KPI ‘cost impact’ (Tab. 23). Their impact over
revenues is now at 81,55%, decreased by 5,37% compared to the previous year. This index should decrease to be
even more successful and Ryanair is trying to achieve this goal, for instance by purchasing new aircrafts that are
more efficient in the fuel consumption.
4.4.3 Secondary airports:
The management of secondary airports is another great lever in Ryanair's strategy. Few companies’ strategy relies
on secondary airports as much as Ryanair does. It is a key aspect of its prosperity and it must be taken into account
when analysing the internal success factors of the company. The revenues coming from these airports are accounted
as “ancillary revenues”, like food, extra baggage and on-board purchases. We created the indicator called ‘airport
impact’ to better understand the impact of this sources of revenues (the ones coming from secondary airports) over
the total of the ancillary revenues. We have no clear data about the incomes deriving from the airports but we think
its value will increase a lot in the future. In fact, as we partially stated previously, The CEO has announced:“I have
this vision that in the next five to 10 years, the air fares on Ryanair will be free thanks to the earnings from
secondary airports”.

20
4.5 Value drivers’ analysis – Learning & Growth perspective
4.5.1 New airplanes:
The order of 180 new B737-800 NG Boeings gives Ryanair both the opportunity to introduce innovative
technological planes in its fleet and the possibility to carry more customers with a single flight (the new airplanes
provide 8 additional seats). To verify how the company satisfies these goals, we analysed two different indicators:
1. number of airplanes: the company has concluded the year with 323 airplanes, 15 more than the previous year,
as Tab. 24 shows. The 180 new planes, that will be delivered from 2019 to 2024, will permit Ryanair to transport
160 million passengers more per year.
2. fuel reduction: this information is not available, but it might be a significant measure since it tracks the “fuel
and oil” cost reduction (derived from the better performances of the new Advanced Technologies winglet and
other aerodynamic improvements) and more in general the variable costs reduction.
4.5.2 Increase employees’ competence and motivation:
Ryanair wants to meet ambitious growth targets, it finds essential to invest more money on those people who
considerably contribute to make it possible: the employees. The firm could be satisfied by the achievement of a
Tab. 24

21
lower turnover in the future years. This index represents the number of employees who quit the company by their
own choice. Its value is not available, but it might be really significant for the company, especially for measuring
the level of employees’ satisfaction and loyalty.
4.5.3 Improve AGB program:
The “Always getting better” programme is probably one of the most relevant strategic initiatives of the company,
it is aimed to satisfy the second key element on which Ryanair bases its entire strategy, the customer service. AGB
plans to achieve this goal through the improvement of all aspects of the customer experience providing service,
digital and inflight developments. We selected two indicators to efficiently measure the evolution of the
programme:
1. check-in: this index permits to analyse the trend in the use of Ryanair’s smartphone app. The growth of the
value reflects the customer’s increasing inclination to the digital innovation project of the company.
2. new customers: we analysed the percentage customers increase compared to the previous year. Thanks to the
good results of the AGB program, Ryanair boasts an increase of 1,09%. This is an excellent result, for this
reason we consider acceptable any positive percentage for the next year, (since it would be very difficult to
keep it stable).
4.5.4 Increase of short routes
Ryanair not only wants to reach new countries but it is also trying to intensify its daily aerial traffic by introducing
new routes. To measure the entity of this process we simply identified the KPI that takes into account the company
growth in quantitative terms.
5. CONCLUSION
We decided to conclude the report with a short critical paragraph that shows the problems we faced during the
work and the opportunities we had to better understand the topics studied during the classes.
The biggest benefit of the project was to have a clear, complete and deep overview of the financial situation of a
listed company, in our case Ryanair. We accurately analysed all the documents of the financial statement of the
past three years and we had the possibility to realize how complex the financial management is. We also learnt
how important it is the alliance between the financial decisions and the strategy plans. By comparing Ryanair with
its main competitor EasyJet we also had the chance to understand how companies with very similar strategy can
have pretty different results due to different management choices. Plus, we found the practical development of the
balance scorecard really helpful to understand the link between company goals and the successful factors the
management oversees. This gave us the opportunity to put our own efforts and knowledge in the creation of KPIs
to monitor those factors.

22
Of course, during the report execution, some hurdles occurred. We tried to build KPIs that were as measurable as
possible. For ‘measurable’ we mean that they can be calculated without excessive costs or efforts. Nevertheless,
some of them haven’t got estimated values and the reason can be found, then, not in the difficulty of calculation
but instead in the lack of data. In some cases, we could not find them because they were unlikely reachable on the
internet and in some others because the information was sensitive and ‘advantage drivers’, therefore the company
did not want them to be public. The biggest problem we faced has been the analysis of British Airways’ Balance
sheet and Income statement since they were very specific and different from the ‘examples’ we studied.
Nevertheless, we managed to align all the financial statement items to the Ryanair’s and we benchmarked their
performances.
6. NOTES
(note 1)
We have decided not to analyse the net profit margin due to the company’s business & strategy nature, in
fact financial costs are not so relevant in Ryanair’s earnings and therefore it leads to the same conclusions of ROS’s
analysis (which will be discussed in the following section).
(note 2)
ROA and ROCE have not been analysed as they did not add any relevant information in the overall view of
the company: the operating costs management has already been deeply examined thanks to other indicators. In
addition, we didn’t consider ROACE because “equity” and “long term debt” are too volatile during the time horizon.
EBITDA Margin has not been considered in the analysis among ROS as the “depreciation and amortisation” cost
is not so relevant for Ryanair because the aircraft are partly owned and partly on leasing.
(note 3)
Economic margin. The logic adopted for the cost of capital estimation is the invested capital one because the
ownership structure is split among several shareholders with small percentages of share, therefore the team
considered important taking in account all financing actors (both share and debt capital). The team computed the
WACC referring to cost of debt indicator as kd and we calculated ke through the beta leverage method. Our group
observed that WACC’ s trend reflects cost of debt decrease. This happened thanks to the excellent risk
management, as it is shown in turnover analysis. In benchmarking the logic adopted remained the someone in order
to have comparable data.
(note 4)
Interest cover ratio, effective tax rate, capital expenditure, residual income and cash EVA have not been
examined because they don’t bring any value added to the previous analysis.
(note 5)
In the benchmarking analysis, our group has decided different indicators for each competitor in order to
highlight the most relevant differences and similarities between companies. According to different strategies,
firms’ size, investment policies, liquidity situation and equity management there may be some dissimilarities
among the set of indexes chosen for the two comparisons (Ryanair-EasyJet and Ryanair-BA). Moreover, in order
to compare BA and EasyJet with Ryanair, we used this exchange rate £ = 1,5 €. The exchange rate has been used
only for absolute indicators, because the ratio indicators do not need the conversion.

23
(note 6)
In all the perspectives of the balanced scorecard the team did not specify the measurement frequency, as
every indicator should be measured monthly.
7. BIBLIOGRAPHY
Ryanair
1) https://investor.ryanair.com/wp-content/uploads/2015/04/2014-Annual-Reports-Annual-Report.pdf (2014
Financial Statement)
2) https://investor.ryanair.com/wp-content/uploads/2015/07/Annual-Report-2015.pdf (2015 Financial Statement)
3) https://investor.ryanair.com/wp-content/uploads/2016/07/Ryanair-Annual-Report-FY16.pdf (2016 Financial
Statement)
4) http://corporate.ryanair.com/about-us/passenger-charter/ (Passengers charter)
5) http://www.telegraph.co.uk/travel/news/ryanair-ceo-michael-oleary-reveals-ryanair-plan-to-offer-free-flights/
(Ryanair CEO: “how I plan to make air travel free within10 years”)
6) http://www.repubblica.it/economia/finanza/2016/11/28/news/ryanair_vuole_portare_i_biglietti_a_zero_volar
e_sara_gratis-152945214/ (Ryanair: fly will be free)
7) http://corporate.ryanair.com/about-us/punctuality/ (Ryanair’s punctuality)
8) https://www.ryanair.com/gb/en/useful-info/about-ryanair/always-getting-better (Ryanair: always getting
better)
9) http://corporate.ryanair.com/about-us/history-of-ryanair/ (Ryanair’s history)
10) http://www.ilfattoquotidiano.it/2016/08/20/investimenti-ryanair-pagano-sempre-i-passeggeri/2985416/
(Ryanair investments? Pay State and Passengers)
11) http://www.revenuemanagement.com/press/ryanair-renews-contract.html (revenue management systems and
Ryanair)
12) http://investors.morningstar.com/ownership/shareholders-
overview.html?t=RYAAY&region=usa&culture=en-US&ownerCountry=USA (Ryanair equity ownership)
13) https://rctom.hbs.org/submission/ryanair-the-lowest-cost-airline-in-europe/ (Ryanair: the lowest cost airline in
Europe)
14) https://investor.ryanair.com/traffic/ (punctuality data)
15) http://corporate.ryanair.com/about-us/passenger-charter/ (lost baggage data)
16) https://investor.ryanair.com/traffic/ and http://www.revenuemanagement.com/press/ryanair-renews-
contract.html (load factor and revenue management data)
17) http://corporate.ryanair.com/about-us/history-of-ryanair/ and http://corporate.ryanair.com/about-us/fact-and-
figures/ (customers data)
EasyJet

24
1) http://corporate.easyjet.com/~/media/Files/E/Easyjet-Plc-V2/pdf/investors/result-center-investor/annual-
report-2013.pdf (2013 Financial Statement)
report-2014.pdf (2014 Financial Statement)
report-2015.pdf http://corporate.easyjet.com/~/media/Files/E/Easyjet-Plc-V2/pdf/investors/result-center-
investor/annual-report-2016.pdf (2015 Financial Statement)
4) https://careers.easyjet.com/it/chi-siamo/cultura-vision-valore/ (EasyJet’s culture, mission & values)
British airlines
1) http://phx.corporate-
ir.net/External.File?item=UGFyZW50SUQ9NTYzNTg2fENoaWxkSUQ9MjYzNjgxfFR5cGU9MQ==&t=1
(2013 Financial Statement)
2) https://www.google.it/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiY
qPDOtYXRAhVIVxQKHRyfCPEQFggaMAA&url=http%3A%2F%2Fphx.corporate-
ir.net%2FExternal.File%3Fitem%3DUGFyZW50SUQ9NTczNzgxfENoaWxkSUQ9Mjc2MjY2fFR5cGU9M
Q%3D%3D%26t%3D1&usg=AFQjCNFmAELirgGNmEwvzGvn66tnNWntGw&sig2=zFMJG25s4EIzlohw
DlRxOw&bvm=bv.142059868,d.d24 (2014 Financial Statement)
3) https://www.google.it/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&sqi=2&ved=0ahU
KEwiywYPftYXRAhUKvBQKHRmFB-8QFggaMAA&url=http%3A%2F%2Fphx.corporate-
ir.net%2FExternal.File%3Fitem%3DUGFyZW50SUQ9NjE0MDM4fENoaWxkSUQ9MzI4MDI0fFR5cGU9
MQ%3D%3D%26t%3D1&usg=AFQjCNEmF7jMrKXfkc4qOiGxBveAzgiW5w&sig2=WBoZYGHPUrtZH
WlJzmaZyg&bvm=bv.142059868,d.d24 (2015 Financial Statement)
4) https://www.ft.com/content/381d434f-8026-357c-a27f-150ec1cbb2ac (International Airlines Group trims
long-terms capex and capacity goals)

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