Case Study Ryanair and Virgin Atlantic
Case Study Coursework LEADERSHIP and ORGANISATIONS BABA SDL 2012-13’B’ Virgin Atlantic and Ryanair This case examines two organisations that have many similarities as well as a number of significant differences. The essential technology and systems behind each organisation may be very similar, but the nature and style of management and its consequent impact on the way people working in these organisations think, feel and behave have created very different organisational cultures.
So what are the similarities and what are the differences? The most obvious similarity is that both Virgin Atlantic and Ryanair operate in the UK passenger air transport industry. Both are relatively recent creations and might be seen as new entrants to the sector: Virgin’s air transport business was founded by Richard Branson in 1984 and Michael O’Leary took over as Chief Executive at Ryanair, a small Irish airline which had been founded as Guinness Peat Aviation in 1985 (Creation, 2004).
Both started life in competition with major national flag carrier airlines (British Airways and Aer Lingus respectively) and grew to be major challengers to these established companies.
As they grew, their scale of operations brought them into competition with a much larger number and range of airlines operating from the UK: Branson’s Virgin Atlantic competes with some major US and other intercontinental companies such as American Airlines and United Airlines; O’Leary competes with the likes of Flybe and EasyJet in the short-haul market.
Both Branson, who was born in 1950, and O’Leary, who is ten years younger, are individuals with strong and distinctive personalities, who have a relentless appetite for media presence and who make extensive use of themselves in their frequent marketing communications. They engage in advertising stunts, readily appear on the news media in relation to stories about the industry, and their faces and personalities are easily associated with their companies. Charting different courses There are, however, some major differences. First, they differ in their choice of markets.
Virgin’s air transport business originated in the long-haul, mainly transatlantic market which might be highly profitable but is also extremely competitive.
As the business grew, offshoots were founded as independent companies; for instance, Virgin Blue in Australia and Virgin Express which has its hub in Brussels and serves European destinations outside the UK and does not compete directly with Ryanair. Ryanair started as a short-haul carrier and has remained so, focusing on European destinations from a small number of airports in the UK and Eire. The two companies’ competitive positioning is also very different.
Ryanair is well known as ‘The Low Cost Airline’; the first thing that hits you in its publicity material is the price and this is very clearly the core of its business strategy (Ryanair website). The ‘no frills’ approach means just that: even the in-flight food is limited to sandwiches and costs extra.
Virgin, by contrast, attracts passengers by offering a superior experience and is firmly positioned at the quality end of the market: Publicity material emphasises style and comfort, and there is a range of in 1/4 Case Study Coursework LEADERSHIP and ORGANISATIONS BABA SDL 2012-13’B’ light extras which, even at the economy end of the price range, includes in-flight food and drinks and packs of ‘amenities’ such as flight socks, eye shades and lip balm. As was noted, both men love publicity stunts and often use humour in their public communications. Branson is usually smiling and in poses which indicate fun and a desire to show close links with his staff and popularity with employees, customers and the public in general. O’Leary is much more likely to be acerbic, critical and uses what might euphemistically be called ‘colourful’ language in his public statements.
He seems to care little about public opinion of him as an individual and has been in trouble with the advertising standards authorities in the UK and Eire on more than one occasion for ‘offensive’ adverts that have upset people from British Airways (who were accused of being ‘Expensive ba * * * * ds’ in an Evening Standard advert in 1999) and the Catholic Church (the ‘Fourth Secret of Fatima’ advert of 2000 featured the Pope) (Creation, 2004).
The brand values are also very different. Virgin as a collection of businesses does everything from running trains, manufacturing contraceptives and cosmetics o offering financial services. All these enterprises are linked by the single powerful central image of the founder and the characteristic red livery; Ryanair does one thing and one thing only, but in doing so sets an almost buccaneering tone, readily taking on authorities such as the European Union over competition policy and the British Airports Authorities over charging practices. Branson has certainly had his conflicts with British Airways, notably over the ‘dirty tricks’ affair of the early 1990s, but is not likely to challenge governments.
Virgin tries hard to build customer loyalty and gain repeat business through brandrelated service values; Ryanair’s repeat business (and for some customers the Ryanair experience is one which inspires the thought ‘never again’) is on price, not loyalty to the brand.
These differences have a significant effect on the nature of employment relations and the psychological contract between the two companies and their employees. Working for Richard and Michael Each company’s brand image and treatment of customers have a bearing on the nature of organisational relationship with staff, and vice versa.
Aspects of organisational behaviour therefore show through in a variety of interconnected ways to create consistent and very different cultures. At Virgin Atlantic, cabin crew are there to be helpful and welcoming; they are important projectors of the brand image and their job is partly to encourage the allimportant customer loyalty which generates continuing profit. The importance of staff as carriers of company values is clearly reflected in the recruitment material and other statements about the nature of work at Virgin Atlantic.
Virgin Atlantic brings together all manner of people in all manner of roles, all playing a crucial role in the smooth running of a very complex operation. But whoever you are and wherever you join us, you’ll never stop thinking of our customers and what 2/4 Case Study Coursework LEADERSHIP and ORGANISATIONS BABA SDL 2012-13’B’ we can do for them. From frontline cabin crew to IT analysts, everyone here plays a role in delivering the Virgin brand. That means using initiative, taking responsibility for your actions and being ready to support those around you at all times.
Similarly, you’ll play your part in maintaining the friendly, unconventional professionalism that makes Virgin Atlantic such a unique place of work (Virgin Altantic website).
The recruitment process is lengthy and includes a group interview which acts as a filter for further tests before job offers are made. Training programmes for cabin crew and other staff are run from a dedicated training centre, and there is a wide range of benefits for full-time staff including seven free flights a year, private pensions and medical schemes and discounted goods and services across the Virgin group.
At Ryanair, the cabin crew work for a supplier organisation called Crewlink. You can discover whether you qualify to apply for a job by answering a series of 11 on line questions. Successful applicants for cabin crew posts are trained at one of Crewlink’s centres and are expected to pay an up-front charge of €1,200 for the fiveweek course (or with a €400 deposit it can be offset against initial year’s salary at a total cost of €1,300). Students are not paid to attend the course; successful graduates get a three-year contract with Crewlink to work on Ryanair flights on a shift-work basis.
Ryanair crew are not expected to make overnight stops at its destinations. Post-tax starting salary is listed as being ? 1,100 per month (? 13,200 pa); Crewlink suggests that after the initial three years, and subject to satisfactory performance, a permanent job with Ryanair itself might be available at a salary of up to ? 25,000 pa. Staff must be flexible in terms of their work location across the 15 European centres and Crewlink does not guarantee work if individuals specify a preferred work location (Crewlink website).
By comparison with long haul, a short-haul operation involves very tight turnaround times and Ryanair aims for 20 minutes. This creates a very different pace and set of pressures on the workforce compared with those at Virgin, which is likely to have higher staffing levels and to give crew longer rest breaks in the destination locations between flights. The nature of customer relations, by contrast, might be more demanding at Virgin than at Ryanair – staff and customers are together for longer and the brand image must be maintained.
Complaints and horror stories can be found about work at both organisations; however, Ryanair is subject to a more systematic and organised campaign of criticism for its employment practices by trade union organisations. In particular, the International Transport Workers’ Federation has run a major campaign on its website since 2004 called ‘Ryan-be-fair’, the purpose of which is to pressurise the management at Ryanair into accepting the role of trade unions in representing the workforce.
It collects comments from disgruntled crew and former workers which give a flavour of the operational stresses and organisational culture. Both organisations have been successful – Ryanair has turned in significant profits for several years in a sector which is prone to disruption and financial loss and which has seen a number of brands disappear (Buzz, Go and Debonair) (BBC, 2005). Virgin also continues to go from strength to strength commercially.
But the cultures and values which get them off the ground could hardly be more different (BBC, 2006). /4 Case Study Coursework LEADERSHIP and ORGANISATIONS BABA SDL 2012-13’B’ References Creation, S. (2004) Ryanair – How a Small Irish Airline Conquered Europe. Arum Crewlink website www. crewlink. ie International Transport Workers’ Federation website www.
iftglobal. org Ryanair website www. ryanair. com Virgin Atlantic website, Working for Us, http://www. virginatlantic. com/en/gb/careers/workingforus/index.
jsp BBC News articles: News website: www. news. bbc. co. k Profits Jump at Virgin Atlantic (27 May 2005) Ryanair Profits Jump on Hot Spots (1 August 2006) Question: Using relevant leadership and organisational theory, explore the impact of organisational features and external environment influences on the leadership and management styles and performance of Richard Branson and Michael O’Leary.
Critically evaluate the effectiveness of their leadership approaches in their specific context with their specific set of strategic challenges. (1500 words) Closing date: 1st April 2013, submit on StudyNet by 23. 30 UK time 4/4