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Low-price airline strategies

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by

aslan shirazian

on 19 March 2014

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Transcript of Low-price airline strategies

Low-price airline strategies
EasyJet Pros and Cons
Pros for easyJet

Low cost, No frills
Straight line management mode
Yield management
Wide transport network
Speedy and flexible operation
Cons for easyJet

Customer base
Cheap yet not cheap enough
Competition
Sacrificing services
Damage reputation
Depends on supplier
Sensitive to fluctuation in tax and fuel costs to what extent?
Background
Ryan air
79.3 million passengers in 2013
€4, 884 million in revenue
Net profit of €569.3 million

Other services
F&B, duty-free merchandise
Internet services
Accommodation and travel insurance
Bus and rail tickets
EasyJet
58.4 million passengers in 2012
£3.854 million in revenue
Net profit of £255 million
Other services
F&B
Duty-free merchandise
Car rental services
Accommodation and travel insurance
Founded in 1985 in Ireland
Launched ryanair.com in 2000
In 2003, acquired Buzz from KLM
Founded in 1995 in Great Britain
Launched easyjet.com in 1997
Purchased Stansted-based airline 'Go'
Thank You! Any Questions?
Pros and Cons for Ryanair
Single fleet of aircraft policy
Using secondary airports
Sometimes 60 miles from the destination

However,
Faster turn around times and longer aircraft utilization time.
Cheaper landing slots.
Fewer terminal delays.
In flight duty free
Customers can purchase products on board that have a high profit margin to Ryanair:
Food and drinks
Newspapers
Magazine products
Planning to reduce lavatories from 3 to 1.
Creating greater space for adding more seats.
Improved revenue.
Transferring many costs of operations to customers.
Extra leg room -> £15

Baggage check-in
£15 for 15kg in the low season (£60 if done at the airport). High season rates are £25 for 15kg online or £100 at the airport.

Boarding card re-issue -> £15
Boeing 737.
Less crew training required.
Maintenance costs are smaller.
Similarities
Efficient, high turnover, less paperwork
Risk to reputation, small profit margin per ticket
Differences
Ryanair: Aggressive cost-cutting
Easyjet: Schedule over cost

Plans for Ryanair to improve customer service
Conclusion
Bad Brand Image
A survey by Which? Magazine put Ryanair's customer satisfaction at just 54% - the lowest score in the country!

Ryanair's response:
“We surveyed over three million passengers on the Ryanair website last night. Only two of them had ever heard of Which? and none of them had ever bought it or read it."
Missing out on valuable Business Class
Other airlines gather 40-50% of their revenue from first class and business class passengers (Mouawad, 2011).
Small Margins of Profit
The small profit margins on tickets of Ryanair mean that their flights must run at close to full capacity at all times.
In flight purchases must be made to counter this.
High level of competition
Many traditional airlines are now trying to offer low cost routes.
Over 35 low cost airlines currently operating in Europe.
A Change in Direction
Michael O'Leary announces Ryanair will "eliminate things that unnecessarily piss people off".

Comes after multiple large shareholders expressed dissatisfaction at Ryanairs brand image.

Identified as holding back growth.

Easyjet marketing strategy based around customer satisfaction.
They are planning to do this by:

Refurbishing their website to increase online presence.

Creating new channels for complaints to resolve issues.

More leniency on overweight or size luggage.

Offering the chance to preselect seats on their flights.
Contents:
Background information

Advantages and risks of a low-price strategy for Easyjet

Advantages and risks of a low-price strategy for Ryanair

Recent developments at Ryanair

Conclusion
Full transcript