RyanAir: The Low -Fares Airline - Future Directions?
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Environmental
- Carbon emission credits – buy extra credits
(Airline industry 2% Global warming)
- Noise level controls
- Waste management laws
- Ground level air emissions
- Corporate Social Responsibility
- Surface and groundwater contamination
- Environmentally friendly planes
Political
SWOT Analysis
Conclusions
Weaknesses
Strengths
• Customers are very price sensitive and if Ryanair do not provide the cheapest fair the customer will simply switch to a different airline
• It is difficult to quantify how many customers have been marginalised by Ryanair over the years and refuse to use the airline.
• Some secondary airports too far away from the actual destination.
• Although it is an advantage to Ryanair to fly the one type of aircraft, Boeing this causes the airline to have few suppliers. Switching costs from one supplier to the other is high because all mechanics and pilots would have to be retrained.
• Decline in operating margin
• Weakening employee relations
• Brand name (20 years in business)
• Ryanair is the largest European airline and therefore benefits from scale over and above it competitors
• Strong Revenue Growth
• It operates modern Boeing aircraft and this uniformity of aircraft cuts down on maintenance costs in so far as maintenance staff are specialised.
• High Seat Density
• Ryanair has built its business on a non-union work force and this has made the company more flexible when it comes to changes and innovations in work practices. Traditionally other airlines have had to deal with entrenched unionised work practices which add costs that Ryanair have avoided.
• Fast turn-around
• Small headquarters: Low on overheads
Legal
Threats
Opportunities
• Fluctuating oil prices, surging world oil prices could hamper efforts by many airlines to stem losses this year.
• Dependence on economic cycle
• Fierce competition, market consolidation.
• New entrants are another huge threat to Ryanair as there is a high chance that new entrants will join the market.
• Threats to security
• EU regulations on denied boarding compensation
• Involvement of airlines in EU emission trading system
• Growing demand for low cost airlines
• Expected market adjustment
• Launch of new Routes
• Ryanair could take advantage of the open skies agreement with the US and begin transatlantic flights at low costs providing flights all over the world.
• Fleet Expansion
• Opportunities by EU enlargement
• Low cost flights on long haul as a new market
- Employment law – minimum wage, maternity leave, working hours (Pilots)
- Competition Laws (Easyjet), need to stay over in hotels more.
- Advertising laws (misleading ads)
- Privatisation of airports
- Laws surrounding CO2 emissions
- Health and Safety Laws
- Security laws surrounding aviation
- Illegal subsidizing of airports
Since 1978 deregulation has been helping the airline industry grow. (Airline Deregulation Act )
Ryanair took full advantage of this new opportunity opening new routes to several locations such as London Stansted to Stockholm and Oslo as well as routes from Dublin to Paris and Brussels.
Another form of deregulation is The Open Skies Agreement that could affect Ryanair’s position in the airline business in the future.
Air travel tax
- Ryanair is a low cost airline run on a tight budget. If their variables change they are affected substantially. (fuel costs or ash cloud)
- If Ryanair want to sustain themselves they need to keep growing the business (offer new routes to bigger cities)
- Ryanair is dependent on key personnel such as Michael O'Leary to make key decisions.
Questions
- Why Ryanair has been successful so far?
- Is Ryanair's strategy is sustainable?
Social
- Ryanair has grown in the current economic environment where unemployment was 14.2%.
- They took advantage of consumer needs for cheaper prices, taking away the previous luxuries of flying such complementary drinks etc.
- Natural disasters has left Ryanair in trouble.
''Ryanair has revolutionised European air travel ''
- Ryanair founded in 1985 by the Ryan family.
- Ryanair is Europe’s only ultra-low cost carrier.
- It operates more than 1,600 daily flights (over 500,000 per year) from 57 bases, across 1,600 low fare routes.
- Recently announced orders for 175 new Boeing aircraft, delivered between 2014 and 2018.
- Employing over 9,000 highly skilled professionals, carrying 81.5 million passengers last year and has an outstanding 29-year safety record.
Technology
PESTLE ANALYSIS
Strategic Management
Case Study
- Pilot free planes
- Self service passengers - check in kiosks.
- Baggage drop off - This system is the first self – service passengers kiosks with chip and PIN technology.
- Wifi routers on all planes
- Passbook (Iphone , Ipad etc)
- Ryanair has the most fuel efficient aircraft; this is a certain advantage today with the increasing prices of oil and fuel costs.
Porters 5 Forces
Barriers to entry:
Considered to be low in the airline sector due to..
- high capital investment
- restricted airport slots availability
- need for low cost base
As Ryanair operates how they are doing their external and environmental forces must be examined. To do this PESTLE analysis. This focuses on the influences that the political, economy, social, technology and the environmental, have on Ryanair as a business. Each of these external forces play a huge part on the strategic direction of Ryanair.
Porters 5 forces consists of:
-Barriers to entry
-Bargaining power of suppliers
-Bargaining power of buyers
-Threat of Substitutes
-Competition/Rivalry
Bargaining Power of Buyers:
- Price sensitive
- No loyalty
- Easy to switch airlines and no cost (online bookings)
Threat of Substitutes:
- Other modes of transport (eg) Trains, Buses and Ferries. (TGV,Eurostar, Euroline)
- No customer brand loyalty
- No switching costs.
Competitive Rivalry:
- Cost advantages used by Ryanair can be copied
- Not much differentiation between the services.
- Low levels of existing rivalry (Easyjet)
Bargaining Power of Suppliers:
- Aircraft producers (Boeing, Airbus , COMAC)
- Airport fees
- Fuel costs
- Ancillary costs
Lecturer: Helen Marks
Recommendations continued
24th February 2015
- Train flight staff in other operations in the business so that they can switch roles and be more dynamic. (No winter layoffs= full time employment)
- Improve customer helplines
- Set up link with rail networks across Europe (only if of benefit to Ryanair)
Hannah McGovern, Karla Walsh, Sean Laffey, Denis English & Matthew Devine
Economic
Recommendations & Conclusions:
Could the firm be more successful?
- People unemployed.
- Less people are traveling business class.
- There is a threat of new substitutes. E.g. high speed trains, Ferries.
- Increase in taxes and in interest rates, Airport Tax and travel taxes.
- Increase in oil prices, Ryanair policy on fuel surcharges!
- Energy costs, Flight attendant charging Iphone on plane.
Strategic Decisions
Evaluate Ryanair using:
- SWOT Analysis
- PESTLE
- Porters five forces
- Mr. O' Leary stated in 2012 that '' Ryanair is currently in a very favourable position"
- EU recession
- Higher oil prices
- The unfolding failure of the package tour operator model
- Significant fare increases from competitors
- Expected growth estimated to increase the size of their fleet from 303 planes to 500 planes by 2019.
- Ryanair holds several areas of expansion i.e. their attempt to take over Aer Lingus & a future take over bid is expected
- Ryanair need to build on their customer perception
- Fly to more european destinations
- Possibly look into Transatlantic or Asia flights
- Market the airline better (dont rely on free publicity)
- Work out contract with fuel & oil providers
Ryanair's reasons for being successful
Thanks for listening
- Mr. O' Leary took over Ryanair in order to change the company- ''makeover into a budget airline''.
- Ancillary services - flight beverages, food & merchandise, console entertainment sales & internet-related services.
- Distribution of accommodation, travel insurance and car rentals through its website - increase sales and reducing unit costs.