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RyanAir: The Low -Fares Airline - Future Directions?
Transcript of RyanAir: The Low -Fares Airline - Future Directions?
Why Ryanair has been successful so far?
Is Ryanair's strategy is sustainable?
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.
Ryanair's reasons for being successful
Mr. O' Leary stated in 2012 that '' Ryanair is currently in a very favourable position"
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
Could the firm be more successful?
Porters 5 Forces
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.
''Ryanair has revolutionised European air travel ''
Evaluate Ryanair using:
Porters five forces
Hannah McGovern, Karla Walsh, Sean Laffey, Denis English & Matthew Devine
24th February 2015
Lecturer: Helen Marks
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.
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
Porters 5 forces consists of:
-Barriers to entry
-Bargaining power of suppliers
-Bargaining power of buyers
-Threat of Substitutes
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
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.
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
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
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.
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.
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.
Bargaining Power of Suppliers:
- Aircraft producers (Boeing, Airbus , COMAC)
- Airport fees
- Fuel costs
- Ancillary costs
- Cost advantages used by Ryanair can be copied
- Not much differentiation between the services.
- Low levels of existing rivalry (Easyjet)
• 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
• 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
• 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
• 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
Recommendations & Conclusions:
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
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)
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.
Thanks for listening