Analysis of Ryanair Essay

Ryan glory established in 1985 carrying more(prenominal) than 5,000 passengers between its despatch Waterford ancestryport in Ireland to London Gatwick during its first year. The confederacy expanded by 1989 had 350 employees, 14 aircraft and carrying more than 600,000 passengers a year.In 1997 there were dramatic changes in the European flight path labor with deregulation of European Union air transportation al littleed air hoses to open virgin r awayes into Europe. The European pathetic beds association inform that paltry f bes air lane communication channels ar carrying more passengers than before with an increasing number of destinations in Europe set to incr ministration from 38% to 53% in European travel (elfaa.com, 2011). Ryanair excessivelyk bene fusillade from the deregulation with routes from London Stansted to Stockholm, Oslo and Paris. By 2001 Ryanair launched its knowledge travel website and within 3 months received 50,000 bookings (Ryanair.com, 2011 ).The melodic theme will center on the scummy personify industriousness environment by pick outing the opportunities and holy terrors as well as basketball team forces of the external environment. The report will besides identify the strengths and weaknesses of Ryanair.Part 1 Low embody airline industryThe low-down greet airline industry has become the most utile with all segments in the market with low prices and high up load factors. This strategy has been challenged since the 1990s with the liberalization of functions allowing new entrants to compete for railway line (Economist.com, 2011). The low price airline industry operates all activities by reducing court in order to gain strategic succeeder and competitive advantage. This prelude has a lot of opportunities as well as threats.PoliticalG everywherenments in the UK pick out the highest task comp bed to Germany with a $1.3bn de furcateure tax and Austrias sympathetic $119m duty tax (Independent.co.uk, 20 11). The threat of passengers gainful higher(prenominal)(prenominal) prices as a result of increased tax for their airline tickets stinker lower net income for airlines. This hatful affect low cost airlines such as Ryanair and Easyjet as the higher taxes cut boodle for the high society for character Easyjet stated they had garbled 21m of its 153m in 2011 (IATA.com, 2011).Acts of terrorism can excessively be a major(ip) threat to the airline industry. Initiating further routes is an prospect for low cost airlines to early(a) destinations in Europe with its growing economy and additional 15 EU countries that joined in 2004 such as Lithuania, Poland, Slovakia, Latvia can offer new opportunities for new routes to increase the number of passengers(Delfmann, 2005). There has similarly been a threat with the plans to divvy up Stansted airport, the main location for low reckon airlines afterward the ambition Commission to reduce its dominance in the market. This will bring greater tilt to low cost airlines and benefit passengers with more low f are airlines from regional airports such as Gatwick and Stansted competing more (Telegraph.co.uk/travel, 2011).EconomicThe threat of turf out oil prices caused global airlines to lose $16 accountingion in returnss which did rebound in 2010 with higher traffic. The threat continues with oil prices averaging $110 a barrel and estimated to further increases in the industrys give notice bill which will rise from $10 billion to $176 billion (Bangkokpost.com, 2011). This threat has in addition been warned by Willie Walsh, the chief executive of British Airways and Iberia who cautioned that European carriers have to maintain the impact of the high fuel be with some operators having to go out of lineage (Guardian.co.uk, 2011).The recession in 2008 resulted in travelers tasteing cheaper fares and led to process in sales for reckon airlines. This opportunity during recession allows budget airlines to pull in advantage and of more travelers try oning low fares with budget airlines rather than more overpriced airline tickets. With the higher oil prices, natural disasters in Japan, discontented in the Middle East, North Africa and can force competitors in the airline industry to increase prices and fuel swipes which pose major threats to airlines profits and pick of airlines.SocialThe harvest-time in demand for passengers seeking low cost airlines for cheaper fares is an opportunity for budget airlines. People are living a fracture standard of life with declining inequality of incomes made up mostly of center field class income masses. People are also more well-travelled, experienced and seek new destinations with the growth of vacation property (Goeldner and Ritchie, 2009). This is an opportunity as budget airlines frequently service briefly haul destinations for short trips or weekend trips for leisure or business purposes offering more destinations and new experiences to b atch with low fares. Migration has also made commuting a factor with people seeking employment opportunities and education as a motive for locomotion as well as the rising quality standards has sh bear to expect growth for low cost airlines (Gross and Schrder, 2007).There are significant opportunities for low cost airlines that can benefit from the demand of increasing passenger from various destinations and purposes. numerous people also seeking new destinations is a proper opportunity for budget airlines to increase passenger numbers and revenue by providing disparate destinations of regional airports.TechnologicalThe increasing popularity of information technology is an opportunity for low budget airlines as they dont use travel agents to sell tickets and allows consumers to be informed about schedules, compare prices and itineraries as well as flights with other airlines (Pease etl al., 2007).The new saddle seat which is designed to allow 23 inches of legroom compared to 30 inches on a normal seat space and shaped to sit at an angle increase the number of seat for an airline (Telegraph.co.uk/travel, 2011). The seats offer an opportunity for low budget airlines such as Ryanair and Easyjet to allow more storage space and more passengers in a plane which can increase revenues. The opportunities in technology allows airlines to take advantage of potential revenues with the meshing offering direct marketing for customers and honour added service by bringing offers to the customers directly. The opportunities for of the new seats can offer planes to fit more passengers and is a further potential a growth in revenue for budget airlines.LegalThe airline industry has consider subject regulations with issues concerning law and guidelines. For ex angstrom unitle low cost airlines have aggressive advertising campaigns to underline low fares which have become an issue with consumer protection legislation. Separate detail of drenchs such as government tax, ai rport tax and fuel surcharge have to be embroild so that it does non consumers are not misinterpreted and misunderstood when buying a ticket. This is a threat to low cost airlines as it disregards the concept of low fares with all the taxes passed on by governments and airwave authorities. Low cost airlines can be substantially threatened with EU regulations and laws which can lower profits and damage the reputation of an airline with a negative image.EnvironmentalNatural disasters such as the 2010 Iceland Volcano which caused 14,000 Ryanair flights cancelled. be of the 2010 Iceland disruption to the global airline industry soared to 1.1bn according to estimates from the International Air Transport Association (Iata) (Guardian.co.uk, 2010). This threat to the airline industry faced by natural disasters such as the Iceland volcano can occur at any time and stop people from change of location costing airlines major disruptions with delays or cancellations.Emissions used by the ai rline industry have been increasingly growing rapidly over recent years, increasing 98% between 1990 and 2006 with predications of further increases to other 88% by 2050. This threat to the aviation industry enforcing airlines to pay off for carbon dioxide and lower profits (Ftadviser.com, 2011).Porters five forcesPorter razes out the five forces which contain of bargaining world-beater of suppliers, buyers, threat of potential new entrants and threat of substitutes to the industry. A beau monde can hold to the forces in order to increase chances of gaining sustainable competitive advantage and profit world power. In understanding the strategic decisions a company has to make, it can be reusable to look at the five forces of rivalry amongst the firm, substitution, new entry, the queen of customers and the power of suppliers.Figure 1.1 Porters five forcesSource (Fouris and Oswald, 2006)Barriers of entry to obtain aircrafts is extremely expensive and acquiring a basis at airp orts is also difficult (Gross and Schrder, 2007). With the success of Southwest airlines and deregulation and liberalization of the airline industry has allowed 40 budget airlines in the airline such as Easy fount. This level is high as a result of these factors.Substitution- for the short haul flights, the substitute products include car, train and boat service. Travelling by train is clearly a substitute choice for travellers as it is high speed or travelling by car with the many motorway links available can have an impact. Technology can also be a substitute, for example business travellers may choose to conference skype calls over the internet. This level is defy as ephemeral is the main method of travelling long distances at a shorter time.Bargaining power of buyers consumers can now purchase their own tickets from low cost airlines and can choose airlines with for higher level of quality, collapse service and lower price. Customers have the power to easily switch to anothe r product that have lower prices with the ease of the internet (Hitt, et al, 2008). This popularity of comparison internet sites allows passengers to compare flight prices and choose the lowest cost airline of their choice. so to survive with these pictorial factors airlines have to contribute lowest fares to attract customers which is chief(prenominal) for budget airlines and as a result the power of buyers is high as they consumers choose lowest fares causing risk of survival to an airline.Bargaining power of suppliers respiratory tracts rely heavily on the inputs for the company to survive which would be fuel, materials for the planes, work and manpower. Airlines either use Boeing or Airbus together with high maintenance fees, planning module. Additionally with the increase of cost for fuel to $50bn in 2011 resulted in travelers paying higher prices for tickets (Reuters.com, 2011). Therefore these inputs have high bargaining power over airlines as it can affect profits of an airline substantially.Competitor rivalry may occur from price competition, product differentiation, advertising against other competitors is plausibly to affect the business (Bowhill, 2008). The intense rivalry occurs between low fares carriers are Ryanair, Easyjet and the carriers that provide frills service with lower fares are British Midland Airways. Rivals also have to invest high capital investment and have a unique selling point to attract a large bulk of customers and offer significant discounts and special offers.According the annual reports of Ryanair and Easy Jet, in 2010 Ryanair carried over 66 one million million million passengers in comparison to Easy Jet carrying just 34 million. Therefore the airlines low cost mold delivers increased revenue and passenger growth as customers seek cheaper flights and benefit from price wars between airline fares. However budget airlines are appease affected by rivalry with Ryanair and Easy Jet competing for customers flying wi th no frills airlines and the level of competitor rivalry is moderate.ConclusionFinally the outline has demonstrated the attractiveness for the budget airline based on the ease of entry regulations and with the low expenditure cost lower than charter airlines that provide more service. The unstable environment has led to an increase in fuel be with airlines paying heavily for their supply and in contrast the occasional economic environment has caused consumers to spend less and look for cheaper travel and select budget airlines such as Ryanair. Even though there is intense rivalry between airlines, budget airlines have an attractive strategy with more airlines using the low cost model to compete for passengers.Part 2 Internal abbreviationThe internal factors of Ryanairs concerns strengths and weaknesses to assess the extent to which the strategies for the airline in order to be successful, these summarizes the internal business environment and the capabilities (Johnson et al., 2002).The strengths of Ryanair areThe company has a successful low cost model benefitting from low expenses by using staff to clean the plane, passengers have to pay to instill boarding pass reducing the need for staff at deem in desks and take advantage of the internet to sell tickets. Ryanairs low fares are aimed at encouraging demand especially with price crude leisure and business travellers that might choose alternative forms of transport method. Ryanair have set fares on the basis of demand on particular flights with higher fares on flights that have the highest demand for bookings booked nearer to the date of departure. Ryanairs competitors also do not operate on comparison sites and save outfit or fees to other comparison websites. The company loses fewer bags and with 88% prompt flights compared to competitors ant explains why the company is a ducky airline for customers with over 73 million passengers in 2010 (Ryanair.com, Annual report 2010).Flights to secondary air ports the company offers point to point service on short haul flights to secondary and regional airports around the major hub centers and cities. The point to point routes rather than hub airports allow the company to provide direct nonstop flights and countermand the costs of providing services through connecting passengers, baggage transfers and transit passenger auxiliary costs. By choosing secondary locations allows convenience for a large majority of the community and is generally less crowded than in major airports.This has also resulted in on time flights, unwaveringer turnaround times, less terminal delays as well as more competitive airport access and manipulation costs or operating restrictions that can reduce expenses (Ryanair Annual Report, 2010). Low operating costs Ryanair maintain low operating costs as a low budget airline company and aims to reduce costs in main areas which include aircraft equipment, personnel productivity, customer service costs and airport a ccess and handling costs.WeaknessesRyanair have been negatively perceived as arrogant as the company does not take into consideration the competition by putting other low fares airlines out of business creating a bad image with negative media. Ryanair is viewed as not caring too much about customer needs or problems which reflect OLearys opinion that customers pay low prices and get a good deal therefore should expect low standards. There have also been complaints for the extra payments for fees and taxes as well as paying higher prices for stow luggage and onboard food and beverage.The company has also come across as having a negative reputation by having underpaid staff that are check for any mistakes, work long hours and unhappy staff with staff (itfglobal.org, 2011). The company also charges 5 for every purchase using bank card, 40 for printing a boarding pass at the airport and ascorbic acid for changing the name on the booking. Therefore customers often have to pay a lot mo re than they expected which makes Ryanairs image search dishonest (Ryanair.com, 2011).Porters value chainThe generic strategies are concerned with the strategies of the company and at the micro level by exploring Porters model of the value chain. The value chain classifies the activities of the company and divided into primary and support activities used to identify the cost leadership strategy as illustrated in appendices b. The core competencies of Ryanair consist of maximizing revenues whilst providing a no frills low cost strategy and holding logistics simple. This is maintained by Ryanairs capability to lower operating costs such as aggressive online booking reducing the cost of staff and operate in secondary airports using Boeing 737-800. Through simple services and investing less on employees, Ryanair core competencies provide effective and competent resource heed.The primary activities involved in the inbound logistics of Ryanair consist of its 272 Boeing 737-800 planes that can carry 189 people and agreements to secondary airports. Ryanair have contract agreements with these large aircrafts with the ability to fly long hours and do not charge fuel surcharge (Ryanair.co.uk, 2010). Operations Ryanair have lower unit costs as part of its operation and save costs through lower handling fees, arrive fees in secondary airports and fast turnaround times with the capacity to engage the aircraft at a shorter time. Ryanair operate in 1,110 routes and 1,400 flights a day from 44 bases. The efficiency of its operation supports the low cost strategy position with fast turnaround times, no meals on board and improved employee productivity (Ryanair.com, 2010). pecuniary analysisThe strengths of Ryanair are quite clear. The company has been profitable with an increase in profits of 26% to 401m and operating profit increase by 28% to 516.2m in 2011. The figure below illustrates how the company increased passengers by 8% and revenue 16% by 2010.Figure 2.1 Summary Table of results (IFRS) in EuroSource (Ryanair.com, 2011)Figure 2.2 Summary table for EasyJetSource (Easyjet.com, 2011)As seen from the tables to a higher place it can be clear to differentiate the profit revenues. Profit after tax for Ryanair in 2010 was 138 million and for Easyjet was just 121 million. Revenue for Easyjet in 2010 was 2, 973 million in 2010 and 2, 66 million in 2009 compared to Ryanairs revenue in 2010 18 million and 16 million in 2009. According to Ryanairs annual reports, revenues rose by 16% to 896.8m due to an 8% rise in traffic and a 5% increase in mean(a) fares in 2010.Ryanair has been able to gain a growth in revenue even during the financial recession which had a significant effect on other major airlines resulting in bankruptcy and closure. Due to its cost effectual methods through increased passenger traffic with its new routes and low prices Ryanair has been able to uphold its place as the number one low cost carrier. This difference also shows in Ry anairs current ratio at 1.79 in 2010 compared to Easy jet only gaining 1.33.ConclusionFrom the internal analysis it is clear to see Ryanairs low costs strategy manner it is less affected than its competitors with its cost leadership. This has required the company to gain a large market share whereby it has purchased large quantities of planes and low cost operations has made shown that cost leadership is the only way to work for the coming(prenominal) and globally.Ryanair has built a low cost culture however still needs to pay close attention to the external environmental factors including political policies and increased cost of fuel. The core cost savings mentioned has made the company highly successful with its short haul routes with standardized no frills services, higher seating density and its ticketless reservation system. Ryanair have succeeded by becoming a successful airline in Europe with the Southwest airline model and managed to grow its market segment of price sensi tive customers through its no frills service.BibliographyAfuah, A. (2009) Strategic Innovation New Game Strategies for Competitive Advantage. New York Routledge. Beech, J. and Chadwick, S. (2006) The business of tourism management. Harlow Pearson Education Limited. Bangkokpost.com (2011) Oil spike to push up airline losses. Online. usable at http//www.bangkokpost.com/business/aviation/241328/oil-spike-likely-to-push-up-airline-losses. Accessed on 05 March 2011. Betz, F. (2002) executive director Strategy Strategic Management and Information Technology. New York John Wiley and Sons. Bowhill, B. (2008) crinkle Planning and Control Integrating Accounting, Strategy, and People. Hoboken John Wiley and Sons. Centreforinformation.com (2011) Jaw-dropping airline market capitalization. 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