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Ryanair is an Irish low-cost airline -the largest in Europe-. Its head office is based at Dublin Airport. Ryanair operates 1400 flights per day with 254 Boeing 737-800 aircraft (the airline has a rapidly expand and by 2012 will operate a fleet of 292 aircraft) and on over 1,100 routes across Europe and Morocco from over 43 bases and connecting 160 destinations. Ryanair is largest low-cost carrier in Europe, in terms of passenger numbers is the 2nd-largest airline in Europe and in terms of international passenger numbers the largest in the world. Ryanair has more than 1700 employees this year it is expected to carry 73,5 million passengers approximately.
Ryanair entered in the market in 1985 and it wasn't so successful always. Ryanair was founded by the Ryan family with a share capital of £1 and a staff of 25. The airline began with a 15-seat Bandeirante aircraft, flying daily between Waterford (SE of Ireland) and London Gatwick. Ryanair's aim was to provide a low- cost service between the two market leaders, the British Airways and Aer Lingus. Because the first Ryanair's cabin of the aircraft was too tiny its crew recruits was less than 5ft. 2ins. tall in order to be able to operate in there. (Passengers: 5,000, People (y/e): 51)
COMPETITION'S STRATEGY AND RYANAIR'S COMPETITIVE ADVANTAGE
Ryanair's main aim is a world where the passengers will increase and they could fly for free, with low- fares and no-frills. This will be succeeded through continuing improvements and expanded offerings. The major characteristics of Ryanair's strategy are:
Low fares: aim to stimulate the demand. In order to eliminate the minimum stay requirements Ryanair sells seats on a one-way basis. Furthermore, the fares are getting higher when the booking made near to the departure date.
Customer service: the best in Europe (punctuality, fewer lost bags and cancellations).
Frequent Point-to-Point Flights on Short-Haul Routes: the short-haul routes eliminate the necessity for frill service, the Point-to-point flying provides direct routes and avoid costs such as baggage transfer etc.. Finally, secondary and regional airports offers punctuality at the arrivals and departures, less taxes and fewer delays.
Low Operating Costs: Ryanair tries to reduce the four primary: (a) equipment costs(b) personnel productivity (c) customer service costs (d) airport access and handling costs. Ryanair's operating costs are among the lowest in Europe.
Taking Advantage of the Internet: Ryanair developed a low- cost internet booking service.
Commitment to Safety and Quality Maintenance: crew's and pilot's training and high European airline industry standards.
Enhancement of Operating Results through Ancillary Services: by providing ancillary services (car rentals, travel insurance etc) Ryanair manages to increase the sales and reduce cost simultaneously.
Focused Criteria for Growth: Ryanair has a growth plan for specific targeting markets such as: additional routes to continental Europe, new bases, increasing frequency of service etc..
Ryanair manage to succeed this what other airlines like British Air didn't: the low-budget which passes its costs to its customers direct in order to maximize the profit. The factor which help Ryanair to be a cheap-flight industry are the variety of routes and destinations, the rapid amount of flight and the sufficient capacity.
ELASTICITY OF DEMAND FOR THE AIR-TRANSPORT SERVICES
Elasticity of demand is a measure used to show the responsiveness of the quantity of a good or service demanded to changes in its price/income, in other words the ED measures the way in which the quantitative demand reacts when the price of the product or service increases or decreases.
ED is important in determination of demand for air-transport services and is used from Ryanair for forecasting demand. By price elasticity of demand it can be shown if an air-transport service is elastic or inelastic.
In the case of Ryanair the elasticity of demand for the air-transport services is elastic. Ryanair succeeded to offer services in low cost [for example: tickets booking through internet, the use of secondary airports landing (less taxation), the cost of selling its services is reduced, no meals etc.] and these lower prices help Ryanair to increase the market share in comparison to other established and big companies, like British Airways.
Elasticity of demand has a major role in air-transport services and helps Ryanair to understand better the market and take the appropriate measures according to its benefit.
EXPERIENCE (LEARNING) CURVE
According to learning curve effect the more time a task is being performed the more efficient is it, because less time is required for each subsequent repetition. In the case of Ryanair when the aircraft production is doubled, the labor time which required is being decreased. The experience curve effect is broader than the learning curve effect and doesn't include the labor time only, but according to it, the more often a task (good or service) is executed the lower will be the cost of doing it. Every time that the volume doubles, value added costs fall by continuous and expected percentage.
Ryanair's profits from learning curve affects respected on costs are in the following areas: the same characteristics of fleets, the staff costs and productivity, the contracting out of services, the marketing costs and the airport an handling charges.
So, according to all the above it can be assumed that Ryanair's attainment of its profitability objectives should be attributed to an Experience (learning) Curve effect, where the labor becomes specialized and more effective, the products become more standardized, the automated production and information technology increase the efficiency, better use of the equipment, changes in the resource mix, the Network-building and use-cost reductions and the shared experience effects.
(In Ryanair the cost has declined at about 20% when the production is doubled).
ryanair's Efficiency, Effectiveness and Adaptiveness
Ryanair according to its financial performance objectives manages to be effective and efficient and this is derives from the company's Full Year of 2010 Results where it shown how adaptive Ryanair is in difficult situations such as Ireland's tourism collapse (2009), or in the case of cancellations due to the
Icelandic volcanic ash. Regarding the non-financial performance objectives,
Ryanair seems to be also efficient, effective and adaptive considering the fact,
that is one of the biggest world's airlines, although some people may not find it so attractive due to the fact that its low-cost strategy offers them less facilities.
CRITICAL FACTORS IN TERMS OF POTENTIAL THREATS
The potential threatsto the company's success particularly in an economic recession period such as the one we are going throughare:
Low threat of new entrants: the high costs are needed, the existing firms and the high competition.
Substitution threat: serious on short distance flights because it can be replaced by other means of transport such as train, car, boat and other airlines.
Threat to Ryanair's dominance:if Lufthansa manage to integrate Austrian Airlines, Brussels Airlines and bmi (plus one or two others).
Fuel's price threat: nowadays fuel prices are getting rising and this affects the company's expense's (getting increased) and as a consequence there will be an increase in tickets or a decrease in the profit.
Terrorism's threat and insecurity: especially after September 11th, owed to the artificial mood of fear and based on wrong information.
Environmental threats: that can't be predicted, but it can cause many problems, such as in the case of the Icelandic volcanic ash which led to closures and cancellations.
ADVANTAGE OF NEW CONDITIONS IN THE BROADER MARKET
According to the Full Year's of 2010 Result Statement, Ryanair managed to take the advantage in the case of the falling tourism demand in Ireland, by predicting it. The low-cost strategy of the company combined with its expansion in other countries and the increase of destinations along with the predictions, help the company to be prepared and effective in order to face difficult situations such as the collapse. Furthermore,
Marketing mix is the combination of elements which are necessary for the planning of the marketing operation and is known as the 7 P's.
Ryanair's marketing mix is the following:
PRODUCT OR SERVICE
Low cost, no frills to European destinations
No free food or drink (reduce cost)
Ryanair deals with Herzt car rental, hotels etc. 16% of its profit is due to the commission that is takes from them.
Ryanair's low fares.
The majority of the seats are sold in low prices (6% at highest). The price is associated with the time booking (the sooner, the cheaper).
Doesn't use travel agencies.
Online booking (saves 15% on agency fees).
Secondary airports (less traffic, cheaper).
Keeping the aircraft in the air long.
Few money for advertising.
Not advertising agencies. Simple adverts (inform passengers for the low fares).
Pilots are recruited when they are young (get early promotion).
Cabin crew invest in their own training and they are responsible for the passenger's safety.
Pay lee for aircrafts. Buy aircrafts with discounts in periods (such as after 9/11, Iraq's and Afghanistan's invasion) where other companies don't.
No long check in.
No seat selection. FIFO method (first come, first served).
No air bridges.
Baggage delivered in terminal. Not high levels of customer service for example in the case of a broken bag.