The ryanair airline

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Strategic Planning

Strategic Planning is a major activity performed by the higher-level management where higher management develops policies or vision for future growth based on past experiences and implemented by middle or lower level management. Strategic Planning covers the long term goals of the organizations. In strategic planning issues like goals of the organization, resources to achieve those goals and ultimate customers are discussed. Gregory et al (2004 :05) define strategic planning in these words " Strategic management consist of the analysis, decisions and actions an organization undertake in order to create and sustain competitive advantage

Introduction to Rynair Airline

Ryanair was registered in 1996 with the aim of providing low fares to clients on short haul flights and on point to point routes across the UK and Europe With in short spam of time Ryanair has become an important part of air line industry which has survived in the adverse business environment.

Ryanair: Financial facts and Prospects

The year 2008-09 was not impressive for air industry due high fuel prices and many organizations made losses in 2008-09. Although there was 8 percent increase in Ryanaair total revenue in 2009 compare to 2008 but Ryanair could not save itself from global recession and increasing fuel and made a loss of Euro169.20 million in 2009 where as it has made profit of Euro 390.70 million in 2008.

Ryanair's Strategic Policy

Low Fares

Ryanair introduced itself as low fare airline to attract customers from all sphere of lives. To ensure availability of low fares to clients Ryanair sells one way seats to clients and fares are provided to customers on the basis of demand and time of booking prior to flight. The sooner a person book a ticket, the cheaper they will get.

Customer Service

Customer services are important element of strategic planning and today customers are become more quality service conscious than ever before. Keeping this in view Ryanair has introduced excellent customer services. Ryanair flights are more on time than services, less baggage losses, less flight cancellations compare to its peers in the industry. To achieve this Ryanair firmly implement its quality objectives. To ensure on time flights and less cancellations Ryanair operates from less congested airports.

Frequency of Flights on Short Routes

Ryanair provides frequent flights on major routes to retain greater number of customers. This frequent and short haul flights enable Ryanair to maintain low costs and offer low fares to its customers.

Low Operating Costs: To offer low fares to its clients Ryanair have to maintain low cost and at present Ryanair offer lowest fares to its customers. To keep its cots to a minimum Ryanair operates from secondary airports which are less congested and incur less handling costs. Ryanair control it's in the following sections,
  1. Airplanes related costs
  2. Employee related costs
  3. Customers related costs
  4. Airport handling related costs
Aircraft and Equipment Related Costs.

Ryanair has adopted the policy of standardisation to acquire aircrafts. It is planning to retained same type of aircrafts from single manufacturer. It has recently made an agreement with Boeing to provide them Boeing 737-800s aircrafts and also maintain those aircrafts. The purchase of planes from a single manufacturer has enabled Ryanair to reduce its costs significantly related to employee's technical training, aircrafts maintenance and storage of spare parts.

Personnel Costs

To increase its employee's efficiency and productivity Ryanair offer incentives based on productivity of its employees. Employees with higher productivity are given bounces and incentives such as it pays particular percentage of onboard sales to flight staff.

Customer Service Costs

Ryanair to ensure delivery of high quality services to its customers at competitive prices it has made contracts with external contractors. Ryanair has also introduced on line ticket booking which has eliminated intermediation costs. The elimination of intermediation costs has brought benefits for the ultimate customers.

Airport Access and Handling Costs

Airport access and handling charges are take a big share of costs in airline business. To keep low costs low Ryanair operates from airports where such costs are less compare to busy airports. The selection of secondary airports has enabled Ryanair to reduces its cost significantly. Moreover increasing number of customers has brought Ryanair in a better negotiating position with airports management authorities and able to get competitive rates from them.

Taking Advantage of the Internet:

The invention of internet has changed the world dramatically and now world has become a global village. Now more and more companies are using this marvellous invention to take competitive edge over competitors and airline industry has also been greatly benefited by technology. Ryanair introduced e ticketing in 2000 and since then has made significant changes in this system. The adoption internet has enabled Ryanair to reduce its costs significantly be eliminating agent's costs and transfer this benefit to its customers. Now nearly 99 percent of Ryanair bookings are done through internet.

Quality and Safety at Ryanair

In today dynamic environment safety is such an important issue that people are willing to pay extra for this. Now people are more safety conscious than before. In this way Ryanair places great emphasis on safety. To ensure safety Ryanair has hired very professional trained pilots, flight staff and aircraft maintenance staff. To increase safety of Ryanair has contracted with Boeing for its aircrafts maintenance. Due to these preventive measures there is not a single incident which caused major injury to clients or staff.

Enhancement of Operating Results through Ancillary Services:

Technology has changed the world. Now people want a single place where they can get number of services. Keeping this in view Ryanair also provide services such as Hotel booking, Accommodation, Insurance and car rentals. These services increased Ryanair customers and now these extra services nearly 20 percent of total Ryanair's revenue.

Initiatives for Growth

Ryanair started its operation in UK in 2000 and after the success of its UK operations it has expanded its services to other destinations as well. Now Ryanair flies to Morocco and different countries in Europe. It is also planning to expand its flights on other important Europe routes and management believes that they can made possible growth by

  1. Initiating additional routes in the EU
  2. Initiating additional routes in countries party to a European Common Aviation Agreement with the EU that are currently served by higher-cost, higher-fare carriers
  3. Increasing the frequency of service on its existing routes
  4. Starting new domestic routes within individual EU countries
  5. Considering acquisition opportunities that may become available in the future;
  6. Connecting airports within its existing route network
  7. Establishing new bases in continental Europe
  8. Initiating new routes not currently served by any carrier.

Adopted from Ryanair annual report 2009 (pp 51)

Challenges faced by Ryanair during Present Economic Situation

Year 2008-09 was not a good year for airline industry particular for low cost and low fares airlines as they faced significant pressure on their finances due to high fuel prices. To face these challenges Ryanair has considered following

  1. Selectively grounding aircraft,
  2. Disposing of aircraft (increasing its disposals from six in the 2008 fiscal year to approximately 17 in the 2009 fiscal year)
  3. Controlling labour and other costs, including through wage freezes, selective redundancies and the introduction of Internet check-in
  4. Renegotiating contracts with existing suppliers, airports and handling companies.

Adopted from Ryanair annual report 2009 (pp 51-52)

Ryanair Future

Over the last decade Ryanair has made strong growth and holds very strong balance sheet. It has nearly Euro 2.5 billion in cash which is a competitive edge for it over its competitors. Ryanair also operates low costs aircrafts and plan to increase number of its aircrafts to 300. As fuel prices will decrease in future Ryanair will be benefited from this. To its costs in future Ryanair has planned to reduce its non-fuel expenses by more than five percent in coming years and to date it seems that Ryanair will achieve its target.

Introduction to Sky bus Air Line

J Weikle and K Gile established an airline in 1990s and they named it Heartland Airlines but doe to financial constraints they abandon this and concept and after years they initiated this plan again with the name of Sky bus with US$ 160.00 million capital. In the beginning they plan to provide services in the following cities, California, Florida, Missouri, New Hampshire, North Carolina, Ohio and Virginia. Sky bus raised capital of US$ 160.00 million in first round and US$ 72.70 million in 2nd round which is a record in airline industry (Oobdoo). Sky bus has been backed by many strong financial organizations such as Morgan Stanley, Fidelity Investments and Tiger Management. Sky bus started its operations by developing a strategy in which it tried to keep revenue at high ebb and costs at low ebb. Thus providing low fares to its customers and attracting large clients' base.

Strategy of Sky bus to achieve its objectives

Sky bus started its operation by providing low fares flights by utilizing technological advancements such as online booking and online check in. Most of the information is available through its website. To enhance the quality of its services and achieve its objectives Sky bus also related information about hotel, insurance, and events.

Low Fares

Sky bus planned to get maximum share of clients by offering as low fares as US$ 10 in the beginning excluding taxes and airport fees. It has promised to offer at least ten tickets per flight at US$ 10. This low fares strategy has proved a two sided sword for the sky bus which has brought benefits for the Sky bus as well as losses. Sky bus failed to maintain its cost due to raising fuel prices.

Customer Service

Good customer services are most important element in air industry but unfortunately Sky bus to keep its fares low Sky bus has failed to provide quality services to its clients e.g. it has no toll free number for customers, meals provided during the flights are charged at high prices without proper system of food stuff disposal. Flights from secondary cities were an issue for Sky bus as major cities were far from secondary cities which created tough times for Sky bus.

No Connecting Flights

Sky bus has major pitfall that it does nto offer connecting flights from GSO and CMH airports. Due to non availability of this facility customers find it difficult to travel through Sky bus as costomers have to move their luggage by themselves.

Frequent Point-to-Point Flights on Short-Haul Routs:

As mentioned earlier Sky bus started its operations as low fare airline and reduce costs maximum. It has offered point to point short duration flights which enable it reduce expenses such as meal as Sky bus believed that short haul and frequent flights with low fares will enable it attract large clients base. Although this strategy of Sky bus has been successful to some extent but increasing fuel prices and other expenses has constrained on its capacity in providing low fares with quality services.

Low Operating Costs:

To operate as low low fare airline sky bus has brought its operating expenses by selcting secondary airports for its operations as they are less congested and other charges are alos minimum which has enables sky bus to keep its charges to minimum livel. Unformity in the purchase of equipments is an other factor that has enabled Sky bus to keep its fares low. Sky bus has also reduced ots loading and unloading times by using Aporn for boarding instead of jetways. To reduce commission of middle man sky bus planned to sell 98 percent of its tickets through internet.

Employee Wages

To reduce its costs and provide low fares to its customers Sky bus has offered significantly less wages to its employee's comapre to industry average. On average it has offered US$ 65,000 per annum to pilots compare to industry average US$ 135,000. It also offered 10% of on flights sale to staff.

Commitment to Safety and Quality Maintenance:

To provide high quality services to its customers and maintain industry requirements sky entered into agreement with Airbus to purchase 65 aricrafts in 2006 worth US$ 3.6 billion. To maintain quality of service and keep its costs low Sky bus also asked Airbus to maintain its crafts for twelve years.

Financial Performance of Sky bus

Started as low fare airline company Sky bus suffered from losses of US$ 16.00 million during its first quarter of operations but these losses were unexpected for Sky bus as they were expecting these due to new player and less experience in the air industry. To attract large customers Sky bus has offered incentives of US$ 57.00 million to its clients.

Initiatives for Growth

To make a reasonable growth Skybus has been offered incentives of worth Euro 57.00 million by Columbus Regional Airport Authority (CRAA) these incentives are consist of 'business purposes loans' and 'tax credit'. In return Sky bus promised to create 1000 job opportunities for local people.

Compare and Contrast the Outcome of the two Companies

Brief introduction of Ryanair and Sky bus has been presented with their strategic planning to increase their share in the air industry. Here I am going to compare the two airlines with SWOT analysis.

Strengths for Ryanair

Experience

Ryanair holds more than two decades experiences in air industry. This long experience has helped Ryanair in difficult economic times to continue its operations profitability.

Strong Brand name

With more than two decades of experiences Ryanair has developed on the horizon of air industry a very strong name. Now people trust this name and prefer to use this for short haul flights.

Use of Less Congested and Airports with Low Access Charges

Ryanair has selected secondary airports where air traffic is less and this has helped Ryanair to keep its costs and fares low.

Internet Bookings

More than 97% of Ryanair booking are done through internet which has eliminated extra costs such agent commission or phone booking which is also more costly than internet booking.

Large Customer Base

Over the period Ryanair has increased its customers significantly. In 2008 more than 50.9 million passengers travelled by Ryanair which as helped it to take advantages of large scale operations and brought it in better negotiation positions with different airport authorities for incentives.

Use of Only Boeing Aircrafts

Ryanair is using only Boeing 737-800s aircrafts which has helped it to keep maintenance costs and training costs at low level.

Quality Customer Services

Ryanair maintained good quality services compare to its competitors which has enabled it to attract large number of customers. Its more flights are on time with minimum baggage loss.

New Aircrafts

Most of Ryanair aircrafts are new which has helped to reduce maintenance costs. Ryanair has entered into agreement with Boeing where Boeing will provide 60 air crafts to Ryanair and also provide maintenance services for twelve years.

Short haul Point to Point Services

Ryanair operates on short routes and directly flies from one airport to another airport without any in between stop which help it to reduce costs.

Minimum Over Heads

Ryanair operates small head quarters with has reduced its expenses significantly.

Weaknesses of Ryanair

Bad Relations with Press

Management at Ryanair has failed to keep healthy relations with press and due to this small event in Ryanair is significantly highlighted in press and media.

Target Market

Ryanair has targeted offer cheap flights and provides services for a specific class which can prohibit it from great expansion.

Use of Secondary Airports

To keep its costs to a minimum level Ryanair uses secondary airports which are far from desired customer's destinations and this aspect create problem for the clients and as a result in future customers may turn to other airlines.

Refunds at Ryanair

As Ryanair is low fare airline it does not offer refund for cancellation or for missed flights and customers have to purchase new tickets if they wish to continue their journey.

Onboard No Frills

Ryanair does not offer meal or other complimentary such as TV, Drinks or magazines to customer. However customers are allowed to purchase drinks during flights or can bring their own.

Opportunities for Ryanair Expansion of European Union

As the major target market for Ryanair is Europe, the expansion of European Union has brought many fruitful advantages for Ryanair such as it has started its flight on 8 new routes in 2008.

Less Prone to Risks

Ryanair is less prone to geographical risks as it only operates in Europe which has great potential.

Global recession

Although global recession has tuned the companies upside down but it has brought benefits for Ryanair as due to slow economic people prefer to travel by low airlines.

Threats for Ryanair

High Fuel Prices

Fuel prices jumped suddenly in 2008 which brought heavy losses for air industry and Ryanair could not survive from high oil prices.

High Competition

Over the last few year number of new low fare airlines has started their operation and those airlines has stolen some share of Ryanair customers and if they continue to grow in future competition for Ryanair will be more intense.

Price Charged to Customers

Ryanair's focused class is more price sensitive particularly in today adverse economic environment and a nominal increase in fare due to increase fuel prices or other can cut the share of Ryanair in the market.

Sky bus

Introduction

Sky bus started its operations and unfortunately closed its services within one year of launch because of adverse business environment prevailing in the world market. It was an unfortunate for Sky bus that with the start of its operations world came under tremendous economic pressure. Oil prices reached its all time level which brought huge set back for a newly established airline such as Sky Bus. Some people warned in the beginning Sky bus might not continue in long term 'Sky bus may not be viable over the longer term because it is a very risky investment proposition' (Cordle, 2007).

Strengths for Sky bus

Large Capital

Sky bus raised huge capital at its fund raising event backed by high profile Companies such as Morgan Stanley, Fidelity Investments and Tiger Management. At initial offer they raised capital of US$ 160.00 million and US$ 72.00 million.

Employee Wage Policy

Sky bus has adopted a policy in which they paid low wages to their employees and employees at first year receive lowest wages which can help Sky bus to keep its cost low.

Young and Energetic Employees

Employees become less energetic in an older organization whereas Sky bus has young and energetic employees who can contribute in the success of Sky bus but unfortunately this strength could not save it from the cruel clutches of bankruptcy.

Weaknesses of Sky bus

Lack of Experience

Sky bus started its operations in 2007 and lack experience compare to Ryanair which has more than two decades experience.

Opportunities for Sky bus

Large Customer Base

Sky bus can attract large customer's base due to low fares and frequent point to point flights.

Threats for Sky bus

Major Airline

Sky bus was established after seeing the success of Ryanair but in USA major airlines have reduced their fares by 20% which was a big setback for Sky bus.

Bad Industry Practices

In air industry more and more new companies are being established as there are low entry barrier and capital is also available due to high growth and profitability and this can be threat for Sky bus

Fluctuating Fuel Prices

Fuel is major part of cost in air industry and fluctuating oil prices can be dangerous for a newly established air line like Sky bus and this came true when fuel prices increased suddenly and due to lack of experience Sky bus could not resist against this rise where as Ryanair still surviving.

Outburst of Diseases

Diseases such as swine flue can have negative impacts of the airinustry and this is a threat which can be fatal for any airline

Slow Economy

Sky bus started its operations at a time when many economies across the world are facing decline and struggling. This has reduced people spending power and can affect Sky bus performance and income generation.

Conclusion

Skybus started its operation at a time when most of the world economies were facing recession and high fuel prices. It was unfortunate that people lost a cheap source of travel due to high fuel prices and slow economy. CEO of Skybus explain this in these words "Skybus struggled to overcome the combination of rising jet fuel costs and a slowing economic environment. These two issues proved to be insurmountable for a new carrier" (Hodge, 2008) Where as Ryanair has survived in bad economic conditions due to experience and best strategic policy. In year 2008-09 although Ryanair also made losses of €169.173 million (Ryanair Financial Report, 2009) but it was able to survive where as Skybus could not resist this pressure and bankrupted ultimately. It is expected that Ryanair will be benefited from low fuel costs in future and again earn profits and remain sustainable in foreseeable. The strategic policy of Ryanair has worked for it and brought benefits.

Growing to become the World's favourite airline:

In 2009, Ryanair was for the first time ranked by IATA as the world's largest international airline by passenger numbers.Ryanair can now rightfully claim to be the world's "favourite" airline.

Bibloigraphy

  • Aaker , D. (2007) Strategic Market Management, Wiley; 8th Edition
  • Chemev, A. and Philip Kotler (2008) Strategic Marketing Management, 3rd Edition Brightstar Media, Inc
  • Gregory G. Dess, G T (Tom) Lumpkin, Marilyn L. Taylor (2004). Strategic Management: Creating Competitive Advantages
  • Johnson, G and Scholes K (2005). Exploring Corporate Strategy, Prentice Hall, 7th ed
  • Ryanair Finanacial Report, (2009)
  • Skybus Financial Information (2008)

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