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Sky bus Airlines and Ryan airlines were the both low cost airlines and also both companies were the competitors to each others. Both companies had struggled much to compete each other. The strategy of the both of the companies was almost same to offer the low fare to the customers but due to the different facilities and services the out come of the both companies was totally different.
Basically low cost strategy is considered as a good weapon into the market to compete the competitor. So we must know about the low price strategy that what is it where does it important till what extent it should use. We can better understand it with following.
"A low strategy in which a company offers the low price to fulfil the demands of the economy and also to get the high market share into the market any company can use this strategy where the product has no advantage of competition
If we see with the point of these airlines then this consist of
- A single passenger class
- Same type of aircraft
- Point-to -Point Flights
- Flying to Secondary and Regional Airports due to less congestion
- Free services for catering and other complimentary services is been eliminated
Critical analysis of Ryan Air and Sky bus
Ryan Air was the first no frills airline in whole Europe. This airline was setup by the ryan family headed by TONY RYAN in 1985 with the lowest share capital we cant believe that the in first when ryan air takes a start the share capital of this airline wa just £1 at that time there was just 25 staff members it lanuch its first fligth in the which is 15 seater aircraft.
After wards ryan air started there way to success by arranging the first flight from dublin to london luton in just £99 which the lowesr fare at that time it was the half price of the ticket comparing the other line.
if we have a look upon the year 2006 the airline reecord the half year porfit of €329m for the first half of fiscal year 2007. The unit cost of the airline increase by 7.5 percent. The airline was incresed by the 9 percent as total revenues which Is arise by 33 percent to €1.256bn. If we have a look upon the year 2006 the airline reecord the half year porfit of €329m for the first half of fiscal year 2007. Ryan air in 2008. Ryan Air has introduced 950 plus low fare routes across 26 countries, connecting 150 destinations. Ryan air is the World's favourite airline which operates a fleet of 210 new Boeing 737-800 aircraft with firm orders for a further 102 new aircraft (before taking account of planned disposals), which will be delivered over before the end of 2010. There are more than 7,000 people employed and Ryan air expects to carry approximately 66 million passengers in the current fiscal year In 2009 its recorded that Ryan air had carried 65 million passengers to different destinations of the world it increase the growth by carrying the 5 million passengers and then 12% more then it in December 2009
Ryan air's Stephen McNamara said:
"Ryan air's guaranteed lowest fares and no fuel surcharges and our number one on time performance, fewest lost bags and least cancelled flights continue to attract more and more passengers every year. We are delighted that over 65 million passengers travelled with Ryan air in 2009 and we are confident that even more passengers will opt for our guaranteed lowest fares in 2010.
Lets concentrate on some points of Ryan air
OBJECTIVES AND VISION Of Ryan Air
- Customer services
- To get the higher market share
- To be a cheapest and profitable airline
- Cost reduction
- Generate more revenue
Ryan air is a low fares airline. The system of seats is like 70% of seats are sold at the lowest two fares.30% of seats are charged at higher fares. The last 6% are sold at the highest fare. They provide no food on board passenger can buy or can take food with him self. Air line offers Dublin to London with fares ranging from £18 to Euro £152
Ryan air have not any agency to sold the ticket via them it sold their tickets via website rather then to pay any commission to the agents it create the direct link with the customer. This reduces the cost of the ticket. You can book the ticket online though Internet. This saves them 15% on agency commission. They use secondary airports to land because its is cheaper to fly from a secondary airport like Stan stead rather then the Heathrow and these kind of secondary air ports are not usually busy so the air craft can be move easily The destination airport of Ryan air are secondary so it reduce the fare as well.
They spend not much on advertisements. They use simple way that tell passengers that Ryan air has low fares. The aircrafts are decorated with advertisers e.g. News of the World, Jaguar and Kilkenny. There is no check in for the airline on airports. You simply show your passport and give your reference number.
They recruited the pilots when they are young as pilot cadets. Cabin crew pay when they want their uniforms to be cleaned. They invest in their own training.
Extra fares on board
You cannot have a preferred seat. The rule is first come, first served. There are no air bridges or tunnel which connects your way to aircraft you have to walk or are use bus to the aircraft. Your Baggage is sent directly to the terminal it's quick. However if your bag is lost or broken into don't expect high levels of customer service.
Reducing the cost was the main strategy for Ryan air. To generate the revenue was the basic focus sky bus aircraft has the facility of gift shop, food shop selling all kind of foods and gifts like perfumes watches clothing and toiletries
The exterior of the aircraft and cabin is full of advertisements like on overhead bins, carpets, tray tables. Low cost fares and sky bus advertisement
The company was established in 2003 and is based in Columbus. On April 5, 2008, Sky bus Airlines it is known as the ultra low cost airlines after the Ryan air. The planning of Sky bus was to offer cheapest fares in USA which will be 25% cheaper then south west. The aircraft is designed with the advertisement on it all around on the interior. The airline offers $10 on every flight on this point the CEO of Sky bus said that the flight will offer 10 seats at least $10 on every flight Sky bus applied for operating approval on January 1, 2005, received approval to operate on March 15, 2006, and FAA certification on May 10, 2007. It had been granted a waiver to begin ticket sales on April 24, 2007, Sky bus' first passenger flights out of Columbus began on May 22, 2007. Less than a year later, Sky bus announced on April 4, 2008, that it would cease operations as of April 5, citing the lagging economy and rising fuel costs as causes. Not cited: operational issues causing the airline to operate late flights nearly 50% of its short history, low employee morale and rapid expansion not envisioned in the original business plan
The starting fares of the all target destinations began at $10 one way. Airline advertise al around that 10 seats just for $10. the tickets of the sky bus airline was the on the half price then the other airlines. In a 10 dollar one way ticket the taxes and other airport fees in not included. If we include all of the taxes and other airport fees then a adult ticket have a cost about $40 on way. So it was the very cheap fare to travel around
Sky bus charge extra fees for any other extra facility other then the ticket this thing is almost common in the other cheaper airlines. A passenger can take only one bag and one personal item in board if he want to carry any extra baggage then he have to pay like if passenger want to carry two bags under 50 pounds then he have to pay $12 at the counter on the airport. If the passenger want to carry more additional baggage after two bags then he have to pay $50 for each bag. About the over weighting if the weight is over 50 pounds then he have to pay $25 but if the weight of the bag exceed 70 pounds then that bag was not acceptable
Sky bus strategy was to reduce the cost of maintenance so for this the equipments purchased was uniform which include the engine, electrical parts, and the personnel gear. The other strategy of the airline was to use secondary airports which are mostly not to busy so it is easy to turn the aircraft and less to lease space there is not any tunnel connecting to the aircraft so it reduce the cost on the airport the tickets are to be bought online rather then through any agent it reduce the chargers like commission.
Sky bus pay the wages to the employee with this strategy the attendants were paid $9 per flight hour. This wage to the attendant was the lower wages if we compare it with the competing airlines. Flight attendants also received 10% of all sales made during the flight.
Sky bus paid the wages the pilot also low then the others $65000 was paid to the captain annually and for first officers it was $30000. sky bus pilots work 8-10 hours and can work maximum 16 hours.
Reducing the cost was the main strategy for sky bus. To generate the revenue was the basic focus sky bus aircraft has the facility of gift shop, food shop selling all kind of foods and gifts like perfumes watches clothing and toiletries
The exterior of the aircraft and cabin is full of advertisements like on overhead bins, carpets, tray tables. Low cost fares and sky bus advertisement.
The plane was fully covered with the name of the airline and a butterfly logo on the tail of the aircraft. The same advertisements were not for all air craft. The plane of sky bus was branded airplane so branded planes featured with the full body advertisements along the fuselage with the tail of the plane and engine of the plane with the sky bus color scheme.
- Less cabin crew - no need of more then enough cabin crew as there is even no food serving.
- Increase air craft sitting
- Cost difference from others which is much imp for profits
- The company has no past backgrounds
- Poor customer dealing
- Few destinations
- Limited resources
- Sky bus hubs do not provide connection opportunities for passengers
- People use to travel all around so market is big
- Tax holidays on aircraft leasing
- Bog advantage from less exposure to political risks
- Competitors in market
- World crisis
- Change in oil prices
- It focus on low cost
- Online ticketing
- Sky bus covered just 17 destination
- Reduced the costing
- Advertisement on the plane
- Require young pilots
- Increase the aircraft space
- Extra fares on extra facilities
- Government target is to attract the foreign investment in the country
- Approval of declaration of independence
- After getting the aircraft certification (FAA) granted for ticket sales
- Oil prices getting higher so mite be there will taxation of air travelling
- Air pollution due to aircraft ]
- Modern turbo fan decrease fuel consumption
- Purchasing power of customer is getting higher
- Increase in growth rate and interest in tourism
- No frill airlines coming
- People travelling more because of the low costs
- Aircraft industries building new air crafts with more seats
- Engines are created which creating less pollution and noise
- E - ticketing
The business strategy of sky bus was very similar to Ryan air and southwest airlines if we go through the complete objectives and the strategies adopt by these two cheapest airlines then we have come to know that sky bus was based on these two airlines.
The business strategy the airlines was
Bargaining Power of Suppliers:
Now a days suppliers of the aircraft are on the peak it means they are all having good market share because of the high prices of the air craft on the other hand the price of oil is changing day by day the suppliers of oil have a great Impact on the market to provide the oil to the airlines
Bargaining Power of Customers:
People are very conscious about the price and also want the high services for low prices the expectation of the customers towards the airline are getting more regarding to health and safety they appreciate the flights in time now a days the credit card system have increase the buying power of the customers can also do shopping from internet as well as they can plan their holidays and buy the tickets
There are allots of airlines giving the same services there no not much big difference in the price many airlines also offers low prices due to high competition in the market and there are other substitutes of travelling like trains and buses so it is also a threat some time airports are much busy n take time a lot so other substitutes take less time in theses all thing
The strategy of the airline is to generate the revenue there is gift shop in the air craft for the passenger to shop the gifts like perfumes, watches, handbags etc and also food shop which not even the special food of all types' even special food for diabetes patient. For the advertisement they have advertise on the interior and exterior of the air craft this airline was known as only bird fly cheaper because it was just for $10
- Ryan air developed a position in the market in 14 years
- It get the benefit of low air port charges by reducing cost
- 94% of booking of ticket done from internet
- Point to point flight save the time and money
- Utilization of aircraft for long time to make more money
- Poor customer service
- Limited destinations
- Increase in values
- Low Employee moral
- Many more other destination will be open in European sector
- Other sectors from European sector will be open
- No frills airlines can increase the market share
- Oil price fluctuation
- Many planes fly in the air every day so air traffic
- Conscious customer about prices
- US is a politically stable country
- In first the countries save there national airlines but after the bilateral agreement between Ireland and UK. Ryan air can fly to different countries
- Fuel and Energy costs are cause of uncertainty.
- Economic resection is all over
- Tourism trend is expanding in every country
- Low cost ticket attract the persons more towards tourism.
- Internet facility to check in .
- Ryan air uses same type of aircraft -Boeing 737s. This reduces operating costs to a higher extent.
Tourism has expanded the market in the unexpected countries
The company offers the low fare tickets and point to point flights between Ireland and UK. The fare of airline was extract to the demand of the passengers 70% of seats in a flight are sold at less fares for the route Ryan Air flight Dublin to London was very cheap with fares ranging €19.00 to €169
The features of Low Cost Carrier:
- Ticket prices should be as low as possible in Europe.
- Usage of secondary and smaller airports
- 100% E-distribution of tickets
- To increase the capacity of airplanes
- Maximum utilisation of aircrafts due to fast turnaround times.
- Extra charges for additional service
- Fuel Hedging
- Cost-cutting measures
- To make a main base location in London - UK.
Analysis of the Low - Cost Airline
Bargaining Power of Suppliers:
There are only two main suppliers of planes Boeing and airbus and different supplier in the market have different criteria so if the airline wants to switch the supplier from one to other then its hard for the company because airline has to retrain the pilots and mechanics. in fuel cost is directly connect to the oil price so Ryan air controlled it with the help of hedging
Bargaining Power of Customers
Normally customer are very sensitive in the case of price they expect and demand more from the airlines there are many airlines in the market who offer also cheap tickets so we have to care of this fare bargaining customer can easily switch to the most cheapest line through internet
there are other many alternative of travelling like cars, trains, ferries, etc so this is also a threat because some time airports are busy on check in due to several flight at same time. The price of oil does not get stable any time.
Ryan Air will continue the same services and strategies of low price to attract the customer and generate the more income. The company is trying to increase the seats in the aircraft to carry more passengers from place to place this thing will increase the financial growth of the company ryna air is a low cost service as well as a low quality service but company is still trying to make it up in different way company is going to introduce the fleet of Boeing 737-800 very soon.