A brief history of Ryanair

A brief history of Ryanair is set out to provide a background of submissions.

Ryanair is Europe’s largest low-fare airline and based in Ireland. This is a public listed company who are trade on Dublin, London and New York (NASDAQ) Stock Exchange stocks. It is committed to low cost airfares and introducing competition to the European flag airlines and air transport market growing alliance. It has the ability to provide passengers with the industry’s lowest fare is dependent to a large extent, the low cost and high efficiency of the airport.(RYANAIR LIMITED 2007)

Ryanair, started operations in 1985, launched 15 flights a day between turbine support and London Gatwick Airport Waterford. The beginning of the company’s commitment to providing low-fare air travel to the Irish public contrast, oligopoly pricing is provided in time for Aer Lingus and British Airways. Ryanair was the first European airline set up a special low fares and competition within the European short-haul routes. In the companies of first year, its 57 employees carried just over 5,000 passengers in this original route.

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In 1986, Ryanair routes into Dublin-London, which was jointly owned by the two countries, the airlines, which Aer Lingus and British Airways. In Dublin, London route has been stalled about 1 million passengers each year from 1975 to 1985, when some of the features the highest air fare per kilometer in Europe. Before Ryanair to join this route, the normal flight between Dublin and London in 1985 was £ 209 return. Ryanair began service on May 23, 1986, to introduce the launch of the fare £ 94.99 return. In its second full year of operation, Ryanair has just 120 employees to carried more than 82,000 passengers on two routes.

In the next three years (1987-1989), the rapid expansion of Ryanair routes opening up many new Irish and British, and to improve its fleet. However, while customers continue to flock to Ryanair’s low fares, the cost does not control, and the company’s accumulated losses. By 1990, the company employs 350 people, operating 14 aircraft (4 different types), was carrying 600 000 passengers, but had managed to loss of £20 million in just 4 years. These losses are mainly due to over expansion and the inability to strictly control costs, the deregulation of the market, and these new cost control is essential to the ability to provide low-cost services of the profits.

1994 also saw the acquisition of Ryanair’s first Boeing 737 aircraft used orders for six second-hand 737-200 series aircraft (130 seats) was purchased directly from Boeing. In the next three years to buy fifteen 737-200 aircraft were to make the fleet to twenty-one 737-200’s. In line with the expansion of the fleet, more new routes form Ryanair is to open up the Irish by the British, increase frequencies, providing a total of all the routes, an the ticket prices were reduced even further. As a result in 1995, the airline’s 10th anniversary, Ryanair has become the largest airline in Dublin-London routes, and they operate in each line on which it operated (in terms of traffic routes), total 2.25 million passengers per year and labor Now more than 600 people.

After 1997, the EU air transport deregulation, the airlines was free for the first time open up new routes to continental Europe. Service was launched in Stockholm from London Stansted and Oslo efficient secondary airports, as well as in Paris and Brussels from Dublin and efficient secondary airports. Similarly, Ryanair to enter these markets fare over 80%, respectively, lower than the most expensive week, and then by the flag carrier airline fares. Positive response and a large number of passengers low fares in these arrived in the European market for the first time. Ryanair was the first low-fare airlines to provide scheduled flights from Britain to Continental Europe and vice versa. 1997 also saw the Ryanair Holdings plc float in Dublin and New York (NASDAQ) stock exchange. At that time, the airline is the capital of IR£300 million in the infrared market value and more than 3 million visitors each year to bring its network of 18 routes.

Despite this success, Ryanair remains committed to lowering fares, increase service frequency, and to maximize the low-fare seats to the number of business and leisure travelers. Ryanair was a direct competition with a lot of Europe’s largest airlines, including British Airways, Scandinavian Airlines, Alitalia, Lufthansa, Sabena, Air France, Aer Lingus, but offer low fares unparalleled of The package, on-time flights, high frequency, and friendly in-flight service, Ryanair is continuing to be successful, winning increasing public and customer support.

In 1999, Ryanair announced an up to 45 new Boeing 737-800 series aircraft for the two billion U.S. dollars next major investment plans. This is the latest and most modern Boeing aircraft. The first five aircraft to be delivered to Ryanair in 1999, and five more scheduled for delivery each year thereafter. Ryanair is the lowest in Europe and is to provide the latest and most modern air fares on Europe. Ryanair announced in 1999, another record performance, operating 35 routes to 11 countries, the carrying almost of the nearly 600 million passengers. Ryanair’s customers to enjoy high-fare competition is the flag carrier airlines from Europe collected 300 million pounds worth of savings. At that time the company employs were more than 1,200 people.

Ryanair launched in early 2000, Europe’s biggest travel website at www.ryanair.com, which launched within 3 months has taken over 50,000 bookings per week, by offering low airfares which start from as little as £ 1 return taxes on Glasgow London plus tax and £9 return plus taxes on Dublin-London route.In February 2000, Ryanair announced 10 new European routes for the summer of 2000, the service from London (Stansted) to Malmo in Sweden; Hamburg (Lübeck) in Germany; Verona (Brescia), Sardinia (Alghero), and Lamezia in Italy; Provence (Nimes), and Perpignan in France, and Shannon in Ireland. The airline has also introduced two new low fare services from Frankfurt (Hahn) Shannon in Ireland last summer, and to Glasgow (Prestwick) in Scotland.

So far in 2001, Ryanair has launched seven new routes in the UK and to increase the capacity on number of existing lines. In February of this year, Ryanair announced that its first mainland Charleroi in Brussels, the European base would initially be open from its seven destinations in the provision of services. Ryanair will build the airport in Ireland, the base has been the basis of the cost of more competitive and cost-oriented regulation of airport / facility. This year, Ryanair will offer 36 Boeing 737 aircraft fleet and will be about 9 million passengers. Unfortunately, only about 18% will come from the traffic in Ireland as in the regulation of the airport’s competitive cost and inefficient infrastructure.

It have be clear from the background that Ryanair’s rapid growth of routes and traffic will continue to focus on low-cost, high efficiency of the airport, in order to minimize costs and ensure that the airport’s rapid turnaround time and maximum efficiency of the aircraft. This is a major factor in Ryanair’s ability to guarantee the lowest fares in Europe.( RYANAIR LIMITED 2007)

2.Environmental and European airline industry analysis

2.1 External analysis – PESTLE

PESTLE analysis is a short form for political, economic, social, technological, environmental and legal (Channon, 1997). PESTLE analysis has provided a comprehensive detailed list, possibly affects successful or the defeat, especially strategy (Johnson and Scholes, 2007).

Political

Some countries grant preferential treatment to companies from their own country. From the case study also pointed out that ‘the French government attempted to protect Air France-KLM by forcing easyJet and Ryanair to move the staff they employ on French soil from British contracts to more expensive French ones’

Economic

Fuel prices, because they increase the problems caused a major airline industry, if they do not hedge they had to cut corners to save costs in other areas. All the airlines are working to reduce costs and increase their profit margin, they reduce the cost of the effort will have a negative affect on the pilots and staff because as they may have low wages of lack benefits that would otherwise have been there. There are problems, the market increasingly competitive, as in emerging and developing countries have more people hope that have more airlines, so in order to adapt to this, by reducing industry profits. With the current economic crisis may be the demand for flights in the fall, because we are in recession, layoffs and people therefore have less disposable income means that they cannot leave. This may be a favorable low-cost aviation industry for people who can still afford the holiday will be looking for cheaper alternatives.

Social-cultural

Passengers are now not only need the cheapest fares, they also need a comfortable chair, safety and never lose their luggage, and the best facilities and etc.

Technological

Technology has improved, which means that the industry is changing, becoming more environmentally friendly and efficient. More effective infrastructure of airports are means that many airports of the airlines can charge more fall from the sky.

Environmental

There are new laws that say that the airline industry has to be more environmentally friendly therefore the manufacturers, designers and airline companies have to combat this together in order to decrease carbon emissions and make the industry less harmful to the environment in order to comply with EU regulations.

Legal

The whole industry is very strict control laws, but also because they have to constantly adapt to new changes in law, i.e. not allowing the liquid on board. These contracts to the industry has their pilots did not seem to benefit the workers as it contributes to the company soon which may change soon and the company will have to adapt to this.

2.2 Internal analysis – five forces framework 

Porter’s five forces is an important tool for analyzing the organizational structure of the process of strategic industries. It is used to understand the strategic business opportunities and threats should be consistent with the organization of the external environment (Dagmar Recklies, 2001).

Threat of entry

• Some barriers to entry:

• High capital investment

• limited availability of slots to make them more difficult to find the suitable airport.

• instant price wars if erode the existing LCC route.

• Need low-cost basis

• Flight Authorizations

In Europe, low-cost carriers were increase in 2006. Although expressed in the European airline industry is a large number of entrants and competitors, but as many as 50 have gone bankrupt, been taken over, missing or had never left the ground. Therefore, the threat of entry Ryanair face is media.

Threat of substitutes

• Customer are No brand loyalty

• No close customer relationships

• No switching costs to customers

• Other modes of transport, such as Eurostar, high-speed trains, Eurolines, ships, cars, etc.

Passengers will choose the train, because do not want to face the inconvenience and cost of checking baggage, spend more extra time in airport security line. The train is the only alternative of airline to the threat of an alternative airline of Ryanair is low.

Bargaining Power of Customers

• Customers are Price-sensitive

• Switch to another airline is relatively simple and does not involve high costs (internet, all airlines are online)

• Customer understand about the cost of providing services

• No loyalty

Although the customer’s complaints, they feel disturbed about Ryanair has been trying to sell them something of the aircraft. Although some passengers, they need comfortable seating, security will never lose their luggage, the best such facilities and Ryanair has been graded as the world’s most disliked airline in the survey of Ryanair, but they do not want to change and continue to focus on cutting costs, to provide low fares. Therefore, the buyer bargaining power is low.

Power of supplier

•Boeing is a major supplier of RA

• Only two potential suppliers of aircraft – Boeing and Airbus

• Switching costs from one supplier to another is high, because all the mechanics and pilots must be retrained.

• Aviation fuel prices is directly related to the cost of oil (Ryanair control these through the hedge).

• Regional airports have little bargaining power because they rely heavily on an airline

• A larger airport, where Ryanair’s competitors operate with greater bargaining power

The actual purchases of aircraft, fuel supply, are the two major suppliers of the aviation industry. The supplier cannot control the fuel prices, although Ryanair is so sensitive and cannot affect the fuel suppler to Ryanair. On the actual purchase of the aircraft, Ryanair has a very healthy relationship with the main supplier of the aircraft, the Boeing Company (Brophy and ST. George, 2003). Suppliers cannot bring great results to Ryanair

Competitive Rivalry

• Intense competition in the LCC market

• Most of the cost advantage can be copied immediately

• The current low level of competition as the two major low-cost airlines to avoid a direct face to face competition by choose different routes to service

• However, if a company does decide to compete on the same basis, as Ryanair has a heavy pressure on prices, profit margins and thus profits

• there is not much difference between the services. The main difference is the price factor

In the highly competitive aviation industry competition is high. Although Ryanair is a pioneer who performed low-cost airlines, but competitors has also the implementation of low-fare. Beside, they also copied a number of Ryan strategic. For example, Aer Lingus and FlyBE airlines have also introduced charges for hold luggage after Ryanair perform it.

2.3 Scenario analysis

Worst Case:

Increase of Salaries

If the employee be successful, unions can represent the experience of Ryan, to increase wages.

No. Increase of other staff

New employees need in marketing, European Union regulations (such as safety regulations require additional crew on each flight.) Accounting, information technology

Increase of Airport Charges

Airport charges could increase in many Government owned airports. It may be are 100% increase.

Increase of Fuel Prices

Fuel prices may rise by 1% per annum. There may be another war to increase the oil prices.

The increase in average flight distance

The new destination may result in the average flight distance increased by 10% for two years and 5% for three years, followed by 0% per annum

Increase of Marketing Costs

Such of the competition may increase in some routes may need to launch marketing campaign for Ryanair. Eastern Europe may not be a popular route is expected, and may require additional advertising. Low price does not mean low quality. This idea needs to communicate.

Best Case:

In this case, this situation will be re-considered the most optimistic assumption that all possible outcomes into account.

Future energy prices will remain at today’s prices, in the best situation.

The euro is still better than the U.S. dollar against the U.S. dollar.

Load factors will remain stable at a high level for many years benefited from the growing number of passengers to use the entire fleet.

The marketing costs should support the continuous increase of passengers, and should cover the new routes.

Revenue should be increased in the plane’s flight as a better offer / services to enable passengers to spend a few euro on average for each flight.

3.Ryanair’s strengths and weaknesses.- SWOT analysis

Strengths:

• Brand Name: Ryanair, through its 14-year in LCC market has developed a very good recognized brand name.

• Benefit from the low airport charges: These low-cost assistance benefits based on Ryanair.

• The first advantage of the regional airports (such as Charleroi): As a market entry barriers

• Internet sites (94% reservation) : reducing distribution costs as through the phone booking is more expensive. Eliminates the need of travel agents.

• High-density seat

• All of the Boeing aircraft: a unified fleet saving on maintenance and training cost.

• Fast turn around

• High service performance: Punctual, flight speed the completion of the high rate and low loss of luggage, these give a good image of the company’s reliability.

• Modern fleet which resulting in lower maintenance costs: will become more uniform, with only one model (737-800), also a relatively new aircraft will require less maintenance.

• High aircraft utilization: Ryanair Airlines planes to fly longer to generate more income from its assets.

• Fuel and other risk hedging.

• Small headquarters: Low on overheads

• Point to Point: No hub and spoke, lower cost because not passed the required services

Weaknesses

• Easy to Bad News: Ryanair was considered arrogant and the slightest incidents have been a lot of news stories.

• Niche market: the possibility of limited expansion

• Distance of some regional airports from the advertising objectives: After a period of customers may feel that this is a big inconvenience.

• Poor quality of services: interpersonal skills.

• Ryanair is extremely sensitive to changes in charges (increase in value of the fare)

Opportunities

• EU enlargement: will open many new destinations

• Significant potential to capture market share: In the LCC market share will more than double

• Benefit from less exposure to geopolitical risks: As the only real business in Europe

• Ryanair economic slowdown actually helps to change the corporate culture, ‘stealing’ customers from traditional carriers as they seek lower fares.

Threats

• Dependent on the oil market: fuel cost depends on the oil market.

• Dependent on the economic cycle

• Increase of Low fares competition

• European Court of Justice ruling: It may make more difficulties and costs of future expansion.

• Limited growth of the southern European market

• Regional airports gain bargaining power for “second round”

• Customers are very sensitive of price

• Ryanair and Easy Jet limit each other’s growth “rout wise”, need to live peaceful coexistence, or is likely to become the battlefield of the line (such as: London- Rome)

-• Face increase in air traffic control charges. As more planes fly in the sky.

• Inability to prevent the introduction of fuel tax and environmental fees: this will reduce their growth potential because it depends on the price of the stimulus.

4.Evaluation of Ryanair’s strategy

Ryanair aims to establish itself as Europe’s leading low-fare scheduled passenger airline through continued improvement and expansion of low-cost services to their products. Ryanair aims to offer low fares, thus increasing the passenger traffic. A continued emphasis on cost control and operational efficiency is a very important part of the Ryanair way of doing things. Here are the key elements which make up Ryanair’s strategy:

Low fare: This is used to stimulate demand, their goal fare conscious leisure or business travelers who do not go, otherwise it will all or use other transport modes, such as car, coach or train. Ryanair to sell seats on the basis of one-way unlike most traditional carriers this change take effect in November 2001. Ryanair set fares based on demand for flights and with reference to the remainder of the scheduled departure date. 70% of the seats are the lowest fares in the sale of tickets can be assigned routes, once the full price of each seat. Ryanair’s Dublin to London (Stansted) is the most popular passenger route in terms of passenger volume; with fares from 19.99 to 169.99 (available in the lower special promotions).In September 2003, Ryanair launched a fare promotion offers a total of two million seats on certain routes for “free” (excluding government taxes and passenger service charges) for travel period from September 2003 to 17th December 2003. These movements are very useful to consolidate Ryanair’s low fares image. (M. Michel Alle ,Ryanair Plc. 2004)

Frequent point-to-point short-haul flight routes. Ryanair provides frequent point-to-point service in the short-haul routes, airports and major population centers in the surrounding areas and tourist destinations. An average of 1.1 hours flying time has been an average line length of 746 kilometers, in 2003. Ryanair flight an average of 1.94 round per day from each line. Short-haul flights only option to allow Ryanair to provide frequent service, while eliminating the need to provide” frill” service customers, or they will no longer flights. Point-to-point flying (as opposed to the service center and spoke the traditional operators used) to avoid the cost of Ryanair’s passengers to connect through service providers, including baggage transfers and transit passenger assistance costs. This is one of the key differences between Ryanair and traditional carriers. (M. Michel Alle, Ryanair Plc. 2004.)

Commitment for safety and quality of maintenance. Ryanair’s commitment to safety is the most important priority for the company and its management. This commitment begins with hiring and training of Ryanair’s pilots, flight attendants and maintenance staff, and includes a policy to maintain its aircraft in accordance with the highest European airline industry standards. Ryanair has not been a single incident or significant damage to passengers or flight crew in the 19 years of operating history. Although Ryanair aims to operate its fleet in a cost-effective manner, management does not seek to extend Ryanair’s low cost operating strategy of the region’s security, maintenance, training and quality assurance. Routine maintenance and repair of aircraft carried out in-house, and the present contract airframe maintenance, engine overhaul services and routing of the maintenance contractor, these contract will be under reviewed.(M. Michel Alle ,Ryanair Plc. 2004)

Ancillary Services: Ryanair offers a range of ancillary, revenue-generating services, including on-board merchandise, beverage and food sales, accommodation booking service, advertising, travel insurance, car rental and rail and bus tickets. Ryanair distribution of car rental, accommodation and travel insurance through its Web site and traditional telephone reservation offices. Management believes that providing these services through the Internet to allow Ryanair to increase sales, while at the same time, reduce cost per unit basis. Ancillary revenues, not including charter flights, increased by 68.1% (2002: 44%) and now accounts for 11.7% of total revenues compared to 9.4% in 2002.

Customer service. Ryanair’s strategy is to provide the best customer service performance of its peers group. According to reports by the Association of European Airlines and the airline announced its own statistics, Ryanair has made good on time, luggage lost less and less to cancel all of the rest group than their European counterparts. Ryanair realized that the strong focus on the implementation of these services and the operation of non-congested airports.

5.Recommendation

To have the largest amount of routes, the lowest fare airline in Europe without any compromise Ryanair’s business model, beyond all the other operators in all aspects, including quality of service. I think Ryanair is also eager to adhere to high growth.

I think Ryanair’s strategy has become a key factor in its great success. Therefore, in the end I applied all of these designed of recommendations to improve their business. The Recommendation of Ryanair are as following:

Continue to look for ways to reduce costs

Although Ryanair has the lowest cost base of any competitor, I believe Ryanair can continue to reduce its cost base, because it although at a lower pace of growth.

Increase the frequency of existing routes

European low-cost airline (LCC) market is not exhausted. Ryanair currently has a average 3.88 fights per capita daily of flight routes. This figure compared with Easyjet airlines and traditional carriers, is very low. This means that, Ryanair is the loss of business passengers who need a more flexible schedule. Ryanair added that if the frequency of some of their routes, they can effectively steal some passengers from the traditional carriers in order to increase market share.

The development of smaller bases in the Continental Operating Bases

With the low cost market saturation from London, Ryanair must to look at their other business base to expand their network. Dublin, Brussels, Hahn, etc … can be developed. Although there is not the same demand, outside London there is sufficient demand to make considerable profits

Open up new routes in Europe

There are many possible routes are still not served by low-cost airlines. To make a viable way there must to at least 32,000 people each year. Research is needed to find out a feasible route before the competition. And the opening route to un-served destination, Ryanair can also open routes where the competition is more expensive traditional carriers to attract customers to the cheaper, no-frills choice

Extended to the Central / Eastern Europe

Eastern Europe is rapidly becoming a hotspot for tourist and business travelers continue to expand as the E.U., but Ryanair does not meet any of the more popular destinations. Other low-cost airlines has been established there, such as Sky Europe, but not all routes have been exhausted. There are still have many opportunities in this field.

To actively seek market share from the Charter Market

The Charter is a huge market of represents 25% of the total traffic in Europe. Ryanair must be aggressive in this market by vigorously promote DIY holidays, rather than group tours. With the increasing popularity of the Internet and the popularity of lower travel agents, which is the market cannot be ignored. Ryanair should be provided to small package destination and aim to strengthen the side of the business.

Customer Service Overhaul

Ryanair has a remarkable performance as’ tangible’ customer service (punctuality, time to complete the flight, etc.) views, but in the ‘softer’ side of the customer service is not always good and have a lot of bad news. With this in mind Ryanair Airlines, while maintaining its strict rules and regulations, must to be adjusted on this area.