Ryanair-The Low Fares Airline Case Analysis
Issues
In 1985, the Ryan family founded Ryanair to provide airline services between Ireland and the United Kingdom. Ryanair’s strategy is based on providing a no-frills service with low fares to stimulate demand. Ryanair’s business level strategy is cost leadership. Although the firm faces weaknesses and threats, their strategy has created a competitive advantage. Ryanair’s competitive advantage will weaken over time due to vulnerability to fuel prices, ancillary charges, low employee satisfaction and their negative brand image.
Analysis
Porter’s Five Forces analysis is a tool to analyze the external environment in which an industry operates. In the European airline industry, the threat of new entrants is low. Entrants will need high capital investments to compete with existing firms. The substitutes in the airline industry are the railway networks, rental cars and sea transports. Rental cars and sea transports are more expensive than the airlines therefore they don’t pose a threat to the industry. It takes longer to reach a destination by train than a plane, which causes the threat of railways be low. Existing firms pose a threat to the industry because there are 35 firms operating in the European airline industry, which creates intense price rivalry among firms. Customers are price sensitive and customer can easily switch to another airline causing the threat of buyers to be high. Suppliers can charge a high price for their
Ryanair was established in the year 1985 by the RYAN family and has grown from a small airline flying a short hop from Waterford to London, into one of the Europe’s largest carriers. The company expanded and within 4 years it had 350 employees, 14 aircraft, and carried 600,000 passengers a year. It is currently serving to 26 European Countries with 148 destinations. It operates on 794 different routes daily serving by more than 1050 flights in a day. It has totally 169 aircrafts running for different routes with 5986number of employees working in it However, Ryanair’s costs rose drastically and it recorded losses of £20 Million sover four years despite its growth. Although consumers were continuing to fly Ryanair
Cathal Ryan and Declan Ryan have started Ryanair since 1985. For nearly a year, Ryanair had operated a 14-seat turboprop between Waterford and Gatwick Airport on the outskirts of London. The airline targeted low-fare segment market. It initiated service from London’s secondary airports. In terms of competition, Waterford and Gatwick didn’t pose any challenges.
The multitude percentage growth of Ryanair, an ultra low cost Irish airline established in 1985 & operating to 185 destinations within the European Union depicts the above quote perfectly. In the last 30 years of its operations, Ryanair has emerged as the largest low cost carrier across Europe and Africa. The airline has been ranked as No 1 in coverage and customer service flying to more than 10mn customers annually & across 1600+ routes through its 73 bases. The following report covers the journey of Ryanair an Irish low-cost airline headquartered in Swords, Dublin, Ireland. Ryanair is a listed company in the Irish Stock Exchange (ISEQ), London Stock Exchange (LSE) and the NASDAQ.
The perception of poor customer service about Ryanair from passengers and observers would definitely affect Ryanair’s reputation and image. So, Ryanair should make some changes to improve its customer services. Ryanair should provide adequate staff training for its employees so that its staffs are highly skills and competences to provide good customer services and better handle customer complaints. Ryanair can use its website to interact with its customers to handle their enquiries and problems. For example, Ryanair can provide online chat or forum for their customers. By improving customer services for customers, this
After researching and went through many articles which were published on the Ryanair Airline in Europe. To me, the online resources are more utilized as book resources which can be dated back to 20th century or more. The article 's which I read gives different facts and the information on marketing strategies which were used by the Ryanair Airline. Many of the contents are related to the work which I learned from this course on Airlines, and Airline Management and Marketing. The Ryanair Airline is known for its ' low airfare and consistent profitability and rapid growth. I think, the main goal for the Ryanair Airline is to provide low airfares for their customers and give high level of service, most of Ryanair passengers get excellent
The strategic plan of Ryanair has been to establish itself as Europe’s leading low-fares airline.” Ryanair aims to offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost-containment and operating efficiencies.” (www.ryanair.com)
Summary: Ryanair was founded in 1985 by the Ryan family to provide scheduled passenger airline services between Ireland and the UK, as an alternative to the then state monopoly carrier, Aer Lingus. It started out a full service conventional airline, with two classes of seating and leasing three different types of aircraft. However, despite growth in the passenger volumes financial problems were of a growing concern.
The Risk of Entry by Potential Competitors – Since the deregulation of the airline industry in 1978 over 1,300 new airlines have opened for business. However, most now are bankrupt or merged with the other carriers to stay workable. The established giants were Delta (merged with Northwest), American Airlines (merged with U.S. Airways), United Airlines (merged with Continental), and now Alaska Airlines (merged with Virgin America). Now the Low-Cost Carriers (LCCs) are posing a massive threat which includes Southwest Airlines (merged with Air Tran), and JetBlue.
Porter’s five forces are competition from substitutes, from new entrants, from established rivals, the bargaining power of suppliers and bargaining power of buyers (Porter, 2008, p. 2). By its nature, flying to a destination faces few substitute competitors. The bargaining power of suppliers such as labor unions and fuel run high within the legacy carriers (Whitelegg, 2003, p. 247). The bargaining power of buyers, the people who purchase airline tickets, drives all carriers in the industry (Mertens & Vowles, 2012, p. 67). Competition from established rivals diminishes as mergers and alliances form (Porter, 2008, p. 13). The
Ryanair, originally an Irish low-cost airline and established by the Ryan family in the year of 1984 starting off with only 25 members of staff. Replicating the American Southwest airline business model and then officially relaunched in the year 1990. It has vastly grown from being a single-aircraft family operation into one of the world’s top leading airlines. Now Ryanair has reached 11,458 employees. The airline carries over 131 million passengers per annum on over 2,000 flights daily, from 86 different routes, flying to more than 205 destinations in 33 countries.
Ryanair is one of the most profitable low-cost and low-fare airlines in the world. Even though it was merely bankruptcy in 1991, it could stand up and become very successful by 1999. An issues was what led Ryanair to huge losses in 1991, how did it re-gain its position, and what lay ahead in the next century.
Ryanair is Europe’s largest low-fares, no-frills short-haul carrier. The organisation was founded in 1985 as a conventional airline but re-launched itself in 1990/1991 as a low-cost carrier, replicating American Southwest Airlines’ business model. Since then Ryanair has grown
In this paper I will be analyzing the airline industry using Porter’s Five Forces. Porter’s Five Forces is a business management tool that allows firms to possess a clearer perception of the forces that shape the competitive environment of an industry, and to better understand what these forces indicate about profitability with regard to the microenvironment. The forces include Competitors, Threat of Entry, Substitutes, Suppliers, and Customers. When firms are able to widen their conception of competition beyond their direct competitors, and consider the broader economic fundamentals of their industry, they are able to form better strategy to better optimize their profitability. The airline industry is one characterized by low
Ryan air, an Irish airline started in 1985 by Ryan family with a capital share of £1 and a staff of 25. Over the past few years the company has shown tremendous ontogeny. Indeed it is Europe's largest low cost carrier and fastest growing airlines. Currently it’s operating more than 1,500 flights every day from over 50 bases and around 1400 low fare routes across 28 countries which connect 165 destinations.