Dogfight over Europe: Ryanair (a)

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 sector employs more than 3 million people. Prior to the 1990’s, the air transport industry in Europe had been traditionally highly regulated and dominated by national carriers and state owned airports. Since then a single market for aviation has been created. The single market has seen the removal of all commercial restrictions for airlines flying within Europe. These include restrictions on routes, number of flights and the setting of prices.

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.

At the onset of the airline industry in the United States, major network airlines were the sole providers of air travel. This multifaceted industry was a difficult industry to break into as a consequence of “sophisticated customer segmentation, hub-and spoke models and costly information systems for reservations, fare wars and intense competition” (Thompson 2008). Shrinkage in airline ticket prices augmented the demand for airline travel. Many markets were simply deserted or over-looked by major network airlines; this is a region a fresh “second tier of service providers” could enter into. This endeavor proved to provide a consumer savings of billions per year. Thus in June of 1971, after a tumultuous battle with other Texas-based

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.

A drop in fares has been the best result of the Airline Deregulation Act of 1978. It has been the impetus for the increase in the number of flights, which in turn has spurred a drive for greater safety in airlines. But with the current airline market, this development has given us one negative. Since ticket prices have dropped to new lows, the realities of an industry which operates on such economies of scale dictates that only a few competitors have the capacity to operate within the market. This is not the desired effect of either political side on this issue, but it is an economic necessity with the environment that has been created, very similar to that of public utilities and phone companies.

The airline industry has always been a fiercely competitive sector. Since the invention of low-cost carriers, also known as no-frills or

Ryanair is an Irish based airline company, headquartered in Dublin airport, Ireland. It was established in 1985, and since Ryanair has expanded from a small airline to serving 90.6 million passengers. It operates 1,800 flights a day connecting 200 destinations. (Ryanair Annual Report, 2015; (Ryanair)).

3,4- The Airline industry and the market The airline industry is large, specially in the United States, mainly due to the “ Deregulation” of the industry. In 1938, the Civil Aeronautics Board was created to control the growth of the air transportation industry. This board had the authority to control entry, exit, prices and methods of competition. In the late 1970 this structure was found inefficient and in 1978 deregulation took place. Due to the deregulation of the industry competition intensified, prices dropped, and the number of people travelling increased. Many new companies emerged and regional airlines saw deregulation as an opportunity to expand. Due to the rise in competition, by 1986 mergers started to take place and in 1987 64.8% of the market was controlled by the four largest airlines. The demand for air travel is determined mainly by price, studies revealed that half of the leisure travellers and on quarter of business travellers did not have a preference for a particular airline, which means that prices determined the

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.

Operations in international and/or foreign countries will create significant operational challenges. Differences in governing laws and regulations for the airlines industry, business, and employee relations will become challenging. Interpretation and intent for various laws can and will provide ambiguity that must be dealt with. Research shows that various international airlines continue to be plagued by high costs and poor service (Ramamurti & Sarathy, 2007).

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

We will see how Ryanair was successful as world’s one of the most favoured low-fare airline and how did it apply each of this mix by putting in the

Nowadays, the commercial competition has surpassed the limits of the previous era in which dominant markets are protecting their set market shares. Mega commercial activity back then was completely regulated by the government. The United States has privatized a lot of sectors related to energy, telecommunication, and transportation sectors. In response, the USA introduced the deregulations in the aviation industry to increase the competition in the aviation market.