Business Applications in Engineering
The first section of this report deals with the “Macro Environment”. This consists of broad environmental factors that impact almost all organizations. Here the PESTEL framework can be used to identify how future trends in the political, economic, social, technological, environmental and legal environments might effect on organizations. The following PESTEL analysis provides broad data from which to identify key drivers of change. Many of these factors are linked together for example restrictions regarding mergers are political decisions written into law therefore covers both political and legal aspects. The four I have chosen are also in some way linked together and are as follows. Macro
The increase in the use of technology should stay up to date on cost saving measures regarding the increasing use of online check-in. As Ryanair expands to the Balkan states and turkey the flights get longer therefore entertainment technology may be “taken on board” (Ancillary revenue). The video entertainment industry is heavily endorsed socially. Technological advances in the research and development of engines and airframe play an important role with respect to lowering an airlines’ major expense, fuel costs. Ryanairs’ decision to upgrade its fleet to an average age of 2.9 years tackles this very problem as newer aircraft have much more efficient engines (fuel burn) and with lighter airframe materials and various modifications such as the winglet modification program which reduced fuel burn by 2%. Also carbon emissions as much as 50% were reduced with these newer aircraft and therefore will save on the ETS imposed by the EU that coincidently are under fierce scrutiny from US and Chinese airlines. Staying up to date on Economic issues enables the price of oil to be forecasted and manipulated to give you stable costs using Hedging. Hedging will be discussed later with suggestions as how to move forward taking a Micro point of view.
Staying on the Macro and emissions, Climate change (whatever our beliefs to whether it is factually correct or not) is providing much debate in the airline industry especially with low cost high passenger capacity airlines. The EU has demanded that all flights taking off or landing at any airport within the EU will from January 2012 will be included in the EU Emissions Trading System (ETS). This will affect the European Budget airline industry as all of their flights will come under this scheme. It’s up for debate whether or not the Intergovernmental Panel on Climate Change (IPCC) has all the facts regarding human influence on climate change and has been a very controversial issue after the devastating revelations from what’s known as “climate gate”, evidence that the “top scientists” are manipulating information to support the claim made so one has to ask oneself, should “government propaganda” be inserted into the PESTEL framework as it’s going to hit airlines hard in the coming years as the demand for carbon credits will rise therefore we will see a rise in the price. I would recommend to Ryanair to open up debate regarding both climate change and indeed the Emissions scam, it has much broader consequences which will affect us all in the balance sheet, debate is a cheap but good insurance policy and true provider of real image. China have Banned their carriers from paying it. They would have to pay emissions from where the flight originated. One can understand why they are not happy. There is a rising public awareness around these areas and creates a market, the public changes and Ryanair must change somewhat with it and be on the political platform when it matters. How Ryanair and other European airlines play this one out who knows, but that’s politics. POLITICAL/LEGAL
Speaking of politics, the European Union now plays a major part in providing legislative reform of the Airline industry. Its pro...