Ryanair Analyses
Master’s thesis M.Sc. in EU Business & Law
An analysis of the European low fare airline industry - with focus on Ryanair
Student: Thomas C. Sørensen Student number: 256487 Academic advisor: Philipp Schröder Aarhus School of Business September 13, 2005 1
Table of contents
1. Introduction
1.1. Preface 1.2. Research problem 1.3. Problem formulation 1.4. Delimitation 6 6 7 7
2. Science and methodology approach
2.1. Approaches to science 2.1.1. Ontology 2.1.1.1. Objectivism 2.1.1.2. Constructivism 2.1.2. Epismotology 2.1.2.1. Positivism 2.1.2.2. Hermeneutics 2.2. Methodology 2.2.1. Types of research 2.2.2. Types of data 2.2.2.1. Quantitative data 2.2.2.2. Qualitative data 2.2.2.3. Primary and secondary data 2.5 Reliability and validity 9 9 9 9 10 10 10 11 12 13 13 13 14 15
3. Theoretical framework
3.1. The structure of this thesis 3.2. Theory on strategy and competitive advantage 3.2.1. The Positioning School 3.1.1.1. Theory on Porter´s Five Forces model 3.2.1.2. Theory of Generic Strategies 3.2.2. The Resource-based School 3.2.2.1. Theory on SWOT analysis 16 18 24 20 23 25 27
4. The low fare airline business model
4.1. Introduction 4.2. Differences between the LFA model and the FSA model 4.2.1. The service factor 28 29 29 2
4.2.2. Turnaround times 4.2.3. Homogenous fleet 4.2.4. Point-to-point travel vs hub-and-spoke travel 4.2.5. Higher seat density 4.2.6. Choice of airports 4.2.7. Distribution system 4.2.8. Frequent flyer programmes
30 31 31 32 32 33 34
5. Analysis of the macro environment
5.1. Introduction to the theoretical framework – PEST Analysis 5.2. Political/legal issues 5.2.1. Liberalising the European airline industry 5.2.2 State aid 5.2.3. Commision vs Ryanair/Charleroi Airport 5.2.4. Passenger rights in the EU 5.3. Economic issues 5.3.1. The world economy 5.3.2. Labour costs 5.3.3. Oil prices 5.3.3.1. Fuel-efficient aircraft 5.3.3.2. Fuel ferrying strategies 5.3.3.3. Hedging 5.3.3.4. Fuel surcharges 5.4. Socio-cultural
An analysis of the European low fare airline industry - with focus on Ryanair
Student: Thomas C. Sørensen Student number: 256487 Academic advisor: Philipp Schröder Aarhus School of Business September 13, 2005 1
Table of contents
1. Introduction
1.1. Preface 1.2. Research problem 1.3. Problem formulation 1.4. Delimitation 6 6 7 7
2. Science and methodology approach
2.1. Approaches to science 2.1.1. Ontology 2.1.1.1. Objectivism 2.1.1.2. Constructivism 2.1.2. Epismotology 2.1.2.1. Positivism 2.1.2.2. Hermeneutics 2.2. Methodology 2.2.1. Types of research 2.2.2. Types of data 2.2.2.1. Quantitative data 2.2.2.2. Qualitative data 2.2.2.3. Primary and secondary data 2.5 Reliability and validity 9 9 9 9 10 10 10 11 12 13 13 13 14 15
3. Theoretical framework
3.1. The structure of this thesis 3.2. Theory on strategy and competitive advantage 3.2.1. The Positioning School 3.1.1.1. Theory on Porter´s Five Forces model 3.2.1.2. Theory of Generic Strategies 3.2.2. The Resource-based School 3.2.2.1. Theory on SWOT analysis 16 18 24 20 23 25 27
4. The low fare airline business model
4.1. Introduction 4.2. Differences between the LFA model and the FSA model 4.2.1. The service factor 28 29 29 2
4.2.2. Turnaround times 4.2.3. Homogenous fleet 4.2.4. Point-to-point travel vs hub-and-spoke travel 4.2.5. Higher seat density 4.2.6. Choice of airports 4.2.7. Distribution system 4.2.8. Frequent flyer programmes
30 31 31 32 32 33 34
5. Analysis of the macro environment
5.1. Introduction to the theoretical framework – PEST Analysis 5.2. Political/legal issues 5.2.1. Liberalising the European airline industry 5.2.2 State aid 5.2.3. Commision vs Ryanair/Charleroi Airport 5.2.4. Passenger rights in the EU 5.3. Economic issues 5.3.1. The world economy 5.3.2. Labour costs 5.3.3. Oil prices 5.3.3.1. Fuel-efficient aircraft 5.3.3.2. Fuel ferrying strategies 5.3.3.3. Hedging 5.3.3.4. Fuel surcharges 5.4. Socio-cultural
References: Company documents: Airports Council International: Airport Traffic Data 2000, Airports council International, Geneva 2001 Ryanair 3rd quarter results, 2005 Ryanair annual reports 1999-2004 easyJet annual reports 2003-2004 117 Maersk Air annual report 2004 Ryanair 1st quarter results, 2006