Strategy and Operations Management
2013 / 2014 - GLASGOW
(Mat No: 200813679)
Course work 1 Resit
Report on RYANAIR
The company chosen in this report is Ryanair in the airline industry. Ryanair is a low cost budget airline travelling across 1600 routes from 57 bases connecting 180 destinations in 29 different countries (Ryanair.com). Ryanair first started its operations in 1985 between Ireland and London. The first year it commuted around 5000 customers but the company really took off in 1990 when Michael O’ Leary was appointed the CEO of the company. The company was envisaged by its CEO Michael O’ Leary and adapted the Southwest airline model from America and brought it to Europe and since then the company has also embraced a no frills, low cost model where it plans to get their customers from A to B at the cheapest rate possible. This has revolutionised the travel industry and made travel cheaper and reliable within Europe. Ryanair has a strong hold on market in most of the countries Europe with 44% in Ireland where its headquarters are, followed by 23% to 21% in Poland, Italy and Spain (centreofavaiation.com). In the UK the company holds a modest 16% of the market with its overall customers estimated at 81.5 million for the year 2014. The company gets a stiff competition from Easyjet, Lufthansa, Aerlingus and Alitalia. These airlines try to follow the same model as well but Ryanair has been the leader by far generating revenues of €3.789 billion for the fiscal year 2013 with profits of €374.6 million.
Figure 1: Market share of different airlines ( Source: Centreofaviation.com) PEST Analysis
The political factors tend to affect the airline industry the most if they are flying from one country to another. In case of Ryanair, it only flies within the EU, thus there is no question of arising uncertainties. One factor which has helped the airline sector grow is deregulation. In 1978 the United States removed government control over many aspects of air travel, including fares and routes, in the Airline Deregulation Act (Liberty of Economics and Liberty). This shifted the power to the market sphere. Following the success of this, Europe completed their own faze of deregulation by April 1997. This allowed passenger planes to fly between member states freely. Ryanair added several new routes to their repertoire after deregulation, taking the opportunity to add routes to new parts of Europe and Scandinavia. A further form of deregulation came in March of 2008 when the EU and United States agreed to let any city within each other’s territory fly between each other. This was called the Open Skies Agreement. Although Ryanair have still to take full advantage of this, they have announced their desire to start transatlantic flights at a very low cost to the consumer (RTE, 2007). This unprecedented step could shake the air flight market, increasing the volume of passengers able to fly more freely across the Atlantic and could have a knock on effect with Ryanair’s transatlantic competitors, forcing a change in the market. In 2012 a new law was introduced where all flights coming to and from the EU had to buy their CO2 emission allowances, whereas before they were exempt from the Emissions Trading Scheme. Many airlines have expressed their anger at their inclusion in the scheme, pointing to the fact that only 2% of global CO2 emissions are caused directly by air traffic. Many airlines have increased ticket prices to cope with the extra costs incurred. Ryanair have passed on the cost to customers in the form of a 25c charge (Irishtimes.com) Economical:
During a deep recession Ryanair has flourished, recording a +18.71% 1 year return in 2012 ( Bloomberg, 2014) and announcing that it is Europe’s leading scheduled airline. In comparison...
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