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Ryanair was founded in 1985 by the Ryan family, which was headed by Tony Ryan. It was the first budget airline in Europe, modeled after the successful US carrier, Southwest Airlines. It was founded to provide scheduled passenger airline services between Ireland and the UK, as an alternative to then state monopoly carrier, Aer Lingus. At the beginning, Ryanair was a full service conventional airline, with two classes of seating, leasing three different types of aircraft. Despite growth in passenger volumes, by the end of 1990, the company faced a great conflict, disposing of five chief executives, and piling up losses of IR£20m. After getting through the conflict, the airline restyled itself to become Europe’s first low-fare, no-frills carrier, built based on the successful model of Southwest Airlines. Michael O’Leary, who was appointed by Tony Ryan, was made to lead the new management team. Ryanair continued to outperform other airlines, especially in European market. In August 2006, an Air Transport World magazine announced that Ryanair was the most profitable airline in the world, based on its operating and net profit margins, on a per-airplane and per-passenger basis. The airline’s growth was remarkable, successfully increasing its profit over the years.
In this report, the strategic analysis on Ryanair will be discussed further, including the SWOT, PESTEL and Porter’s Five Forces Analysis. Furthermore, the central problems identified and recommended solutions to the problems will be would be stated and examined.
In this analysis part, the strategic analysis on the case study of Ryanair would be evaluated. This analysis consists of three components, which are SWOT, PESTEL and Porter’s Five Forces Analysis.
| Strength * Leader of low costs airline in Europe * High ancillary source of income * Second-mover advantage * High seat capacity aircraft * Fuel hedging to reduce cost * Innovative cost reductions * Established market share
| Weaknesses * Poor employee relation * Ambiguous advertising * Low employee morale and devotion * Bad image in the media * Poor customer services * Destinations mostly to secondary and regional airports
| EXTERNAL FACTORS
| Opportunities * Further winglet modification * New aircraft with higher capacity * New flight routes * Ancillary service for long flight * Potential for advertising on Ryanair website * Due to the monetary crisis, more people resort to budget airlines for traveling * Strong demand of low fares flight
| Threats * Competition from other budget airlines * Competition from other forms of transportation like trains and buses * Risk of fuel hedging and exchange rate exposure * Distress of consumers due to terrorism * Upcoming regulations on environment protection and customer compensation * Increased fuel price
From the SWOT analysis, it can be deduced that the core competences of Ryanair are its ability to provide safe, efficient and low cost flight. It is done through innovative cost reduction like fuel hedging and using secondary or regional airports. It mostly gains profit from the extensive ancillary services. The major threat would be the price of the fuel as the CEO of Ryanair, Michael O’Leary, declared that they guarantee our customers no fuel surcharges not today, not tomorrow, not ever’. This has created a constraint for Ryanair to keep its low cost operation. A rise in the fuel price would impose a risk for Ryanair to make loss. They solved this by hedging on the fuel price. However, this introduces new threat as fuel prices are denominated in US dollars and the firm would be risked by exchange rate exposure....
References: O’Higgins, E. 2007. Ryanair – the low-fares airline. In G. Johnson, K. Scholes, R. Whittington, eds. Exploring Corporate Strategy. London: Pearson, 2008, pp. 694-707.
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