Terms of reference
This is a report that analyses low cost airline Ryan Air. It checks on both internal and external factors that influences the industry. The internal factors will be used by analyzing the SWOT mechanism. The main purpose providing this report is to appreciate and recommend the work of Ryan Air management.
The main source of this information is books and website sources.
Ryan Air founded in the 1985 by a family called Ryan family based in United Kingdom to provide reliable services to the citizens of Ireland and United Kingdom as a means to the state monopoly carriers. The Ryan services offered widely and having competitive low prices compared to other airlines.
The local government never supported the issues of private airline services, with the agenda of guarding national airline services to hinder competitors in the airline industry. In the year 1980, the European Union joined to fight for control of the airline industry
The decontrol of the industry resulted to substantial competition in the industry, although the new comers in the industry led to a sudden increase of competition, and existing players in the industry quickly ejected many new entrants.
Supplementary low cost airlines
The move to a low-fares strategy from 2002, leading to much more passionate competition with Ryan air on Irish routes emerged the most profitable by the end of the year.
The company main strengths are its capital and competence that are can be used as a foundation of raising a viable advantage (Creaton 2007). The input strengths of Ryan airline are as follows:
Contracting out of services
Ryan airline does not depend on its permanent employed staffs it works with other companies in handling of baggage, ticketing, aircraft handling and cleaning services to third parties.
Airport charges and route strategy
The Ryan airline evades expensive airport charges by avoiding congested main airports.
The firm discovers that the safeguarding of its top place amid supplementary low cost airlines varies on airline having. This requires regularly cutting down cost to maintain low fares and making sure the company remain profitable on low yield. The Ryan airline strategy based on key five areas:
The use of Boeing 737s, are widely used Ryan air uses Boeing 737s, which are highly widely used and for this reason the corporation is capable to obtain spares and conduct cheap maintenance services (Creaton 2004).
Staff cost and productivity
The Company operates on an act related to pay structure of the entire staff therefore, cutting member of staff payment costs.
The method of advertisement by Ryan airline is low mainly because they do it in their website and update it frequently.
Strong brand name, Ryan airline being in the market for more than 14 years, Ryan airline has been in developing a staring standing and brand name depending on the services they offer, thus making it more marketable.
Profit acquired from low airport charges
This process helped the Ryan airline to keep its prices low and fair to the customers. The benefit helps the firm to count it as sources of profit gained from the business.
First mover advantage on regional airports
Having the first mover recompense acts as a means of blocking other competitors into the same region such as Charleroi in Belgium.
Having the online website, it reduces the cost of ticketing by passengers and distribution. This reduces the booking through travelling agencies and phone, which is a bit costly. The website hurled in 2002, and it takes time for it to adopt in the market as at bringing it a low turnout. Improvement in online booking the airline tossed its website in 2000.
The nonexistence of some strength considered as a weakness. (Creaton 2004)
Ryan air is viewed as people who never care about the wellbeing of the customers, for instance when the client are stranded after a poor take off , or a plane landed in the wrong airport, the client on board should be compensated Unlike when the airplane landed in wrong airport the passengers were not compensated.
when there is provision of cheap services, should be monitored unlike, the Ryan, low cost services means poor the low cost strategy means moderately poor service are offered and staff ability. Therefore damages the firm reputation in the public.
The outer environment study may expose new opportunities for return and expansion in the industry.
Horizontal and vertical integration might develop into necessary a further growth in growing markets.
The European Union enlargement
The expansion of European states with the adding up to 10 new member states to the European Union. This creates an opportunity to create more destinations within the Europe continent (Creaton 2007).
Economic crunch favors Ryan airline
When the economy is poor client seeks alternative means trying to find lower prices and are likely to change from classic caries and opt for the cheaper ones.
Alterations in the peripheral environment can lead to exiting threats to the company, and insecurity of the destination the plane to land.
Abrupt increase of Oil prices
Increase in oil prices affect prices of air tickets resulting to loss of customers.
The Ryan air forced to register its employee in trade union to cater for the working condition of the stuffs, union representing workers in the industry are complaining about the working condition of Ryan airline staff being poor.
Increased stiff competition in the air industry
From the time when the decontrol of commercial aviation introduced, there has been rigid competition. Increase in the low airline has come up making it difficult for the industry to be monopolized by a single firm.
The Ryan air analysis based on Porter's five forces
Bargaining power of suppliers, the clients are extremely sensitive; they prefer rescheduling of their flight but not the increase cost of service .New Entrants, there are many barriers in airlines industry as you need more capital to invest in the sector and difficult to compete with current market situation. Threat of Substitutes, the company prefers a friend that is not close, to making sure all customers are treated equally.
Competitive Rivalry, the bazaar is viable. The prices of Ryan air is cheap and has advantage comparing to other airlines. Bargaining power of buyer, large inhabitant’s base in European Union and control cost are as there is no differentiation of service.
Strategy explained by porters’ generic strategies.
Generic Strategies, there are mainly three categories of strategy branded by Porter in this model: differentiation, cost-focused and niche. A differentiation engages charging higher prices for an appearance that add rate to a product.
Cost-focused strategies entail cutting the design of a product to a least amount to keep costs low, so value reduced. A niche strategy engages on condition that an extremely specialized product to a tapered market, likely with possibly with the accumulation of cost.
The main strategy of Ryan air focused on cost. To bring in apprehension for the situation it would involve incorporate feature to the manufactured goods that does not lower expenses but differentiates it.
Profitability and performance of Ryan airline
The success of the strategy evidence in its basic form of financial outcome and the airline the most share in European low cost and having a reputation of lowering fare. The financial strategy seems to work well for airline, by not only increasing revenue, and succeeded in lowering their cost therefore giving the airline a massive profit margin in every year.
The profitability ratio for Ryan air increases gradually in operating margin depending with increase or decrease of the clients.The good management of the airline contributed to well performance of airline since 2000 to 2012. The increase noticed every year because the company is determined to serve the client in good faith.
Rising ticket prices:In the 2010 accounting year (ends at end-March), Ryan air expected to have reduced its average ticket price by 15% to only EUR 34. This price cutback has primarily driven by Ryan air’s strategy about producing high passenger growth despite the global slowdown, which has of course affected the willingness to travel on behalf of Europeans.
Average airfares 2010
High passenger growth in 2011 and 2012: Growth in 2011 and 2012, among other things, the graph below tries to show the increase of passengers since 2000 to 2013 and can determine the profit of Ryan air for the last 10 years. When the total number of passangers rises the higher the profits the company gets while when the number of passage lowers down there is short of profit exprienced
In the year between 2000 to 2007 the Ryan air experience increase of passengers due to its cut price in fare while in by the end of 2007 the company experience low profits due to increase in oil prices which affect the profit margin of the company.
Ensuring Good Customer Care: The complaints by clients about poor treatment by the staffs should be controlled and stopped to maintain the customers loyalty, a large number of customers have been have been disappointed Ryan air services, acknowledged on board. The Ryan air needs to focus on future on feature organization of the company to maintain its eputation in the European and even Worldwide.
Taking above conversation, it indicates that Ryan air’s tactic has a number of differences from those of its opponents, and that these differences directly and indirectly put in to its competitive advantage.
Ryan airline has appeared to be the main money spinning and the highly ranked airline in the entire Europe. Overtaking the German firm Lufthansa and doubling-up its value over British Airways and the budget known to be KLM airline. This show how the Ryan air have been doing well when the opportunity chances come across from the external environment factors and turning them into strengths.