DOGFIGHT OVER EUROPE: RYANAIR (A)
We will answer the questions raised about the airline company, RYANAIR, but first let’s make a brief introduction about the airline industry and more especially about this company. Ryanair was the first budget airline in Europe, modelled after the successful U.S. low cost carrier, Southwest Airlines. Ryanair is one of the oldest and mostsuccessful low-cost airlines of Europe. This case study on Ryanair highlights its low fares business model, its business strategies and operations.
From the 90`s, the airline industry in Europe was composed of two types of companies: big flag carriers, that make regular flights, and small companies that doing charter flights.
These small companies offer lower rates by reducing the additional servicesoffered to the customer.
For these companies, the customers demand a service that satisfies their need to be transported from one place to another at the best price without having to pay for additional services.
Since deregulation in 1993, these companies have been growing, especially in the UK and Germany.
The number of passengers and routes continued to increase. The secret was low fares onmany daily flights for day, the removal of bussines class and on-board auxiliar services such as meals and newspapers, using secondary airports...etc
What ‘s your assessment of Ryan air entry strategy?
In order to assess the entry of Ryan air to the market we should analyze all external and internal conditions at that time.
First of all, we start with analyzing the environment for a newairline company. How were the economic and politic conditions when Ryan air appeared? And how these conditions affected it?
While analyzing the environment it can be useful to look at the historical process of aviation; After World War 1 the European governments amalgamated airlines into national “flag carriers”. Until the early 1970s powerful flag carriers and their bilateral agreementsdominated the airline industry.
During 1970s the OPEC oil embargo and reduction of demand for travelling hit the airline companies. After oil crisis, the starting liberalization process also affected the aviation.
In this process, improving economy (a better economic situation for a lot of people in occidental countries) and government policy (that have been encouraging new entries) could be seen asexternal advantages. Meanly it is possible to call them “opportunities” for a new airline company.
When it comes to “threats” for Ryan air we can see the old owners of this industry: Aer Lingus and British Airways which are the flag carriers on the same route with Ryan air. It was difficult to compete with their dominance in the market. In addition we can mention about obligatory of havinglicense.
After analyzing the environment we can glance Ryan air’s internal conditions. The founders of Ryan air – Cathal and Declan Ryan had grown up in the airline industry. Their father had long worked for Aer Lingus; he founded an aircraft leasing company that gave him a lot of money. The earning of Tony Ryan is important because it became the capital of Ryan air.
Their knowledge aboutairline industry and their capital can be seen as their ‘strength’.
At first Ryan air used a 14 seat turboprop aircraft to run from Waterford to one of London’s secondary airports. In 1986 Ryan air gained a license to run between Dublin and Luton, another secondary airport of London. Using secondary airport is very important point that decreases costs. Later, they started to use a 44 seat turbopropon their Dublin London service but they did not have permission for a larger aircraft.
After analyzing these conditions we can think about other factors. How did the suppliers, new entrants, buyers, substitutes and competitors affect the strategy of Ryan air?
The most important supplier was Opec and after crisis the price of fuel oil was raised. They had to reduce costs as much as possible...
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