Leadership position |
Annael Brohan / 09008646 |
Over the years, the airline industry is the result of internal and external factors which is expected to face many challenges. Terrorist threats, high fuel prices, uncertain economic events and market trends in external air transport sector have resulted in sustainable development practices ofcompanies. These have been particularly involved in a process of deep restructuring and redouble efforts to retain their customers. Airlines low cost have altered the pricing practices of the market, challenging the power of large companies on this historic ground .These new actors grow older in devising new strategies to ensure their competitiveness in these models at low operating cost andhigher margin. The result of this deep evolution of the market is a multitude of problems and issues. This is why, it is interesting to identify and evaluate the strategies that Ryanair pursed to maintain its cost leadership position. Are lower operating costs achieved through a genuine strategy of lowering the cost of fuel and ticketing or through an artificial form of cost reduction (Salary freezes,part-time position)? How sustainable is the Ryanair model if lower costs are achieved through lower services and lower wage rates?
1. Market Analysis
Strengths | Weaknesses |
* Low cost leader * Innovative cost reductions * First-mover advantages * Established market share * Substantial growth * High load factor * Strong public image * Establishedroutes/network * Range of ancillary services | * Poor employee relations * Volatile customer relations * Antagonistic relationship with competitors * Uncharacteristic management expansion * Dependence on Michael O’Leary |
Ryan has been known as the first low-cost airlines, nowadays its brand name is recognised everywhere. Ryanair is able to reduce as much as possiblethe costs: very high seat density, the booking is 96% via internet, it chooses airport with low charges, using one model of aircrafts and fly as much as possible…
Ryanair owns as well the first mover advantage and appears as a company which offer a service with a good value for money. Indeed, it is very punctual and few baggages are lost.
Ryanair accumulates hidden taxes andother fees, thus the customer’s complaints. The quality service is low. The consequences are a bad publicity for the company and a negative perception of the airline brand. Moreover the relationship between employees is poor and there is dependence on Michael O’Leary.
Opportunities | Threats |
* Further growth * Advanced cost reductions * Offering free flights * E.U. expansion | *Increase of the competition * New entrants * Mergers/alliances between competitors * Industry criticism * Non expansion in new E.U. States * Substitute transportations * Train * Cars |
New destinations are opened up each days, it is therefore the opportunities to increase its domination in Europe and its market share because there is a potential. Furthermore,with the financial crisis, people don’t want to pay more. Moreover, although Air France accuses Ryanair receiving illegal financial assistance from territorial community, the European Law admit that Ryanair is right.
Ryanair is faced with fierce competition between low fare airlines and for low cost strategy, fuel taxes and government regulations are major threats flying all overindustry.
* Increase of Trade Union pressure
* Increase of route charge by the government: government’s latest moves about airline industry, e.g. security solution which will increase the cost of service.
* Government passed “ The law for carbon emission” to aviation industry to compensate further taxes
* Change in government policies and...