Ryanair
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Ryanair was founded in 1985 by the Ryan family to provide scheduled passenger airline services between Ireland and the UK, as an alternative to the then state monopoly carrier, Aer Lingus. It started out a full service conventional airline, with two classes of seating and leasing three different types of aircraft. However despite growth in the passenger volumes financial problems were of a growing concern. In its fight to survive the airline went through a dramatic restyle to become Europe’s first low fares, no frills carrier, built on the model of Southwest Airlines.
When I began my research into Ryanair I thought it best to start at the core of the company. I searched for a mission statement to provide me with an insight into the thinking behind the name Ryanair. However it was hard to find an actual mission statement but what was crystal clear was the company’s main objective. Ryanair’s objective is to maintain its position as Europe’s leading low fares airline, operating frequent point-to-point flights on short-haul flights, mainly out of regional and secondary airports.
The heart of Ryanair’s strategy is based on providing a no frills service with low fares designed to stimulate demand, particularly from budget conscious leisure and business travellers who might otherwise have used alternative forms of transportation or who might not travelled at all. Following on from this I looked at the external environment that affects Ryanair, to get a brief idea of the possible opportunities and threats.
In order for me to identify opportunities and threats within Ryanair’s competitive environment I am looking at Porters Five Forces. His model focuses on five forces that shape competition within an industry: (1) the risk of entry by potential competitors, (2) the intensity of rivalry among established companies within an industry, (3) the bargaining power of buyers, (4) the bargaining power of suppliers, and (5) the closeness of substitutes to an industry’s product.
Porter argues that the stronger each of these forces is, the more limited is the ability of established companies to raise prices and earn greater profits. The stronger a competitive force the more of a threat this item is in comparison to the weaker competitive forces which are seen as opportunities.
The airline industry is ever growing with 62 low cost airlines across Europe in operation. When Ryanair began their low cost airline strategy they were the only company in Europe to have this vision. The dramatic growth in this area shows that the risk of entry of potential competitors is high however there are barriers to entry such as set-up costs, brand loyalty, economies of scale and government regulations. The rivalry between existing companies is fierce with the top three companies in Europe being Ryanair, Easy Jet and Air Berlin. Each company tries to set themselves apart from the others Easy Jet with their image and service and Ryanair with the lowest price flights starting from 5p excluding taxes.
Ryanair has a competitive advantage over its rivals, as it is the most profitable airline in Europe with the lowest staff costs in all of Europe. Easy Jet (Ryanair’s main competitor) has strong brand recognition with clear ideas and goals. Their mission statement: “ To provide our customers with safe, good value, point-to-point air services. To effect and to offer a consistent and reliable product and fares appealing to leisure and business markets on a range of European routes. To achieve this we will develop our people and establish lasting relationships with our suppliers.”
As you can see from the descriptions of the two companies Ryanair is mainly focused on offering the cheapest price for the journey offering no frills and cutting costs wherever possible. For example when the catering company which supplies Ryanair withdrew the provision of free ice, the airline sent a memo to cabin staff advising them that ice would no longer be available for passengers drinks, a measure which saved the airline IRЈ40,000 a year. With 26,392,361 passengers in 2004 Ryanair are market leaders.
However when you look at the Easy Jet style of airline they not only focus on cost reduction but on employee needs and training along with customer satisfaction and retention of both customers and suppliers. They understand that money is not everything people demand friendly service and flexibility. With 24,300,000 passengers in 2004 Easy Jet are becoming very attractive as a low fares airline.
The airline industry is a buyers market were all somebody has to do is log onto another website to access alternative flights with another company. The power of suppliers in the airline industry is very strong also, as you can see in the newspapers there is a strike at Boeing and this has halted