Competition is the name of the game when it comes to capitalism which is the main sociopolitical system in the world. Through competition among continents, countries, industries, and companies the resources are effectively distributed and efficiency is maximized. This maximization of efficiency is probably the most critical element in the field of "operations management". Operations management has become a science and is blended with the other functions of a business like marketing and finance. A very competitive industry where the management of operations makes or breaks a business is the airline industry and especially the low-cost part of it. In the low-cost airline industry the service provided has been almost commoditized and the companies are trying very hard to be profitable while being competitive, in order to please their stakeholders like investors and customers. A well known low-cost airline is Easyjet which operates in several European countries and has been founded by serial entrepreneur Sir Stelios Haji-Ioannou in 1995. Easyjet's goal is to be the leading low-cost airline in Europe while providing exceptional value to its passengers. This is a difficult goal but the company uses various operations management strategies to accomplish it. These strategies are going to be analyzed in order to understand the positive and negative aspects of each one and also will be contrasted to what the direct competitors do similarly or differently. When it comes to low cost we have identified eight different strategies being used by Easyjet that help lower expenses. These strategies contain use of the Internet to reduce distribution costs, effort to maximize the utilization of the substantial assets like aircraft , ticketless travel, not offering a free lunch on board, efficient use of airports, paperless operations, economies of scale, and few management layers. The quality and value provided to the passengers is being accomplished by strategies like having satisfied employees, the use of the Internet for convenience, centrally located airports, and tight flight schedules. Legendary investor and businessperson Warren Buffett has said: "Whenever I read about some company undertaking a cost-cutting program, I know it's not a company that really knows what costs are all about. Spurts don't work in this area. The really good manager does not wake up in the morning and say, This is the day I'm going to cut costs,' any more than he wakes up and decides to practice breathing." His words are a great introduction to start analyzing Easyjet's cost-cutting efforts that have been implemented from the first day the airline commenced operations.
The following value chain, which focuses on Spirit Airlines, is representative of most of the firms in the Ultra Low-Cost Airline industry. Spirit is the industry leader in many areas such as operational efficiencies/cost structure, aircraft fleet management, brand/network and growth. The firm, however, trails industry foes in areas such as customer service and operational reliability and recoverability. While most in this segment pursue the cost-leader competitive strategy, Spirit has demonstrated the most effective model to date – whether the model is the most sustainable remains to be seen.
Having a low cost of operations is one of the contributing factors to Southwest Airlines’ financial success. Such low cost model of the corporation is brought about by an effective strategy. Southwest uses only one type of aircraft – the fuel-efficient Boeing 737. This tactic keeps training and maintenance costs down. Moreover, the no-frills approach to customer service contributed to the low cost of operations for Southwest.
...leader. Certainly, it has to take into account the implications of completion from both the direct and the indirect competitors. That is why EasyJet centers on the cost management strategy and the differentiation strategy (Hanlon, 2007). Through an analysis of EasyJet Airplane company strategies and performance, it is clear that they are ambitious and strive for the best. They not only survive in an industry that is intensely competitive, as shown through the analysis by Porter's Five Forces, but also succeed in terms of offering their customers the best that they have to offer in terms of value for money. The advantage this airline gains over its oligopolistic competitors stems from flexible ticketing and complete access to all primary routes. However, in keeping airline industry, there is room for improvement and growth as the analysis using Ansoff Matrix reveals.
...ry long and successful history in the airlines industry, which makes it one of the leading airlines in the world. Also, it provides the most comfortable flights and services to its costumers and employees, which makes it unique.
Due to the increased use of the internet, it is becoming more and more easier to book online. This allows customers to book flights easier and increase Jet2’s revenue. Revenue is increased through not having to deliver or post tickets out to its customers, in comparison with other non-internet based airlines. It is believed that over 97% of Jet2’s customers book online, which further highlights Jet2’s emphasis on online bookings.
One of the many influences that affect Qantas is the presence of globalisation, which has heavily affected the airline both positively and negatively. Globalisation is a process which refers to the increased integration between different countries and economies as well as the increased impact of international influences on all aspects of life and economic activity. Globalisation is responsible for the removal of many trade barriers and the increased level of competition that Qantas has been exposed to. The increased levels of competition has increased consumer sovereignty and forced Qantas to implement strategies to gain a competitive advantage in order to redirect consumers towards their business. Qantas has implemented a cost leadership strategy as a response to globalisation and the influence of cost based competition. One way that Qantas achieved this was by using Globalisation itself to the business’ advantage. Globalisation ha...
Airline and travel industry profitability has been strapped by a series of events starting with a recession in business travel after the dotcom bust, followed by 9/11, the SARS epidemic, the Iraq wars, rising aviation turbine fuel prices, and the challenge from low-cost carriers. (Narayan Pandit, 2005) The fallout from rising fuel prices has been so extreme that any efficiency gains that airlines attempted to make could not make up for structural problems where labor costs remained high and low cost competition had continued to drive down yields or average fares at leading hub airports. In the last decade, US airlines alone had a yearly average of net losses of $9.1 billion (Coombs, 2011).
Use of technology and automated processes to reduce reservation, ticketing and customer services costs. Paperless cockpits, use of e-manuals, electronic ticketing, owning its own in-flight entertainment provider, automated baggage handling are some of the examples where Jet Blue’s use of technology has lowered operating costs.
The airline industry is a costly business to partake in especially due to the cost of fuel and technology needed to operate the airplane. With EasyJet internationalizing into Africa, it had the notion of facing new competitors, however, with the finances (see appendix) it possesses and the famous identity of its brand, made the threat of being a new entry within the Nigerian market low. However, a big threat would be if local Nigerian airlines were to reduce its prices then EasyJet might be at risk because the local airlines have the necessary equipment and knowledge to operate in its region.
Dixit, A. (2000). Growth of discounting in the airline industry: Theory, practice, and problems. (Order No. 9978379, Georgia Institute of Technology). ProQuest Dissertations and Theses, , 330-330 p. Retrieved from http://search.proquest.com/docview/304592352?accountid=8364. (304592352).
Inbound logistics – Low cost, simple to use cost effective reservations system, ticketless travel, pre-assigned seating, paperless cockpits, search engine optimisation and BlueTurn; for minimising ground time.
The International Air Transport Association (IATA). 2014. Airline Cost Performance. IATA Economics Briefing. [report] IATA, p. 31.
This concept was challenged by Southwest Airlines by marketing itself as a cost leader. Their entire growth curve in the industry has been attributed to its cost effective strategies which has made it more efficient and successful than traditional airlines.
Within the airline industry currently the airlines can be divided into low cost airlines and full service airlines. The low cost airlines targets customers that are seeking no frills connectivity between cities at low ticket prices. The full service airlines provide several add-ons like free meals, on plane entertainment, and communication facilities. The target market for full service airlines are customers who are willing to spend extra for the services that the airlines provides.
The aim of this report is to carry out a strategic analysis of Ryanair. This will involve investigating the organisation’s external environment, to identify opportunities and threats it might face, and its strategic capability, to isolate key strengths and any weaknesses that need dealing with. Finally, a SWOT analysis will be carried out to assess the extent to which Ryanair’s strategies are suitable to what is happening in its task environment.