Ryanair Case Study

The airline industry is an unprofitable business even with increased traffic every year (HUTCHINSON, 2011). By identifying the marco-environment factors that may have an impact on the airline will enable airlines to make better decisions and to exploit or reduce the impact of those macro forces.

Demography
The demographic environment includes the study of human populations in terms of size, density, location and other statistical information (allbusiness, n.d.). Airlines look to airports that are situated in cities or population with high density. Airlines have the need to serve airports and markets where they can generate sustainable levels of traffic and yield (IATA, 2013). This is particularly true as the airline industry is already highly competitive and coupled with competition that drives lower fares for customers; the need to operate in an airport that revenue potential for airlines is crucial. Population density is one of the factors that affect the choice of airport for airlines. Southwest is a LCC that serves dense, short-haul markets on a point-to-point basis with frequent service (Dresner, Lin , & Wi, 1996). A strategy that LCCs can adopt when expanding is to look out for markets with high density and high GDP and tap on the latent demand of the middle class. Ryanair has been successful in seeking out markets with high density and GDP ( Ryanair, n.d.). Ryanair’s strategy is to attract the latent demand for extra flights distinctive of the middle class, which is especially concentrated in high GDP areas as they are more willing to spend money on leisure trips, while still being price conscious (Malighetti, Paleari , & Redondi, 2009). The decision to serve a market is crucial to airlines as it has fixed costs that c...

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...fares, which in turn affects their profit. The other four marco forces can be exploited to the LCCs advantage. Technology is LCCs best option to expand its business as its low cost and aligns with the LCC model. Deregulation in other markets serves as an opportunity for LCCs to expand into other regions and tap on the latent potential of the market. Most industries have a direct proportional relationship with the economy; however, the LCCs have a inversely proportional relationship with the economy and they can take advantage of the economic downturn to improve its financial position. Last but not least, the demographic factor dictates the market that LCCs should target and if done properly, it will provide a constant stream of revenue. In all, the macro-environmental factors cannot be ignored as they present could present an opportunity or threat to the airline.