Ryanair has the lowest unit costs of any European airline and one of the lowest of any airline in the world. Whether measured cost per seat, Ryanair's production of capacity and traffic costs it less than that of any of its competitors.Low costs enable low fares on a profitable basis. Ryanair's average fares are lower than those of any of its competitors in Europe. They have a partnership with Boeing in order to guarantee low maintenance costs. 1.2 Size With more than 1,600 routes across 30 countries in Europe and North Africa, 186 airports (of which 69 are ‘bases’, where Ryanair bases aircraft and crew), Ryanair has the largest short-haul network of any carrier in Europe. It is number one by passenger numbers, with 83.4m in the 12 months to …show more content…
The average age of Ryanair fleet is approximately 5.5 years, and is set to get younger with their latest order (Ryanair, 2014). Ryanair has built on its strong financial position to place significant orders with Boeing in the past, in 2001 and in 2013. Although the pricing of these orders has never been made public, its strong negotiating power - and willingness to trade off the two large manufacturers - has undoubtedly provided Ryanair with significant discounts to list prices and, importantly, lower prices than most competitors. In turn, this has fed into Ryanair's unit cost advantage. The Sep-2014 order for up to 200 Boeing 737MAX aircraft (100 firm and 100 options) continues this approach (see Opportunities below). 1.4 Management focus Under the leadership of CEO Michael O'Leary, who has been with the company since 1988 and CEO since 1994, Ryanair's management has shown a strong focus on doing what it does best: keeping costs and fares low. Innovation focus has generally been aimed at finding new and better ways to keep costs and fares low. For example, the introduction of bag charges was aimed at reducing the number of checked bags, thereby reducing handling …show more content…
This included a re-designed website, with a more attractive look and feel and with fewer clicks to make a booking; a new mobile app; the reintroduction of allocated seating; a relaxation of baggage restrictions (for both on-board and checked bags); a reduction in the charges levied for printing boarding passes at the airport and for making changes to bookings. Fleet expansion On 8-Sep-2014, Ryanair announced a firm order for 100 Boeing 737 MAX200 aircraft and agreement for a further 100 options. The aircraft will be delivered between 2019 and 2024 and will have 197 seats, compared with 189 seats on its 737-800 fleet. Newer aircrafts will produce 50 per cent less emission, 45 per cent less fuel burn and 45 per cent lower noise emissions per seat. This could improve fuel efficiency Threats Price sensitivity As they have elastic demand, so the changes in prices will affect on quantity demanded. So there is a risk that customers could switch to alternative airline company like
Spirit addresses “price” by attempting to get the lowest possible fair for their potential customers. They have instituted their “unbundling” strategy that essentially removes all the conveniences that other airlines afford. Fees for checked bags, fees for flight changes, and no complementary in-flight beverages are just a few of the cost-trimming techniques employed. This strategy allows Spirit to come up with impossibly low fares. It also conforms to customers who just want to get from point A to point B without paying extra for services they don’t use. This strategy, coupled with an in-your-face “promotion” ploy, has made Spirit Airlines “the most profitable airline in the U.S.” (Nicas, 2012).
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.
No matter how a business operates, change is inevitable and affects all businesses. CAMERON SMITH investigates the changes Qantas have had to undergo in order to keep up with their competitors, whilst navigating the challenges of low cost of fares.
As airline industry is a competitive marketplace, the airline companies use new technologies to improve their efficiency and decrease the overhead costs, including ‘advanced aircraft engine technology, IT solutions, and mobile technology’ (Cederholm 2014). The technology changes including technology improvement, new innovation and disruptive technology. The disruptive technology need to meet the characteristics of ‘simplicity, convenience, accessibility and affordability’ (Christensen 1995). The technology changes would bring both opportunities and threats to airline companies. Since Labour cost and fuel costs occupy 50% of most airlines operating cost (Groot 2014). Therefore, if new technologies could be disruptive in the two aspects, there will be important changes to current airline
...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.
The new entry is likely from rich Gulf nations, China, and India of low budget planes around the globe. The airlines from the Gulf nations have placed orders with Airbus and Boeing that are valued in the billions. The deliveries are expected in the next decade. The demand will grow in the production of advanced narrow-body airplanes, such as Airbus, A321 and Boeing, B737 Max. The growth that is expected in the next decade, more consumers will be flying to their destinations. The airlines in the United States are expected to have a profit margin over the next decade. Resulting, from economic growth, and the demand for aircraft service. Buyers are expected to have a lot of power in the next decade, resulting in bargain prices for buyers. The competition will increase with intense rivalry in the aviation industry. The contracts for the aircrafts are totally from airplane
Global competition- As more companies are coming into this airline market so there can be a threat to Air Canada from these
In order for revenue management to be successful, four fundamental conditions must be met. The first requires a permanent amount of supply available for sale. Meaning, a fixed amount of seats per aircraft should be available per route. Second, resources sold must be perishable. Seats are a perishable items, if not sold they terminate without value. Third, the most vital portion of r...
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.
Lufthansa, one of the world’s biggest airliners, has divisions handing maintenance, catering and air cargo. Since the World War II the airline industry has never earned its cost of capital over the business cycle (Hitt, 2010). Most of the airline companies have either filed for bankruptcy or are being bailed out by their government. Lufthansa had also gone through these tough times, but had resurfaced to become one of the worlds most profitable airline company. The company adapted a transnational strategy, seeking to achieve both global efficiency and local responsiveness. Lufthansa’s monopoly in Germany came to a halt with the creating of the European Union. All the EU member countries become one regional and therefore the European competition became, an increasingly a local competition. Lufthansa created its regional Hubs, to cater for its domestic market. But the availability of substitutes such as bullet trains and the Euro tunnel, made is necessary for Lufthansa to create short traveling time, customizations and quality standards in the region to achieve a competitive advantage. But outside the EU there are no substitute to air travels as such all the flag carriers are competing in the market, the international airline industry is a highly competitive environment. A new force has also emerged in the world of air travel, in the form of three Gulf airlines with jumbo ambitions. Within a decade Dubai’s Emirates, Qatar Airways and Eithad from Abu Dhabi have between them carried the capacity of two hundred million passengers (Micheal, 2010). The company had to go global and therefore adopted the international corporate-level strategy, where Lufthansa will ope...
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.
Airline of choice: Remain the top choice for international flights for premium customers as well a...
We can also identify the weaknesses of Ryanair in accordance to scientific management. From what we have previously discussed in the essay we now know that there are a few points from Douglas McGregor’s theory X that can relate to scientific management. However these key points also have influences on Ryanair, which can come across as
When an airline does not have a sustainable competitive advantage, it does not have any properties of differences from there competitor and turns to a dangerous price war. The sustainable ...
As Boeing’s CEO, Frank Shrontz promised to increase earnings and return on equity. Boeing had a history of making money when its competitors did not, but Mr. Shrontz wanted higher returns. The airline industry was characterized by large cash outflows for R&D and manufacturing and long payback periods over long life cycles for each new airframe design. Companies had to have deep pockets to keep the operation going while waiting for a return on their investments. If Mr. Shrontz could increase the return on equity for Boeing, it would increase the likelihood of Boeing’s continued success well into the future.