Opportunities Ryanair

Categories: Business Economic Recession Ryanair

Essay, Pages 4 (904 words)

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Europe's bloodbath (again)

1. Recessionary conditions suit true Low Cost Carriers best. The global economic recession has handed Ryanair and similar carriers near-perfect operating conditions. As Ryanair explains, "this recession has encouraged passengers to become much more price sensitive which is why they are switching to Ryanair's low fares and unbeatable customer service over all other competitors". Ryanair expects a 15-20% reduction in average fares this year to around EUR32 per passenger. Ryanair is expecting that several of its smaller rivals will not be able to withstand falls of this size over a longer period.

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This means that Ryanair is in a position to profit handsomely over the next 12 months. Ryanair's CFO, Howard Millar, summed it up; "we're the only airline in Europe predicting a profit for next year at this point in time". Ryanair forecasts a profit after tax of between EUR200 million to EUR300 million for the year ending 31-Mar-2010.

2. "Collapsing" aircraft order books: Ryanair is also on the offensive for a cheap aircraft deal to cover its requirement for 200-300 aircraft between 2013 and 2016.

Talks with Boeing have reportedly been scheduled for late Summer. With its negative net order book this year and a customer that is arguably too big to lose, Boeing may be more willing to deal than Airbus. The US dollar is certainly heading in the right direction for Ryanair at present, with a substantial delivery log. But both manufacturers know Ryanair needs more aircraft to keep its model working next decade and will not be too eager to discount.

Contrary to O'Leary's charge that the aircraft order backlogs of Airbus and Boeing are "collapsing", although there has been some churn in orders, the manufacturers still hold the upper hand. 12-18 months from now, it might be a different story.

Ryanair Airlines SWOT Analysis:

1. Challenges for Ryanair, answers for the same Ryanair’s journey have not been a smooth run for the company over the years. Being in business since 1985, it has carved a niche market for itself in being the most widely used low cost airline today. Global recession of 2008 definitely affected Ryanair in a huge way. Its scope to increase fares and increase volume of passengers was hit hard. Since economies collapsed spending power of the regular consumer collapsed too. In this paper we are going to discuss the challenges and threats Ryanair has to face and what could be the probable recommendations for the same. As new opportunities become limited the low-cost carrier market’s growth slows down significantly. Ryanair must be prepared for the inevitable convergence of costs and conditions, but it will still retain the ‘no-frills’ advantage of high seat density and aircraft utilization coupled with lowest fares in any market. A SWOT analysis of Ryanair shows that it would continue to dominate in the low-price market segment but it has to expand to new routes and ensure services are going to better than before.

Good customer relations always help in creating customer value. This will require high employee retention, which is key to customer satisfaction. Ryanair has been previously accused of being an adversely affected airline in the world with regards to environmental issues with a shortfall of 2.8 tons in CO2 allowances. This is in turn caused the airline loss of about € 40 million. Market conditions are always dynamic in nature. Corporations have to constantly struggle to keep a foothold. To sustain and expand in such a dynamic market requires critical analysis and planning on the part of the any corporation. Hence growth will slow down. Ryanair’s competition with other low-price airlines in such a market will require it to launch new routes and operations in non-European regions. This would help it to carve a niche market not just in the Europe but outside Europe as well like Turkey and Russia.

This would require off-base (like crew lodging in areas not having home bases) service operations increasing operational costs. This will cut into its operating margins. At the same time, its improved services can have a positive impact on the share prices. Since stock market earnings are always based on expansions and high operating margins they will continue to be vulnerable to market dynamics. Ryanair is already the leader in the lower price segment and it needs to cater the rapidly growing value segment to have total domination. The value segment constitutes travelers interested to optimize time, comfort and price.

2. Preferences would have to be given to city-centric airports, convenient departure and arrival times, and basic service. Competitors like Easy Jet, Air Berlin, Basic Air, BMI Baby are catering to the Value market segment. They have been successful in establishing slots at some primary airports and providing basic cost effective services. Acquisition of Aer Lingus has not only enhanced Ryanair’s expansion plans and market share but also helped it to stay in the top position of being in the low-price segment. The SWOT analysis given below explains how Ryanair can achieve its goals and mission by capitalizing on opportunities and utilizing its strengths and eliminating its weaknesses and threats. 3. OPPORTUNITIES: EU regulations, dependence on economic cycle. -LCC market share can double