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Monday, November 3, 2008
Monday, April 2, 2007
Airline Insight
"What do you want from an airline beyond a well-priced ticket and punctual service? Do you want more legroom? A guarantee that the crying baby will be at least 10 rows away from you? That the man across the aisle will not snore for a solid six hours between Hong Kong and Melbourne? Or a cabin full of attentive and elegant flight attendants who anticipate your next need?"
-- Tyler Brûlé in International Herald Tribune
-- Tyler Brûlé in International Herald Tribune
Monday, March 19, 2007
Sunday, March 18, 2007
POSSIBLE SCENARIOS...
•Competition could increase on certain routes so Ryanair may need to launch a marketing offensive. Eastern European routes might not become as popular as expected so extra advertising may be needed. Low price doesn’t mean low quality. This idea needs to be communicated.Increase of Unit Rates
•The E.U. could introduce a common tariff in 2006 that is higher than the previous average tariff
and it could increase every year by 2.5%
•Decrease of Weight Factor
No change could occur here
•Increase of Airport Charges
Airport charges could increase in many Government owned airports if there is an adverse E.U.ruling on the Charleroi case. A 100% increase in 2004 could ensue with an increase of 3% per year after that.
•Increase Handling Charges
Handling charges could increase by 10% in 2004 and 3% per year after that if there is an adverse
E.U. ruling on the Charleroi case.
Charges could also go up due to increase in passenger numbers.
•Average Flight Distance Increase
New destinations could cause an increase in Average Flight Distance of 10% for two years and 5% for three years and after that 0% per year.
•Fuel Prices
Fuel prices could go up by 1% per year. Also the possibility of another War in 2007 for example could lead to an increase of 10% in oil prices. Fuel prices could then drop in 2008 by 5% after the War. From 2008 on we could have a 1% increase due to EU regulations on pollution. On top of the already mentioned 1% per year increase this could lead to a 2% increase per year from 2008.
•Decrease of Other Costs per Passenger
The max fine over the Charleroi case could be €8.5 million. It will be included under this heading.
•Dollar Exchange Rate
The Euro could constantly gain strength on the Dollar but the Dollar could increase value during the War in 2007 and could again lose value until 2011. From then on there is parity with the Euro.
STRATEGY
Ryanair’s objective has been to establish itself as Europe’s leading low-fares scheduled passenger airline through continued improvements and expanding offerings of its low-fares service. Ryanair aims to offer low fares that generate increased passenger traffic. A continuous focus on costcontainment and operating efficiencies is a vital part of the Ryanair way of doing things. Here are the key elements which make up Ryanair’s strategy:
• Low fares: These are used to stimulate demand, they target fare conscious leisure or business travellers who might otherwise not travelled at all or use other methods of transport such as car, coach or trains. Ryanair sells it seats on a one-way basis unlike most traditional carriers this change came into effect in November 2001. Ryanair sets its fares
on the basis of the demand for particular flights and by reference to the period remaining to the scheduled date of departure. 70% of seats on a flight are sold at the minimum available fare assigned for the route, once these are filled the price per seat rises6. Ryanair’s Dublin to London (Stansted) is its most popular route in terms of passenger volume; with fares ranging from €19.99 to €169.99 (can be lower during special promotions). In September 2003, Ryanair launched a fare promotion offering a total of two million seats on certain routes for “free” (excluding government taxes and passenger service charges) for travel during the period between September 2003 and December 17, 2003. These campaigns are very useful to bolster Ryanair’s low fare image.
• Frequent Point-to-Point Flights on Short-Haul Routes. Ryanair provides frequent point-to-point service on short-haul routes to secondary and regional airports in and around major population centers and travel destinations. The average flight time has been 1.1 hours with an average route length of 746 kilometres in 2003. Ryanair’s flew an average of approximately 1.94 round trips daily per route. The choice of only flying short-haul routes allows Ryanair to offer frequent service, while eliminating the necessity to provide "frill" services otherwise expected by customers on longer flights. Point-to-point flying (as opposed to hub-and-spoke service used by the traditional carriers) allows Ryanair to avoid
the costs of providing through service for connecting passengers, including baggage transfer and transit passenger assistance costs. This is one of the key differences between Ryanair and traditional carriers.
• Choice of routes: Ryanair favours secondary airports with convenient access to major population centers (e.g. London Stansted Airport) and regional airports (e.g. Brussels- South Charleroi airport). Firstly these have more competitive access and handling costs but also provide a higher rate of on-time departures, fewer terminal delays and faster turnaround times (it is much quicker to land, unload and reload passengers and luggage and take off again at smaller less congested airports then at a major airport such as Zaventem or Heathrow which have to accommodate many planes at the same time). The
fast turnaround is a key element in Ryanair’s efforts to maximize aircraft utilization. Ryanair’s average turnaround time for the fiscal year ended March 31, 2003 was approximately 25 minutes. This has allowed the possibility to fit in two extra flights a day that would not be possible with a 60 minute turnaround time7. This allows Ryanair to not only save on costs but also adds tremendously to revenues. The 25 minute vs. 60 minute turnaround time in effect adds €4.4million in incremental revenue per aircraft per year.
• Low Operating Costs. Management believes that Ryanair's operating costs are among the lowest of any European scheduled passenger airline. There are four main expenses which Ryanair is able to control and/or reduce and therefore works hard to do so: (i) aircraft equipment costs; (ii) personnel expenses; (iii) customer service costs; and (iv) airport access and handling costs:
• Low fares: These are used to stimulate demand, they target fare conscious leisure or business travellers who might otherwise not travelled at all or use other methods of transport such as car, coach or trains. Ryanair sells it seats on a one-way basis unlike most traditional carriers this change came into effect in November 2001. Ryanair sets its fares
on the basis of the demand for particular flights and by reference to the period remaining to the scheduled date of departure. 70% of seats on a flight are sold at the minimum available fare assigned for the route, once these are filled the price per seat rises6. Ryanair’s Dublin to London (Stansted) is its most popular route in terms of passenger volume; with fares ranging from €19.99 to €169.99 (can be lower during special promotions). In September 2003, Ryanair launched a fare promotion offering a total of two million seats on certain routes for “free” (excluding government taxes and passenger service charges) for travel during the period between September 2003 and December 17, 2003. These campaigns are very useful to bolster Ryanair’s low fare image.
• Frequent Point-to-Point Flights on Short-Haul Routes. Ryanair provides frequent point-to-point service on short-haul routes to secondary and regional airports in and around major population centers and travel destinations. The average flight time has been 1.1 hours with an average route length of 746 kilometres in 2003. Ryanair’s flew an average of approximately 1.94 round trips daily per route. The choice of only flying short-haul routes allows Ryanair to offer frequent service, while eliminating the necessity to provide "frill" services otherwise expected by customers on longer flights. Point-to-point flying (as opposed to hub-and-spoke service used by the traditional carriers) allows Ryanair to avoid
the costs of providing through service for connecting passengers, including baggage transfer and transit passenger assistance costs. This is one of the key differences between Ryanair and traditional carriers.
• Choice of routes: Ryanair favours secondary airports with convenient access to major population centers (e.g. London Stansted Airport) and regional airports (e.g. Brussels- South Charleroi airport). Firstly these have more competitive access and handling costs but also provide a higher rate of on-time departures, fewer terminal delays and faster turnaround times (it is much quicker to land, unload and reload passengers and luggage and take off again at smaller less congested airports then at a major airport such as Zaventem or Heathrow which have to accommodate many planes at the same time). The
fast turnaround is a key element in Ryanair’s efforts to maximize aircraft utilization. Ryanair’s average turnaround time for the fiscal year ended March 31, 2003 was approximately 25 minutes. This has allowed the possibility to fit in two extra flights a day that would not be possible with a 60 minute turnaround time7. This allows Ryanair to not only save on costs but also adds tremendously to revenues. The 25 minute vs. 60 minute turnaround time in effect adds €4.4million in incremental revenue per aircraft per year.
• Low Operating Costs. Management believes that Ryanair's operating costs are among the lowest of any European scheduled passenger airline. There are four main expenses which Ryanair is able to control and/or reduce and therefore works hard to do so: (i) aircraft equipment costs; (ii) personnel expenses; (iii) customer service costs; and (iv) airport access and handling costs:
Saturday, March 17, 2007
SWOT ANALYSIS
STRENGHTS:
• Brand name: Ryanair through its 14 years in the LCC market has developed a very well recognised
brand name.
• Benefits from low airport charges: These aid the low cost base Ryanair benefits from.
• Has first mover advantage on regional airports (e.g. Charleroi): Acts as a barrier to entry
• Internet site (94% bookings) www.ryanair.com: Lowers the cost of distribution as over the phone
bookings are more costly. Eliminates the need of travel agents
• High seat density:
• All Boeing aircraft: A uniform fleet saves on maintenance and training costs
• Fast turn-around:
• High Service performance: Punctual, high rate of flight completion, low baggage loss, these give a
good image of the company’s reliability.
• Modernised fleet which leads to less expensive maintenance: Will become more uniform with
only one model (737-800), also newer planes will require less maintenance.
• High aircraft utilization: Ryanair flies its planes for longer thus generating more revenue from its
assets.
• Fuel and other risks hedging.
• Small headquarters: Low on overheads
• Point to point: No hub and spoke, lowers cost as no through services required.
WEAKNESSES
• Prone to bad press: Ryanair is perceived as arrogant and the slightest incident gets a lot of press
coverage.
• Niche market: Restricted expansion possibility
• Distance of some regional airports from advertised destination: Over time customers may find
this a big inconvenience.
• Poor service: people skills.
• Ryanair is extremely sensitive to changes in charges(increase in fare value)
OPPORTUNITIES
• EU enlargement: There will be a lot of new destinations opened up
• Still potential to capture market share: The LCC market share could more than double
• Benefits from less exposure to geopolitical risks: As only really operates in Europe
• Economic slowdown actually helps Ryanair- changes in corporate culture, ‘steals’ customers from
traditional carriers as they seek lower fares.
THREATS
• Dependence on oil markets: Fuel costs depend on the oil market.
• Dependence on economic cycle
• Increase of low fare competition
• European court decision: This may make expansion more difficult and costs rise in the future.
• Limited growth on the South European market
• Regional airports gain bargaining power for “second round”.
• Customers are very price sensitive
• Ryanair and Easy jet limit one another’s growth “rout wise”, need for peaceful coexistence,
or routes could become battleground(e.g.: London-Rome)
• Face increase in air traffic control charges. As more planes fly in the sky.
• Powerless to prevent introduction of duty for fuel or environmental charges: This would
reduce its growth potential as it relies on price stimulation.
• Brand name: Ryanair through its 14 years in the LCC market has developed a very well recognised
brand name.
• Benefits from low airport charges: These aid the low cost base Ryanair benefits from.
• Has first mover advantage on regional airports (e.g. Charleroi): Acts as a barrier to entry
• Internet site (94% bookings) www.ryanair.com: Lowers the cost of distribution as over the phone
bookings are more costly. Eliminates the need of travel agents
• High seat density:
• All Boeing aircraft: A uniform fleet saves on maintenance and training costs
• Fast turn-around:
• High Service performance: Punctual, high rate of flight completion, low baggage loss, these give a
good image of the company’s reliability.
• Modernised fleet which leads to less expensive maintenance: Will become more uniform with
only one model (737-800), also newer planes will require less maintenance.
• High aircraft utilization: Ryanair flies its planes for longer thus generating more revenue from its
assets.
• Fuel and other risks hedging.
• Small headquarters: Low on overheads
• Point to point: No hub and spoke, lowers cost as no through services required.
WEAKNESSES
• Prone to bad press: Ryanair is perceived as arrogant and the slightest incident gets a lot of press
coverage.
• Niche market: Restricted expansion possibility
• Distance of some regional airports from advertised destination: Over time customers may find
this a big inconvenience.
• Poor service: people skills.
• Ryanair is extremely sensitive to changes in charges(increase in fare value)
OPPORTUNITIES
• EU enlargement: There will be a lot of new destinations opened up
• Still potential to capture market share: The LCC market share could more than double
• Benefits from less exposure to geopolitical risks: As only really operates in Europe
• Economic slowdown actually helps Ryanair- changes in corporate culture, ‘steals’ customers from
traditional carriers as they seek lower fares.
THREATS
• Dependence on oil markets: Fuel costs depend on the oil market.
• Dependence on economic cycle
• Increase of low fare competition
• European court decision: This may make expansion more difficult and costs rise in the future.
• Limited growth on the South European market
• Regional airports gain bargaining power for “second round”.
• Customers are very price sensitive
• Ryanair and Easy jet limit one another’s growth “rout wise”, need for peaceful coexistence,
or routes could become battleground(e.g.: London-Rome)
• Face increase in air traffic control charges. As more planes fly in the sky.
• Powerless to prevent introduction of duty for fuel or environmental charges: This would
reduce its growth potential as it relies on price stimulation.
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