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Airline Pest Analysis

Essay by   •  November 26, 2010  •  2,598 Words (11 Pages)  •  3,792 Views

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Introduction

Ryanair is headquartered in Dublin, Ireland and operates a low-fare, no-frill scheduled passenger airline. Ryanair serves short-haul, point-to-point routes between Ireland, the United Kingdom, and continental Europe, making Ryanair EuropeÐŽ¦s largest low-fare airline. It has destinations in 13 countries with 76 low-fare routes. Its fleet consists of 21 Boeing 737-200s and 21 737-800s. Launched in 1985, RyanairÐŽ¦s growth has been extraordinary. Ryanair currently employs a team of 1500 people and will carry over 13 million scheduled passengers in the current year (2002). In 1986, Ryanair broke the high fare cartel, which was then operated by the two state airlines Aer Lingus and British Airways in the Dublin-London route. The first four years Ryanair was carrying 600,000 passengers annually, but had managed to lose 20million pounds.

Under a new management team, headed up by Michael OÐŽ¦Leary, a major overhaul of the airline was undertaken in 1990/91. With Ryanair re launched as the very first new breed of ЎҐLow-fare, no-frillÐŽ¦ airline, adapting the formula so successfully pioneered by south West Airlines in the U.S, non profitable routes were eliminated, the network was cut back from 19 to just 5 routes and air fares across the remaining network were substantially reduced. For example, on Dublin-London route, a new promotional fare of just 69 pounds returns was launched which stimulated a whole new era of growth for Ryanair. The companyÐŽ¦s goal was to be profitable on new routes from their inception, by pitching their fares to be low enough to attract new customers but high enough to provide a satisfactory operating margin. By 1991 Ryanair recorded its first ever profit despite the damage done to the Airline industry by the Gulf war in 1991. Over the next couple of years Ryanair substantially slashed its fares further and managed to open up many new attractive routes.

The new formula effected a turnaround in the fortunes of the company, and by 1997 the company was floated in an IPO on the Dublin Stock Exchange and on NASDAQ.

Last decade Ryanair launched an average of 10 new destinations every year. Despite this success, Ryanair remained committed to driving down airfares. Ryanair was competing head to head with many of EuropeÐŽ¦s biggest airlines including British Airways, SAS, Alitalia, Lufthansa, Air France, and Aer Lingus, by offering an unbeatable package of low fares, on-time flights, high frequencies and friendly in-flight service, Ryanair was continuing to succeed and win increasing public and customer support.

Dubai based Emirates Airlines is one of the fastest growing airlines in the world and has received more than 200 international awards for excellence since launch in 1985. Emirates, from a humble beginning in 1985, till now, the growth has been remarkable. Of course, all with the full patronage of the Government of Dubai. Emirates were successful in planning and building up excellent supportive systems by formation of many sister companies. For example, DNATA (Emirates own travel agent), Abela Airline Catering, Dubai Duty Free etc. Emirates now flies to 58 destinations in 41 countries in Europe, the Middle East, the Far East, Africa, Asia and Australia. Emirates prominence in the world travel market is increasing rapidly due to the efforts put forward by the Government of Dubai to make Dubai a lucrative destination for tourism and travel. Dubai plays host to many attractive world class events like, The Dubai Desert Classic, The richest race in the world ÐŽV Dubai World Cup, Dubai Shopping Festival, Dubai Summer Surprise etc. Dubai also takes pride in the making of the first seven star hotel in the world ÐŽV the Burj Al Arab. Known as the ЎҐCity of GoldÐŽ¦, Dubai is the leader in commerce and tourism in the Middle East.

Scenario Analysis of the World Airline Industry.

With the world in an official recession, 2001 was already a difficult year for the airline industry. But the tragic events of September 11th plunged the airline industry into its worst-ever year, with a number of revered names threatened with collapse and erstwhile profitable companies making record loses. No airlines were immune. Global passenger traffic declined by 4% and cargo by 9% in the aftermath of September 11th. In sum, the world airlines lost some U.S$ 12 billion during this period and, together with the manufacturers and the wider travel and tourism industry; hundred of thousands of employees became redundant. According to research by the World Travel and Tourism Council, global travel and tourism demand declined by 404% in real terms in 2001 and is expected to fall by another 3% in 2002. One major concern of all airlines after September 11th is the expected rise in aviation insurance.

For Ryanair, after September 11th, overall booking was down by 10% on normal. But it recovered rapidly from the aftermath of September 11th. The main reason why September 11th did not leave any significant impact on Ryanair was mainly because RyanairÐŽ¦s trading sector consist of domestic and Intra-European routes. And also of the total schedules 1800 flights, it cancelled only 16. Above that Ryanair marginally slashed its fares to encourage and promote more air travel.

For the Emirates, September 11th hit real hard. It was because mainly of the political reason of its geographical location in the Middle East. It was perceived at that time, the nearer one is to Afghanistan, the greater the risk. And Dubai was falsely perceived as being very close to Afghanistan. Emirates traffic to European routes fell drastically. It took Emirates 7 months to recover its equilibrium and Emirates reached the 2001-02 profit target that was set a year ago (Net Profit of US $ 164.2 million). All this because, Emirates kept to their plan for the year, except marginally reduced the schedules and severely restrained cost.

Competitor Positioning

The strategy of low fare/no frill by Ryanair was considered as an anytime-it-will-break bubble by many of its competitors. Most of the Ireland, Dublin, U.K and other Europe routes were dominated by the giants like British Airways, KLM, Lufthansa, South West, Easy Jet etc. But as a budget carrier, Ryanair set itself vigorous with steady growth ambition, which it hoped to achieve in various ways. This included, operating from regional and secondary airports, initiating additional routes from Dublin, London etc, penetrating into German market which was dominated by Lufthansa. Many other domestic airlines followed the path of Ryanair, but were unable to achieve the growth rate of Ryanair. Ryanair is also dead against

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