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Case study: Ryanair

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  1. European Airline Market
  2. The Swot Analysis
  3. Porter's five forces
  4. What changes would you recommend to Ryanair's approach?

The European airline industry is one of the most heavily regulated and protected sectors. In most parts across Europe, carriers were state-owned and therefore enjoyed a legal monopoly over domestic traffic. Governments controlled the entry of foreign companies by means of restrictive bilateral Air Service Agreements (ASA). The implementation of the ASA allowed the carriers that were registered in each signatory to operate commercial services. However, in general, the countries were allowed to use only its state-owned flag carrier.

In 1980, the European Community adopted new strategies in order to liberalize the intra-European air service. This deregulation aimed to substantially reduce the EU member states' ability to restrict the entry of foreign companies. Since April 1997, the European airline companies have been allowed to provide passenger services on domestic routes within the EU member states. In other words, a particular airline company is allowed to travel to other destinations across the EU member states even if the airline company has not been registered in the destination country (e.g. Nice-Reims served by Easyjet).

In the beginning, the restoration of the deregulation of airlines favored the flag carriers which monopolized the market. But later, it allowed other companies to enter and compete against the state-owned flag carriers. Such is the case of Ryanair, the Ireland-based company and the most successful Low Cost Company (LCC). In 2005, the company transported 35 million passengers. Moreover, the company has the best operating margin around 25% (see table 2).
Growing at an annual rate of 20%, this LCC already controls around 7% shares of the of the EU market in terms of passengers' number. However, as we can see in table 1, its market penetration still differs significantly among EU member-states compared to Ireland and the UK.

[...] Ryanair has the possibility to establish new air link with these nations. The company still has the opportunity to increase its market shares in Western Europe; in fact, the LCC market shares could be more than double. Benefits from less exposure to geopolitical risks: European countries are politically stable, which allows Ryanair to operate without any governmental restrictions. The actual economic slowdown helps Ryanair to attract customers from traditional carriers, seeking lower fares. Thanks to the construction of new terminals, Ryanair will be able to penetrate the German market and compete against GermanWings and Air Berlin, in order to raise its market shares and conquer new customers on a relative big market. [...]


[...] The increasing threat of substitutes As we mentioned earlier, there is not much loyalty from customers, LCCs' customers switch between Ryanair and Easyjet or other companies offering reduced prices. Other means of transport such as Eurostar, TGV, Ferries, are lowering their fares in order to attract customers. A competitive market The LCC market is a highly competitive one; many companies are offering low cost services on an increased number of routes. Most cost competitive advantages are copied; in fact Ryanair and EasyJet are offering pretty much the same services (location of cars, reservation of hotel, etc.). [...]


[...] On another level, Ryanair has to face a large number of smaller carriers, including low cost airlines such as EasyJet, BMI Baby, Fly Be, Hapag Lloyd Express and GermanWings. However, the competition varies according to the route, thus Ryanair is not always bothered by its competitors. Today, one of the big issues that the companies have to manage is obtaining the slot allocation. In fact, in certain European airports, airline traffic is regulated by a system of slot allocation. Although the majority of Ryanair's bases of operation do not work with this system of slot, there is no assurance that the company's non slot bases will continue to operate. [...]

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