Ryanair Company Financial Environment and Challenges

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Table of Contents

Discussion
Case Study
Module Review Questions
Reference List

Discussion

How Traditional Business Models should evolve to combat Rising Competition from New Network Carriers

Traditional business models should focus on improving customer service. The low- cost business model is the best strategy that is applicable in countering competition from new industry entrants. According to Hales-Dutton (2008), mainline operators are characterized by high fares besides stripped away services. On the other hand, low-cost carriers offer lower prices by including extra costs for frills and boarding scrums. Establishing a low-cost strategy is a sure way of ensuring business growth since it will attract more customers. In addition, reasonable pricing will also play a crucial role in combating competition. Customers prefer lower price. As a result, the low-cost models will most likely dominate the market (Hales-Dutton, 2008).

Traditional business models should offer customer friendly products, high-frequency services, effective budgetary allocations, and transformation strategies. Most traditional network carriers have unbundled fares. They also exclude other customer services such as frills besides their unfriendly costs. Dunn (2014) posits that the models cannot compete with the new ones that are offered by entrant network carriers. For an added competitive advantage, traditional models should be restructured in terms of product and service provision. Other essential services that should be considered include frequency, route retreats, merging models, and cost-effective budgets (Dunn, 2014).

Case Study

Ryanair’s Business Decisions during 1989, 1990, 1991, and 1992

During this period, the Ryanair’s business decisions aimed at expanding the premises. Various fundamental decisions included leasing and acquisition of large turboprops and restructuring of the business through investing more finances, back routes, and fleet. Furthermore, the airline opted to increase its aircrafts and number of trips while reducing the prices of the air tickets. The airline also ceased offering free drinks and foodstuffs to the passengers. Other critical decisions included operation on fewer routes and re-launching of the company. The decisions aimed at business expansion and customer satisfaction (Hales-Dutton, 2008).

Why Ryanair Lost Passengers yet made a Profit in 1991

The Gulf war caused a drop in passengers to 651,000 in 1991 from 745,000 in 1990 regardless of the fact that the Ryanair made approximately £293,000 profit that year (Hales-Dutton, 2008). This profit resulted from low airfares and return of leased turboprops that withdrew from some of their regional routes.

Ryanair’s Product and Comparison between the use of Smaller Airports and Point-to-Point Service vs. using Larger Airports and Hub-and-Spoke Service

Ryanair is an Irish airline with 50 European bases. It operates around 300 Boeing 737-800 aircrafts. Its strategy is based on the low-cost business model. This situation makes it the most successful airline in Europe. Smaller landing fields create avenues for cost reduction since other since the parking fees is significantly lower. Dispatching is also accomplished quicker than in large airports. On the other hand, using larger airports and hub-and-spoke proves much costlier since passengers have to change aircrafts at particular airports (Dunn, 2014).

Ryanair Business Decisions regarding Labor Productivity, why it has been more successful in reducing its cost base than competing low-cost carriers

According to Dunn (2014), Ryanair is the leading industry in labor productivity. It carries almost 10,000 passengers per employee. This rate is ten times more effective compared to other low-carrier competitors. The large employee-passenger ratio has enabled the airline to cut labor costs efficiently while increasing the number of travelers.

Economic Rent

Economic rent refers to the excess returns made above the normal levels that are generated in competitive markets. It encompasses all payments made to factors of production in excess of the required costs of bringing them into production.

How Safe Operations, Labor Unionization, Fuel Prices, and environmental

Taxes can affect Ryanair’s Future

Ryanair has been facing criticism for fuel incidents, surcharges, publicity, ancillary revenue and in-flight service, and employee relations. It does not allow its staff to join labor unions due to the perception that they will have an influence on its operations. Safe operations, unions, increased fuel prices, and environmental taxes are likely to reduce Ryanair’s profitability in the near future since they induce extra costs to the company’s operations (Dunn, 2014).

How Ryanair Shareholder Policy benefits the Airline

The Ryanair shareholder policy includes share buybacks, dividend payments, and special surpluses. Dividend payments are rewarded in Euros with the exception of shareholders registered in the UK and the USA who pay in sterling pounds and the US Dollars respectively. However, customers can also have their dividends paid in other currencies of their choice (Dunn, 2014).

Module Review Questions

How the 2008 Rise in Oil Prices affected Airline Pricing for Checked Baggage

The 2008 rise in oil prices lowered airline profitability because it affected their share values in the stock exchange. For instance, the American Airlines spend approximately 30% of its operating costs on fuel.

Commission-Based Ancillaries and Dynamic Packaging

According to O’Connell & Williams (2011), the ancillaries refer to transactions concerning hotel bookings, hiring of cars, and travel cover. Dynamic packaging facilitates a simultaneous booking of flights, hotel rooms, and car rentals (O’Connell & Williams, 2011).

Comparison of the Operating Characteristics for Charter, Low-Cost, and Leisure Hybrid Business Models

Charter flights facilitate efficiency, privacy, and flexibility. They enable an individual to fly from one destination to another using a plane of their choice any time they want. Furthermore, other extra amenities are provided for the passengers. The low-cost business model entails the provision of low charges to customers to attract them. It allows business restructuring to enable customers pay low charges for services or products. A hybrid business model strikes a balance between profit and non-profit making goals. This model incorporates both commercial and social enterprise strategies. Leisure hybrid models are for profit making besides incorporating some non-profit making strategies to meet their social goals (O’Connell & Williams, 2011).

How Sector Distance and Aircraft Carrying Capacity affect Unit Costs

Sector distances and large passenger capacity reduce unit costs. Large passenger carriers cover longer distances without intermediate stops. As a result, their overall fare per passenger is less compared to smaller passenger carriers with intermediate stoppages (O’Connell & Williams, 2011).

The Author Predicts a Contraction of Charter in Future. What is the Reasoning?

The author is attracted to the numerous benefits accrued from the possession of a charter. The author wants to have the travel scheduled effectively to save time while making flights any moment. With charter travel, the author will be able to access flights of choice anywhere in the world (O’Connell & Williams, 2011).

Reference List

Dunn, G. (2014). Getting Down To Business. Airline Business, 30(5), 26. Web.

Hales-Dutton, B. (2008). Ryanair’s Revolution: Ryanair has revolutionized air travel in Europe. It was not the first low-cost carrier, but it has become one of the most successful. Air International, 74(6), 38-41. Web.

O’Connell, J., & Williams, G. (2011). Air transport in the 21st century: key strategic developments. Farnham. Surrey, UK: Ashgate Publishing. Web.

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