Ryanairs Business

“The French Transport Ministry said Tuesday that it had instructed its civil aviation authority to discuss the security practices of the low-cost airline Ryanair with regulators in Ireland and Britain. The ministry issued a statement after the broadcasting of a television documentary in Britain that alleged that security practices were occasionally flouted by the Ireland-based airline. The documentary, screened by Channel 4 in Britain on Monday, alleged that passport checks before boarding were not carried out properly, trainee employees were not given necessary training and planes were not cleaned adequately between flights.The airline said that any isolated breaches of Ryanair policy would be investigated. (AFP)” (Source: International Herald Tribune, 14th February 2006)

The International Herald Tribune article from February, 14th 2006 illustrates the recent issues of the low-cost airline Ryanair that occurred in the previous months in regard to its security practices and its weakening employee relations. This essay will answer the relevant questions and will critically analyse the “Ryanair phenomenon”, its successful business strategy and it will also evaluate Ryanair’s future prospects with taking the European airline industry into consideration. Several examples of European airlines including prevailing statistics and development will be given to provide a better insight into this topic.

Ryanair Holdings is Europe’s leading low-fare scheduled passenger airline. The company operates short-haul, point-to-point routes between Ireland, the UK and Continental Europe. The company’s leading market position provides the company with the ability to leverage its market position to further expand its operating network. However, the estimated decline in the domestic European air travel would decrease the demand for the company’s services and resultant revenues. (Creaton, S., 2005)

1. Analyse the European airline industry, with implications for the budget sector, and especially Ryanair.

The airline industry in Europe has always been fraught with regulation from both domestic governments and the European Union. Before the 1980’s, there were heavy restrictions on competition in this industry imposed by individual countries trying to protect their national airlines. A liberalised bilateral agreement in the 1980's between Ireland and the UK was a huge stepping stone for the deregulation of the industry. Also during the 1980’s the E.U. set about deregulating the industry and an array of liberalisation measures followed that were to be applied throughout its territories. The result of the E.U. implementations since 1997 has been that any E.U. airline can operate anywhere within the E.U. without restriction. (Allй, M. & Schmitz, M., 2004) Since the introduction of all liberalisation measures and competition policies, competition in the airline industry exploded, especially in the last ten years. Also, with more of these measures on the horizon it is likely that competition will continue to grow as new entrants seek to take advantage. However, even though there have been an abundance of new entrants many have not lasted. This is mainly due to reactions of the existing players who ousted many of them with sustained price competition and other such measures. Furthermore, the slot system in operation in many major airports meant that new players couldn’t get a strong foothold from the beginning. ( Allй, M. & Schmitz, M., 2004) According to Allй & Schmitz (2004), in order to take a look at the competition in this industry it is necessary to divide the players into four main categories. These four categories can be described as follows: flag carriers, independent airlines, franchises of major airlines and charter operators. The flag carriers, which fly intercontinental routes as well as those within Western Europe, include both those that have traditionally been heavily dependent on aid from their respective governments (including Air France Group (“Air France”), Alitalia S.p.A. (“Alitalia”), Aer Lingus, and Iberia , S.A.) and “commercial” flag carriers such as British Airways, KLM, Scandinavian Airline System (“SAS”) and Lufthansa AG (“Lufthansa”) that have operated with no or little state aid in recent years. The independent carriers include low-fares carriers, such as Ryanair, easyJet Plc. (“easyJet”) or AirBerlin, and carriers providing “frills” services more comparable to those of the flag carriers but at slightly lower fares than the flag carriers, such as British Midland Airways Ltd. (“British Midland”). Certain small carriers, including Virgin Express,