Critical Issues Faces By Low Cost Airlines Management Essay

Critical Issues Faces By Low Cost Airlines Management EssayRyan credit line started its cognitive process in 1985. In the first grade more than 5,000 passengers toured betwixt South Eastern Ireland and London. The go with expanded continuously and by 1989 the company had 14 aircrafts over 600,000 passengers traveled per year. Over the four years the be increased considerably and ends up with lpss of 20 millionIn 1990 the period CEO Mr.Michael OLeary took over the steering and conducted major(ip) changes in the company. Ryanair fol scurvyed the the base make up- measly frills concept and reduces the routes from 19 to 5 by 1991. The company increased the fleet to 21 over the next 6 years and strange increase in passenger traveled in Ryanair due to its low pricing policy. Ryanair uneffective to increase unto the grocery store due to strict ruler imposed on European respiratory tract businesss.Ryanair took full advantage in 1997 open new routes in Continental Europe du e to deregulation of European merger air transportation regulation. Over 160 routes make been established by 2001 and hubs have been set up all around the continent in London, Glasgow, Brussels, Frankfort, Milan, outright Ryanair is the key players within the European budget airway industry and peradventure the most profit adapted airlineIdentifying critical issues and core problem faces by low apostrophize airlineRegulation by domestic and EUEuropean airline industry is always reduce to regulation from some(prenominal) domestic and European Union. Before 1980 heavy restriction imposed by the individual countries to protect their national c arrs. Towards deregulating industry Ireland and UK signed symmetric agreement. In 1997 EU also deregulate the industry and any European airline can operate anywhere within the Europe. Ryanair benefited by this move. later on EU introduces contender law which it prevent taking state advocate and fit out. Also any airline having domin ant position in the commercialise should not abuse the dominant position. Ryanair affected by this rule take up mail carriers and Franchises of major airlinesCharter relief valve operators have taken significant market share in Europe. Major charter operators are owned by the major travel agents or major commercial airlines operators. Small carriers such(prenominal) as Virgin Express have become franchise of major flag carriers. The flag carriers use these self-reliant airlines as franchises to compete with low constitute budget carriers such as Ryaniar and easyjet. Budget carriers cost foundation doesnt allow them to compete effectively on short-haul routes.Customer wait on comfortRyanair has eliminated traditional in-flight serve such as seat allocation, complementary meals and make whoopie and news papers. Instead Ryanair earn profit from such secondhand services by charging guests for in-flight services and other travel expenses such as travel insurance, car hire, In ternet. Ryanair is extremely sensitive in changing the number value. late it was widely on the media that Ryanair considering to charging fee for them for using the lavatory. Meanwhile Ryanair recently announced that its raising its checked luggage fee from 15 to 20 per bag. (Appendix 10). Although the Ryanair has remarkable track record for punctuality, flight completion the perception of the softer side of its customer service has not always been good with much bad media.Ryanairs objectives and dour term visionRyanair objective to operate the largest amount of routes with lowest fare compare to any European Airline without compromising low cost carrier argument model including quality of service. (Appendix 1 )Purpose of this designationPurpose of this assignment is to analyze Ryanairs long term vision of the business model and submit a report to the guidance in run for them for the prox planning for the success of the company and to avoid any future threats. This report d emonstrateDetailed study of Ryanairs current scheme and the management approach which impact on business operations and functions towards carriers customer relation. and the move management has to focus in order to stay in noticeable position in the low cost market.It evaluate Ryanairs current strategy and the action plan to be carried out by the management in the future to avoid any future threats by the company.It also gives shortened evaluation of Ryanairs fiscal abridgment and how the purlieual factors affect the European airline low cost industry.Method and theory usedThe strategies and theory correct forward in this compend are industry compendium, environmental analysis, and financial analysisStrategic factors and capabilities6.1.0 External environmentThe PESTEL analysis Michael Porters five wads analysis clearly talk about external factors on Ryanair function and the strategies which are adapted by the organisation. Hence, a good perceptive of Ryanair external en vironment will identify the opportunities and avoid threats (Refer appendix diagram)An airline industry includes advantageously established key players and to compete with distributively and other but rynair has highschool potential of attracting the market. Thus, the PESTEL variables in macro environment have major force on the performance of Ryanair.Internal environment.This environment analyses about the strengths and weaknesses of Ryanair. This aspect duologue about Ryanair internal factors like skills, competitors and capabilities. Its measures the Rynairs efficiency and effectiveness to acquire warring advantage (Refer appendix diagram)According to the value chain analysis it is principally rely on Ryanairs primary and supporting activities. Value chain analysis creates a value for Ryanair. However, through this analysis it is clearly focus on quality of Ryanair.Industry analysisBefore arrival of low-cost airline, major company such as British Airways dominated the Europ ium airline industry. Until 1997 one member nation could not fly passengers within some other nations domestic market. The Ryanair enter in the low-cost market with grate bulwark to overcome. Nevertheless Ryanair able to bust the market with operating low cost while importanttain the profit. As a result Ryanair has become the largest low cost carrier in Europe.In 1990 Ryanair operates with 74 aircraft including 41 Boeing 737-800, 21 Boeing737-200, 06 Boeing 737-300 and 6 BAE 146. The company offers approximately 475 short-haul flights per day serving 84 locations in the UK, Ireland and Europe. 2004 was the best year for Ryanair overtaking low-cost airline Easyjet became largest airline in terms of passenger in Europe carrying more than 23 million passengers brought in revenues of US $ 1.32 billion, an increase of 43% from the previous year. It crates strong Ryanair discoloration name and became Britain favorite low cost airline.Ryainair having all Boeing aircraft, hence it has g rater negociate power from the supplier. In 2002 Ryaniar placed half of its order towards increase its aircraft by 112 in the next 10 years. (Appendix 1). Also it planed to purchases technology more bring up and environmental friendly Boeing 737-800 and retiring old Boeing 737-200. Boeing737-800 reduces fuel burn and carbonic acid gas emission per passenger kilometer by 45%All of the Boeing 737-800 that Ryanair has bought or committed to buy is certified for category IIIA landings (automatic landing with minimum horizontal visibility of 300 metros and no vertical visibility). Also Ryanair has installed Operational outflow Data Monitoring (OFDM) transcription on each of the Boeing 737-800 aircraft. The purpose of the system is to monitor operational trends and inform the management. By analyzing this report management able to identify potential area of risk to rectify any exit from the normal operating procedure, thereby ensuring Ryanairs flight safety standard. During its past 24 year operation history Ryanair has not had any single nonessential involving injury to passengers or member of its flight crew.PositioningRyanair is the very agonistical low cost airline in the Europe. Towards lower its cost Ryanair uses secondary airports whereas the closest competitor Easyjet does not. (Appendix 4) Ryanair became no 1s in more areas.passenger calling -over 23m for 2004 over take Easyjetpassenger growthEuropean routes (149) and bases (11)Customer service delivery punctuality, flight completion, and fewest lost baggage.Process of strategic management followed by RyanairThe Low cost carrier business model is passing competitive and the model enhances the development of strategy formulation skill by guiding business model systematic and comprehensive study of each business situation (Appendix 2)External factors sharpening competitive positioning the RyanairThere are not one but many factors which determine the strength of competition, the train of profitab ility of low cost carrier market. New entrance brings competition to the industry and risk of fall of market share and profitability.Environmental analysisEuropean Union Regulations The European airline always subject to regulation from European Union. The introduction of the competition law by European Union it prevents getting state aid, beneficial relationship with airport operators. EU expects by introducing this regulation there will be healthy competition among flight operators. The well discussed fact that Ryanair had more favorable relationship with airport operators has benefited the carrier in a tine industry growth and aggressive pricing. EU commission in February 2004 which ruled that Ryanair had been receiving illegal state subsidy for its base airport at publically owned by Charleroi Airport Appendix 8Competition After introduction of the competition law, competition in the airline industry increases dramatically. This creates an environment for new entrants in to the market. Due to the price competitions many of them could not lasted long. The main competition among the players in the industry dived into four main categories. The four categories are flag carriers, Independent airline, franchises of major airlines and charter operators. The independent carriers include low fare carriers such as Ryanair, easyjet. These low cost carriers slightly lower fare than flag carriers. Flag carriers uses independent carriers such as Virgin Express as franchises to compete effectively the low cost airlines in the short-haul routes.External forces. Airline industry has always subject to changes in the world. Especially outbreak of foot and mouth in the UK, the severe acute respiratory syndrome epidemic in Asia, Terrorist attack on 9/11, Gulf war, sparing downturn and recent volcano eruption in Island.Financial analysisAfter Ryanair introduces low fare business model every year the number of passengers travelling increased. From 2002 the company starts to pur chases Boeing 737-800