Ryanair Case Study
For instance in Heathers Airport in London, British Airways can still control a slot although the flight number for this slot has been terminated and is therefore cynically vacant. This is rarely a problem for LEA’s though, as they rarely use these large hubs such as Heathers, London or Siphon, Amsterdam, because they are often congested due to the high frequency of long-haul flights and have high airport fees, although Asset uses the latter as one of Its main continental airports. In Dalton, E Introduced airline liberalizing measures and deregulate the Industry o Predatory pricing as a barrier to entry The concept of predatory behavior Is based on Incumbents In an Industry squeeze out new entrants by temporarily lowering their prices to match the new emptor or even introduce prices below the levels of these new entrants, who often do not have enough capital to survive such a price war, until they have been driven out of the market. After the new entrant has lost this price war, the incumbent then increases its prices back to pre-competition levels. Within the context of the airline industry allegations of predatory pricing is most often made when a low fare carrier enters a market or specific route serviced by a full-service carrier prior to its entry.
The latter will then lower its prices attempting to cause the former to exit this market or route.
Frequent flyers program These programs have made many customers, especially business travelers, prefer a certain Lorene or Lorene alliance as they would receive bonus flights, free hotel accommodation or other free gifts the scheme provides, although they may be able to buy a cheaper flight at another airline. The reason has often been that the company pays for the flights but the individual employee receives the bonus points. Economies of scale No significant economies of scale with regards to the airline industry, when looking at the whole system – Bargaining power of suppliers Aircraft manufacturers There are effectively only two major global players in the aircraft business with regards to larger aircraft and that is Boeing of the US and Airbus, which is a European consortium.
Airlines cannot substitute aircraft by any other products and these are therefore an Important factor for the airlines, which strengthens the position of the aircraft manufacturers. However, In the light of the recent downturn in air travel over the past few years demand for aircraft has fallen aromatically making ten Darling position AT ten alright nutcrackers weaker as he competition for airline contracts has been fierce o Airports Airport facilities of small scale, the fixed costs of providing airport facilities and providing staff are high It is in the interest of both the low fare airlines and the secondary and regional airports to cooperate as the former can increase traffic for the latter, thereby decreasing average unit costs, and the latter can provide airport facilities that are more accommodating to the low- cost model with less congestion, lower fees and charges Airports putting a lot of emphasis on attracting a single airline also face higher risk exposure, because of lack of diversification as a footloose carrier such as Urinary may shift to another airport if it finds that it is not accommodating to its needs such as it did when terminating Hence, one may conclude that airports with a dominant single low fare carrier are subject to more risk and low bargaining power. O Overall the bargaining power of the industry suppliers is reasonably low and the recent economic downturn in the industry has helped decrease it along with more market liberation’s and competition.
With geared to airports, primary airports still have more bargaining power than smaller airports as they have reached critical mass and are not as susceptible to contract demands like low airport fees and fees and charges, which particularly low fare airlines are likely to air, as secondary and regional airports, who have not yet reached critical mass. With regards to the theoretical aspects in the Five Forces model said to influence the bargaining power of suppliers one may also conclude that the threat of forward integration in the airline industry is low, as is seems unlikely that neither aircraft manufacturers nor airports are likely to acquire or create an airline.
Threat of substitutes o Alternative modes of transportation Bus, rail, automotive o Video-conferencing The increased use and developments of technological innovations such as videoconferencing may limit the need for face-to-face meetings, which would require air travel if these individuals are geographically far apart Given that the use of videoconferencing is used primarily as a substitute by business travelers and does not affect the leisure and OFF travel segments as the purpose of their travels is to be hectically present at the destination in question, it should be evident that low fare airlines will be less vulnerable to the potential of videoconferencing as the business travelers constitute a smaller segment of their passengers than they do with full service airlines- Bargaining power of buyers o Historically had low bargaining power in the airline industry, since customers purchasing flight tickets are neither concentrated nor do they generally purchase large quantities recent technological developments have changed this picture though.
The rise of the Internet has increased the bargaining power of the consumer s it has made it easy for a potential buyer of a flight ticket to search for the cheapest available fare between dozens of airlines; either by visiting the airlines’ websites individually or using price comparison sites o Made prices of air travel more transparent o Low switching costs for consumers has helped push down prices of air travel – Rivalry among excellent Tells o Market liberalizing has led to increased competition o Price competition The low fare airlines have been able to lower the prices of airfares through their business models focusing on price leadership forcing full service airlines to also rower their prices to avoid losing more market shares High rivalry What is Ryan’s strategy in 1999?
Routes o Nearly all flights originated from Standee or Dublin Airport, however, Urinary does not consider them to be a ‘hub’, but rather flights were not coordinated and customers were treated as if they were flying point to point o Served secondary airports Not congested Easy to obtain landing slots and likely that flights would land and depart on time Negotiated for low landing few Even up to the point that several airports paid Urinary to serve their locals o Will to enter a route if Urinary cannot break even in 3 hours and grow the market by at least 100% o Customer mix o Leisure travelers (70-75%) Seems business travelers (25-30%) Reservation Customers booked flight directly via its call center Remaining tics via travel agents Opened up its booking via the company’s website in 1999 Ground and in-flight operations Boarding pass with no assigned seating Acquired initial sass at the end of a recession, as a result, at a very low price, about 50% of the peak price during boom o Aircraft conferred with the maximum number of seats and one class of service o Opted for metal stairs for customer awarding instead of air bridges o Sold beverage, snacks and merchandise which constitutes 5-7% of its rev 25 miss after reaching the airport, the aircraft is ready to depart on its next flight during the 25 miss, the aircraft was cleaned, serviced and refueled contractors involved in ground operations were rewarded if everything is done within 25 miss, if not, will be penalized o Focus on safety even though no- frills approach is adopted Pricing and marketing o Marketed as low-fares airline.