Ryan air keeps its fares low by making sure that the routes that they offer are to the less busy airports with the lowest landing charges. (See appendix vii and i) This will reduces their overheads giving them more retained profit to put into the business and so allowing them to be able to run flights at such cheap costs.
In light of recent events using these airports has also bee a factor which has kept them out of financial trouble, as these are such small airports the security measures that have been inflicted on many of the major airports has not affected these still allowing Ryanair to run as efficiently as usual. Because of this, the company only had to cancel 16 flights out of a total of 1800 in the week following the tragedy (see appendix iii). In addition, unlike any other airline company, Ryanair feels that timing is essential. This is another reason for choosing these airports. As seen in appendix I Ryanair can offload passengers and re load again in 25 minutes, allowing more flights to run in a day therefor making Ryanair more efficient then other companies. Therefore giving them the maximum use of time and machinery so they can make as much money as possible. A down fall to this is that because of the extent of use the craft and machinery will need to be serviced or replaced more frequently but with the amount of profit because of all the flights they are able to find money to do this.
To ensure that Ryanair stayed afloat after the terrorist acts they immediately reduced fares (see appendix ii), and made flights more widely available to ensure that no losses were made. They were right to do this as they could see that the balance between supply and demand would change and would move the equilibrium point. By doing this they were largely unaffected by the events. They made losses of 10% in that week. They anticipated more losses and so recognised the customers being ‘price conscious for both business and leisure travel’ and so planned to regain that by having different promotion in the following weeks (see appendix iii) hoping that this would make a shift in the demand curve.
When looking at the prices of the fares they offer (see appendix viii), I have to think that there must be something missing. When I looked at appendix i, I found that no meals were served on the planes. These have to be bought whilst on the aircraft at high prices. These have a lot of added value to substitute for the low fares charged. The company makes it profits by adding value to other services they have such as car hire and hotels.
Ryan air announced on September 30th that there pre-tax profits had improved by 26% from £56.1million last year to £75million (see appendix i). As seen in appendix vi this was at the same time as other rival airlines were announcing job cuts and cancelled flight routes and losses in share prices. The company named Sabena, after estimations of 1400 job losses and shedding its 49.5% stake in the Belgian carrier, it announced bankruptcy on November 7th see appendix x. Ryanair has stated that they believe that many of the problems blamed on September 11th by some airline companies are the excuses of already financially troubled companies, looking for subsidies and handouts.
Not only has Ryanair improved its profits it has gained more business. As can be seen in appendix xi. It shows that Ryanair has taken advantage of the situation given to them. On September 28th Ryanair offered to replace the flights been cancelled by British airways to Cork and Shannon two airports situated in Ireland as ‘an offer to the government to rescue Irish tourism after the events of September 11th…’. By doing this British airways has lost more money and Ryanair has gained more custom therefor improving its market share.
Ryan airs strategies have been noticed by other companies. Even British airways launched a ‘copy cat’ scheme (see appendix v) but this didn’t work, as they couldn’t beat the prices offered by Ryanair. Once again giving Ryanair a competitive advantage over a rival company. Even more publicity has been given to them after there campaigns such as there ‘keep Belgium flying’ campaign (see appendix iv) and its keep Britain flying Champaign (see appendix v)
However, the big question is will Ryanair keep up its success? I believe that after looking at the research I gathered that they will. Ryanair have planned whether it is good or bad. Their share price has risen by a great deal according to appendix i and is said to be going to increase by mass amounts. They are set to take advantage of future offers such as Swiss airports are begging for their business (see appendix i). In addition, according to appendix iii they are looking to seize opportunities to invest in some new aircraft that failing companies will be selling to manage their debt.
In my opinion, their low fare flights are their main source of competitive advantage. No other airlines have been able to beat their prices. They have thought of a strategy that no one else has. Their slogan “low fares/no frills” has brought them a lot of custom. And by using the cheapest airports and their “no frills” slogan it is possible for them to give customers such low fares.
