Pricing
As consumers are happy to buy a large amount of fares at low fixed price, therefore Ryanair are happy to supply as much as is demanded at the price. Ryanair are the first airline to have offer customer’s the lowest fares in the market. This shows their main target market is aimed at middle – class customers and a low percentage of business customer’s. Reasons to why Ryanair provide a low price in fares is due to services they provide which only cover flights to Europe. They have also managed this by agreeing to an “Airline Passenger Service Commitment”. They are fully committed on the issue of price and reducing them, i.e. as part of there service they offer special discounts it you are to book on Ryanair’s website.
Production and Costs
Production is a huge element on how successful a business will run. As part of Ryanair’s fixed factors they need to be up – to – date with there technology, capital equipment and land, by assessing these areas on a regular basis. Having cut back dramatically on price and intense competition with Aer Lingus and British Airways, Ryanair accumulated a 20m in loses. This therefore cost Ryanair a further 20m to re-construct the running of the organisation and cut back on extra expense that is not required, i.e. free drinks and expensive meals. Having looked at where Ryanair currently stands today I have clearly established that the demand for flying with
Elasticity
Ryanair is high due to the price. Therefore to show this in an elasticity formula this would show that the demand is negative or elastic. This is good as Ryanair continue to keep there prices low and having changed from not offering free drinks and first class, the relationship between quantity demanded and price should always be negative, and in this case for Ryanair it is.
Economic Problems
As part of my analysis on Ryanair I will look at the terrorism attacks, competition and re – payment in subsidiaries. As everyone in aware all airlines are on high alert due to attacks that may be made through high jacking of aeroplanes. This has caused major delays when checking in and departing or arriving. Due to that major disturbance this has caused Ryanair to cancel a high percentage of their flights. In a press conference on the 17/8/2006, Michael O’Leary the chief executive of Ryanair announced he would be 1.2 suing the Department for Transport, because of the continuing ban not being lifted. An Estimated 5m passenger face severe delays as they head overseas from airports throughout the country, thanks to measures to police a ban on hand luggage larger than small laptop cases, and the bar on passengers taking any liquid or toiletries into the cabin. The outcome Ryanair have faced is a 3.3million.
With Ryanairs constantly competing with British Airways, Easy Jet and Aer Lingus, Ryanair has come across tough barriers. For example, Easy jet the low cost airline has announced they will be moving into Republic of Ireland market for the first time and intend to launch of three routes from London Gatwick to Cork, Shannon and Knock. This will course a major disruption for Ryanair and their future plans. With the big move Ryanair know they will come worse off as facts are shown easy – jet cover much more then just low fares. They stand to have a better customer’s service, provide a much more business luxuries flights and provide services further then just Europe. This therefore will have a negative affect of Ryanair’s profits as they will be overshadowed by their rival on their own turf. Ryan air also face more stiff competition as British airways responds with its own low fares, while the 400million merger between go and easy jet will displace Ryanair as Europe’s biggest low – price airline.
Further more, in February Ryanair have been ordered to repay several million euros is subsides to the southern Belgian Walloon region. Having not obeyed the rules like every other airline they have to repay some subsidies received for using Charleroi as a destination. The local community feel it has a negative impact to the economy due to huge amount of pollution build up from the engines. This is a huge setback as major debt builds for the business. This will cause an economic problem has Ryanair will have to cut back on there services and limit their customer’s the best deal (s) or service.
Business Strategy
Ryanair’s first problem is to over come the ban in the best possible way and having lost £3.3 million Ryanair must do everything in their power to turn there deficit around. For this be possible a business strategy must be implemented. I feel the best solution’s to overcome this problem is once the ban is lifted, it is essential Ryanair make sure checking in time runs as quick and smooth as possible. For this happen I feel the company should take in on more staff to provide a more sufficient and professional service. For this to be in motion I feel it will take 4 weeks to recruit, train and place the new recruits in the correct areas of the business so they are fully trained for any problems that may occur in the day – to – day running of the business. Economically this would benefit Ryanair as more and customers are aware of their excellent service more customers would fly with Ryanair.
Ryanair’s second problem which I mentioned was competition. In the market today Ryanair are coming up against tough competition with there main rival British Airways. To be able to compete in the market I feel to be able to compete at a higher level, Ryanair may opt to promote special deals i.e. spend a week away get one extra night for free, winter deals and provide a 1st class service. For this to become affective for the company they will clearly have to pay out to get the rewards over time which I feel economically will be over a six month period,
Ryanair’s third and final problem is not having paid subsidiaries. This has put them into much debt and need to pay off what they owe. Economically this will affect their reputation with public and may lead to customer’s flying with other airlines. To overcome this problem Ryanair need to pay off what they can afford at one given time and start to re-build a respectful relationship with their customer’s. This can be accomplished by advising customer’s on their best offers helping them in any possible way.
Conclusion
Having looked at Ryanair and gathered information on different parts of the business, I was able to see how they function and inter-link with each another. Within in findings I discovered Ryanair were the first to launch the original low fare airline and till today run low fares. However, many unpredictable situations occur in this field of business. Such as the terrorism attacks no airline is ready to hope with much ciaos and disruption to the business as more and more delays occurred Ryanair were accumulating a lose (£3.3). However, with many barriers facing Ryanair they have successfully overcome situations with the correct economic solution, by being the no1 for customer satisfaction, providing cheap flights and overall having a great management base for the business, which they have, through there rapid growth over the years.
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