Ryanair Holdings Plc-Marketing Strategy

Dissertation Topic on Airlines Industry-Case Study on Ryanair Holdings Plc

Strategic Evaluation of Ryanair Holdings

Swot analysis of Ryanair Holdings

Strengths

·         Strength in Europe – Ryanair holds dominant positions in European countries, thanks to its early penetration into tertiary airports. Many of its competitors continue to focus on primary and secondary airports.

·         Strong financial results – the company has continued to increase revenues yearly despite the global aviation industry experiencing difficult trading conditions.

·         Low prices – Ryanair is well-known for its cheap ticket prices, which place it at an advantage during an economic downturn.

·         Strong brand image – Ryanair has a well recognised brand which is communicated as being low price and low quality, and is closely associated with its promise of "No Fuel Surcharges – Ever!".

Weaknesses

·         Poor reputation – Ryanair has a poor reputation for cancelling flights and abandoning passengers following cancellations. This places it at risk if its competitors are able to reduce their fares to match those of Ryanair's. In addition, its reputation has deteriorated following its decision to withdraw from some airports at short notice, such as Valencia.

·         External pressure on airline industry – Ryanair is at risk from factors such as economic downturn, rising fuel prices and terrorist attacks, which all have a significant impact on the public's eagerness to travel.

·         Hedging policy – Ryanair lost considerable revenue due to poor decisions on hedging following oil price changes. The company suffered because of its decisions not to buy fuel in advance as the cost of a barrel of oil broke through the US$100 and subsequent barriers. The company had repeatedly vowed not to buy any advance aviation-fuel contracts while prices remained above US$100 a barrel. The company eventually reversed that position, securing supplies for September 2008 at prices equivalent to US$129 a barrel and the October-December quarter at US$124. This policy failed after oil prices started falling in August 2008, dropping to below US$70 a barrel in October 2008.

·         Global downturn – Ryanair has been affected by the recessions in UK and Eire. The Irish economy has been hit severely, with predictions from the European Comission (Jan 2009) forecasting a fall in GDP of 5% in 2009, compared to an average fall in Europe of 1.8%.

·         Customer alienation – the company's approach means that it alienates key consumer segments such as families with children – with each ticket involving two sets of taxes/fees applied.

Opportunities

·         Benefits for online sector – there continue to be opportunities for the online sector during a recession, where low-cost factors add a significant advantage.

·         Competition – Ryanair, with its cheap pricing policy, will benefit from consumers trading down to lower priced deals.

·         Open skies agreement – the company has the possibility of launching transatlantic flights following the agreement between the US and the EU.

·         Cheaper purchases following bankruptcies – Ryanair can take advantage of cheaper prices for purchasing bulk items, such as aircraft.

·         Italian expansion – Ryanair is targeting expansion in Italy, the company's second largest market, following the collapse of Alitalia.

·         Geographical expansion – there continue to be opportunities for growth by expanding into regions with stronger growth forecasts, such as Africa and Eastern Europe.

Threats

·         Environmental concerns – the environment continues to be a focus of concern. This may lead to increased taxes for either airlines or passengers – impacting on prices and reducing demand. Ryanair will be particularly affected by a new air travel tax introduced in Ireland that will come into force on 30 March 2009. This will add EUR10 to the ticket price per passenger.

·         Terrorism and associated disturbances – terrorist attacks can have a detrimental impact on demand for air travel. The costs to business can be considerable and undermine profitability in the short term.

·         Expansion at Heathrow – the recent approval of a third runway at Heathrow Airport provides the national carriers with opportunities to expand their flights. Ryanair does not operate from Heathrow and hence will lose market share.

·         Oil prices – the price of oil has altered considerably recently. This has led to a major increase in expenses for airlines and a distinct reduction in profits. Ryanair was caught out with its fuel hedging policy and was locked in to high fuel costs whilst oil prices slumped in the last quarter of 2008.

·         Falling passenger numbers – the major European economies are in recession. According to IATA's December 2008 forecast, passenger numbers will fall by 3% in 2009.

·         Industry consolidation underway – further consolidation in the industry by national carriers and low-cost carriers will result in a fiercer competitive environment, comprised of stronger and larger airlines.

12 Month Highlights

2007-2008

·         Despite operating in a climate of economic uncertainties, Ryanair continued to achieve improved sales, with revenue growing by 21% in the year end March 2008. Ryanair has continued growing both its aircraft fleet (up 2% on previous year) and passenger numbers (up 20%), while also increasing its number of airport bases and routes.

·         Ryanair has walked away from its bid for Aer Lingus airline. On 22 January 2009 shares in Aer Lingus fell 10% after the Irish Government (with a 25% share) rejected the offer on competition and valuation grounds. The latest bid of EUR748 million was approximately half the price of its previous offer which was blocked by the EU in 2006.

·         Ryanair has advised that it expects to record a full year result of between breakeven and a loss of EUR60 million for 2008-2009. Ryanair announced half year profits of EUR215 million, 47% down on the previous year's interim profits as half year fuel costs more than doubled from EUR392.7 million to EUR788.5 million. Traffic grew by 19% to 32 million, as average fares (incl. bag charges) fell by 4% to EUR47, while total revenues grew by 16% to EUR1.8 billion. Unit costs excluding fuel fell by 6%, (including fuel rose 21%), despite a 2% increase in average flight distance.

Source-Euromonitor International-Company Profile-2009

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