Analysis of Current business environment
The PESTLE analysis (Appendix A) detailed the main macro-environment trends that has and will affect the aviation industry. Among these, the fluctuation of the fuel cost is the most pressing current issue that is effecting the airline operations (Capell, 2009). On the other hand, deregulation has up the open market opportunities to Ryanair, nonetheless introducing more intense competition from new arrival within the European airline industry. Access to a huge pool privatized and under-utilized airports throughout Europe would be a compelling resource that low-cost carriers could leverage to their capacity.
The advancement of the internet has been a compelling force that drives corporations has open the door to new opportunities, where customers can directly communicates with businesses in a cost efficient manner. Therefore, utilizing the internet technology as a key capability and resource in the airline industry would form unique value chain and opportunities for gaining competitive advantages (Mason, 2001).
Apart from the economic crisis that is affecting the industry, while demand has currently dwindle in size. But people are mostly desperately now in need to travel from one place to another in the most cost effective manner. Budget airlines will shine throughout these turbulence waters.
Porter’s Five Forces analysis (Appendix B) indicates that the power of suppliers in the aviation industry is the most considerable thread of all. Rising fuel costs are determined by the world market price, whereas airlines do not have control over another than purchasing hedging, while market value can fluctuated at any point in time. Negotiations with jet fuel suppliers show none in existent. In 2007, one cent increase in average fuel cost would have resulted in a $4.3 million increase in operating expenses for Ryanair (Snell, 2007).
The thread of utilizing secondary airport are a mixes of fortune, most privatized airports in Europe has low negotiation power over the airline. While in contrast airports such as Luton and Stanstead do have the upper hand, and can demand higher landing charges from low-cost carriers, this is due to the fact that the BAA has monopoly status and a numbers of carriers’ make usage of these London secondary airports, and this account around half of Ryanair scheduled routes (Ryanair Holdings, 2009).
Another force that should be considered is competitive rivalry; this was due to the result of deregulation of the aviation industry within Europe. New entrants and any existing carrier that has a valid commercial aviation licensed can operate anywhere within European Union just like it’s their home base country. While well establish full-service carriers like British Airways, Lufthansa, KLM, and Air France has been achievably controlled their operational cost structure, therefore allow them to compete with the low-cost business model and in the meantime providing full-service to the customers (Strategic Direction, 2004). These cause discounting competition an unavoidable issue and have totally gone into a price war and many airlines are on the brink of liquidation because of that (Strategic Direction, 2006b).
Main Opportunities and Threats
The most conspicuous threat currently faced by the aviation industry is the global economic slowdown, where the UK economy shrank at the fastest rate for 30 years, a sharpest quarterly decline since 1979 (Kollewe, 2009), causing direct effect on consumer demand for seasonal holiday travelling to diminish throughout Europe. This financial crisis trend, IMF has forecasted that it will continue on into more deepen recession (Standard & Poor’s, 2009).
Intense competition and price discounting within the airline industry has proven to be another major threat for Ryanair, This was a direct effect from the deregulation of the European aviation industry (CCA, 1998). All budget and traditional airlines are now competing on price to maintaining their revenue target; this will be at the expense of operational profit margin for all airlines in the industry. While competition in the other hand has cause the travel industry to witness stable growth in recent years and the trend is expected to continue over the forthcoming years towards 2012 (Ryanair Holdings, 2009), in contrast should provide market opportunity for Ryanair in relation with the company cost-leadership strategy as its strategic strength (Perman, 2009). Ryanair could provide what Grossberg (2009) suggested to make their airfares best value for something that their do really need to compare to all the alternatives.
Ryanair has a strong present in the online sector and given that the online travel market has witness tremendous growth in recent years (Ryanair Holdings, 2009). Ryanair could take the opportunity to gain increase in ancillary revenue through their website, which already shown popularity as a mean of evident in their recent financial statement (Ryanair, 2009b).
(For SWOT analysis summary, see appendix D).