Ryanair Macro Environment

This report studies one of the largest low cost airlines in Great Britain and Europe – Ryanair. This company is a 20-year-old international air carrier based in Dublin (Ireland), with 36 bases and 950+ low fare routes across 26 countries, connecting 151 destinations. The organisation was founded in 1985 as a conventional airline but re-launched itself in 1990/1991 as a low-cost carrier, replicating American Southwest Airlines business model.

From the very beginning its strategy was to offer simple, low-cost fares and excellent customer service, which they can be proud of these days. REFERENCES The purpose of this report is to evaluate the market environment of the company by using PESTLE Analysis, which gives Ryanair the opportunity to identify the main factors affecting the industry. Moreover, it also analyses the impact on the business from the competitors and competitive environment. 2. Macro Environment – PESTLE Analysis 2. 1 Political forces * The increased Trade-Union pressure in Europe; The European Union expansion (the EU may be a big factor affecting the strategy planning for Ryanair, as the number of countries joining EU increases the number of countries for which they will need to supply their services); * Increased terroristic activities have leaded airline industry to tighten security measures. * Since the political situation in most major oil producing countries will stay unstable for the unpredicted future- the oil prices will stay a major problem for airlines. The fuel cost issue is getting worse by unpredictable currency exchange rate instability since aircraft fuel prices are denominate in US dollars.

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However, the weak dollar compared to pound sterling has had a positive impact for Ryanair. 2. 2 Economic forces In this factor business may be affected by: * Recession, which surprisingly is good for Ryanair traffic growth because competitors have traffic falls, and are increasing their prices. As recession forces millions of passengers to focus on price, more and more passengers are attracted to Ryanair’s low cost fares model, and switching their “brand loyality” to more affordable Ryanair. More customer means profitability, which lets to keep the prices low and continue to grow. Fuel price increases; at the moment, the oil prices are at their highest level for 22 years, which can affect the prices of aircraft fares. However, Ryanair chief executive Michael O’Leary states that they will be still offering all passengers on all routes the lowest prices guarantee and avoid fuel surcharges. 2. 3 Social forces For the social forces, the increasing travelling lifestyles are the factor that may affect the business of Ryanair. In this section the most important are the customers, thus company needs to provide even better: * Customer service The best punctuality ( Ryanair improved it by 88% in the last 12 months); * The fewest cancellations (see appendice 2). *

The least lost bags (see appendice 2). * Protection of the passengers * CCTV cameras * metal detectors for passengers * x-ray machines for baggage * Trace detectors, etc. Moreover, there is reliable software in Ryanair website, which let the customer to feel safe when buying the flight tickets, car hire, hotel accommodation, travel insurance and rail services, etc. http://www. ryanair. com/site/about/invest/docs/2008/Annual%20report%202008%20web. df 2. 4 Technological forces * In the past few years ? 23 million has been spent on IT programme to protect airlines against crime, cyber terrorism and vandalism. After 11th September 2001, the newest technologies are required in the airports, which cost loads of money for business and stress for the customers. Additionally, it is one of the reasons for delays, as baggage and passengers must be checked very carefully. However, without technologies such as body scanner, metal detector, x-ray machine, it would not be possible to ensure the security. SSL (Secure Socket Layer) technology is used to protect personal information and credit card details, then booking the tickets online. * Ryanair is investing in the latest aircraft and engine technologies in order to improve their impact on environment. They trying to reduce fuel emissions and noise. * All of Ryanair’s older Boeing 737-200 aircraft have now been replaced with brand new Boeing 737-800 Next Generation aircraft. * Technology called Mobile OnAir, provided by Swiss, allows passengers to use mobile access to voice and text communications on all of Ryanair flights.

This new technology has been launched in February, 2009. Passengers will be charged to make and receive voice calls and SMS messages via satellite broadband links. The connection between the plane and ground is carried by satellite operator Inmarsat. http://www. dailymail. co. uk/news/article-1149921/Ryanair-launches-Europes-flight-mobile-phone-service. html * Ryanair offers self-service payment terminals equipped with chip-and-PIN readers to allow the customers to purchase optional services before they fly.

In addition, it is expected to speed up the check-in processes. http://www. computing. co. uk/computing/news/2246111/ryanair-presses-ahead-payment 2. 5 Legal forces The tragedy of September 11th, 2001 marks the day that air travel permanently changed. After this date, the tighten security measure is affecting the business. Government had set up restricted rules for passengers in the airport, which includes: * Hand baggage restrictions; * Travelling with liquids – 100ml rule; * Prohibited items (Scissors, Lighters, Knives, etc. )

All passengers are strictly checked on metal detectors and new security body scanner equipments, which reveal any potential threatening items that passenger, may be carrying. Their bags are screened with x-ray machines, and approximately 50% of them are checked by security dogs. Moreover, some passenger’s rights take the pace in legal sector: * Disabled people are protected from discrimination and can rely on right help to assist their journey through any EU airport; * Passengers may be entitled to compensation (from € 125 to € 600) if denied boarding, long delays, or cancellations occurs.

They also may be entitled to receive assistance (catering, communications, and an overnight stay if necessary). http://ec. europa. eu/transport/air_portal/passenger_rights/doc/2008_apr_leaflet/apr_leaflet_en. pdf 2. 6 Environmental forces According to White Paper (2003), more must be done to decrease the environmental effects of aviation and to limit the number of people significantly affected by aircraft noise and waste. The world’s 16,000 commercial jet aircraft generate more than 60 million tonnes of carbon dioxide a year.

At the moment there is no value-added tax (VAT) for airline industry on jet fuel. Environmental campaigners in the UK are pushing the Government for changes in their policy and tax aircraft fuel. (key note, 2006, p13) However, Ryanair have been trying to be the most environmentally friendly and reduced fuel burn and CO2 emissions by 45% over the past 10 years. (see appendix) This has been achieved as follow: * Fuel emission: * By numerous fuel saving measures (including the use of the latest aircraft and engine technology, e. . , winglets); * Commercial measures aimed at maximising passenger numbers per flight in order to spread the fuel use and CO2 emissions over the greatest number of passengers (efficient seat configuration and high load factors). * Noise: * The function of modern technology (reduce the noise affected area at airports by 6. 5%); * The remote location of the majority of airports Ryanair operates from; * The absence of night operations; * Agreement with all local noise restrictions. * Waste: Ryanair does not offer “free” meals, drinks or newspapers to passengers, what should reduce large amounts of waste from food, packaging and newspapers as a result. These days Ryanair is the industry leader in terms of environmental competence and it is regularly working towards further improvements in this field. It thinks that taxing air transport will not have any effect on reducing greenhouse gas emissions. (http://www. ryanair. com/site/EN/about. php? page=About;amp;sec=environment) 3. Competitive Environment

Ryanair’s growth is driven by the widening gap between the guaranteed lowest fares, and the rising fares of most of their competitors, who have frequently increased fuel surcharges over the last year. 3. 1 The main competitors are: * Aer Lingus Group PIc (AL);They fly about 7 million passengers per year to 50 destinations in Ireland, the UK, the US and Europe. Following the financial crisis related to the September 11, 2001 terrorist attacks, AL applied a “survival plan”, which included a staff cut of over 2,000 employees, and sales of non-essential assets.

The airline also adopted a new lower fare strategy which has resulted in significant increases in revenue and profits. This step increased competitiveness for Ryanair, as low cost fares is its main strategic factor. * British Airways Plc (BA) is a very large, full-service airline based in Hammondsworth, England. Today, BA flies to 154 destinations in 75 countries with a fleet of 300 aircraft. Interestingly, the market cap of BA is slightly less than the market cap of Ryanair, a much smaller airline. British Airways provides high prices, what