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The Analysis And Description Of The Business Environment Of Ryanair

The Business Environment Of Ryanair

Introduction

Ryanair Limited is a low-cost airline service provider located in Dublin in Ireland, and in 2013, it was the largest airline company in Europe based on the number of customers (Boscamp 2013). The business was founded by Christopher Ryan, Liam Lonergan, and Tony Ryan in 1985, using a small-leased plane. At the time, the British Airways and the Aer Lingus had dominated the European market. In 1986, the company established a second route from Dublin to Luton in an attempt to break the dominance of the two giants. The company faced challenges ranging from economic, political, as well as the legal ones, but the proprietors had never lost hope, and thus their success was a result of hard work and determination. The firm faced restrictions imposed by the European Union, as well as the Irish government but it continued surviving, and between 1992 and 1999, it had procured 45 jets. The removal of the protectionist restrictions in the European Union in 1997 was a blessing to the company (Ryanair n.d.). In 2000, online booking managed to minimize costs of tickets by eliminating travel agencies’ commissions. By 2005, the company had served more customers than the ones of the British Airways (Ryanair n.d.). By 2010, the business had expanded operations to other cities in Bulgaria and the United States (Ryanair n.d.). The firm currently owns more than 300 jets that serve more than 30 countries (Irish Aviation Authority 2015).

Analysis and Description of the Type of Business of Ryanair

Apart from transporting passengers and luggage, the company also engages in a variety of business activities, which include advertisement, publication, and corporate social responsibility as described below. Passenger transportation and cargo handling are the most crucial activities, which require more than 300 Boeing 737-800 jets (Ireland Aviation Authority 2015). Although its operations started in 1985 on a single route, the ambition to bring to an end the domination of the British Airways and the Aer Lingus inspired the firm’s growth. The carrier executes more than 1800 flights on a daily basis from its 76 bases located in various countries and facilitates the movement of people and cargo in 200 destinations (Ryanair 2015). The company employs more than 10,000 professional workers to facilitate and streamline service delivery. To attract more clients, the management introduced online reservations to cut travel agency charges and eliminated fuel surcharges to offer travelers low-cost tickets as well as allow the use of mobile phones on board. To impress customers, the firm allows them to revise their tickets to alter travel routes and time. The business also observes punctuality and brags about few cases of the cancelation of flights and lost luggage (Barrett 2004).

The company also advertises by the use of the outside of planes as well as the inside. The management allows client businesses to brand the outer part of their planes to display the intended message to passengers and other people in more than 150 airports where the firm operates (Ryanair 2015). Inside advertisement entails the branding of overhead compartments. The company further allows client companies to contact passengers one-on-one for a fee. Another form of advertisement is the issuance of cards bearing the information about local and international products of the client provided to travelers boarding the plane. Additionally, the company publishes monthly magazines to avail information to its passengers about travel destinations, real estate and property guides, recreational activities, and insurance among others on behalf of producers of such goods/services (Barrett 2004).

The firm also engages in giving back to the community through corporate social responsibility. In 2000 the management sponsored the weather report in the Sky News Program while, in 2007, the company assisted the Angel’s Quest, a charity for children in Ireland, to raise 75,000 euros. In 2009, another sizeable amount of money was donated to the Dublin Simon Community that is a charity for the homeless in Ireland. In 2010, the company established a charity calendar for the cabin crew that gave donations to a UK-based charity entitled “When You Wish upon a Star.” In 2011, Tafel, a German-based charity, also received funds from the organization. The beneficiary in 2012 was the DEBRA, an Irish charity, while, in 2013, it was a turn for the TVN Foundation in Poland, and the latest was the Teenage Cancer Trust in the United Kingdom (Ryanair n.d.).

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Economic, Legal and Political Environment of Ryanair

The economic, political, and legal environment of the organization was very turbulent as depicted by numerous challenges that the management faced right from the foundation of their firm in 1985. The economic environment of the airline is very tricky due to competition caused by other firms as well as economic challenges. By the time the organization was making its first trip, the British Airways and the Aer Lingus had been influential in the aviation industry and offered expensive services. When Ryanair started directly competing with them, they also lowered their charges. The infant organization suffered losses, especially due to the failure of the club its management had established for frequent travelers as well as the boomeranging of the business class, and the only solution was scraping the two developments. By 1990, losses caused by the price competition with the two giants had been 20 million euros (Ryanair n.d.). However, from 1991, the company started making profits, and by 1995, it had already overtaken the former champions. The Gulf War of 1991 also posed a challenge to the operations of the company by disrupting the flow of traffic and reducing the number of travelers. In 1997, the firm transformed into a public company, and people bought shares in abundance. What followed was an increase in the price of selling shares, and thus it gave shareholders good returns. However, between 2010 and 2013, the company experienced hardships due to the global economic decline that led to skyrocketing fuel prices, but the management restrained from hiking the price of tickets.

The political environment was also hostile, especially due to the Gulf War of 1991 that contributed to a decline in the number of travelers and lowered the turnover of the business. The 2001 attack in the New York City of the United States also led to increased fuel prices that inflicted losses on the airline. The management of Ryanair was also involved in internal pressures of workers who wanted to join unions against the will of the former. At times, conflicts ended up in court, causing problems to administrators of the firm. In 2015, there was a boycott in the Danish city of Copenhagen organized by workers unions (Jensen 2015). The human rights groups in London also waged a scathing attack on the firm due to alleged mishandling of physically challenged passengers.

The legal environment was also hectic due to instances of restrictions, court cases as well as encounters with law enforcement officers. Before 1997, the airline business had been subject to operation regulations within the European Union and such laws hindered free trade and competition among firms. Ryanair faced restrictions even from the government of Ireland that favored the British Airways and the Aer Lingus, and thus operations were problematic. In 1999, the European Union abolished duty-free travels within the region increasing the cost of operations for the business (Ryanair n.d.). In 2002, managers were involved in a legal battle with the German-based Lufthansa airline, whereby the latter opposed price competition, although the court ruled for the former. In 2008, there was yet another case in a UK court, and the issue was a European Union directive issued in 2004 regarding the Charleroi Agreement. In 2014, French police officers raided Ryanair offices in Marseille under the accusation of illegal employment practices (Oltermann & Wilsher 2014). An outcome of a court case between the company and labor unions in Denmark forced managers to consider quitting operations in the country. The company also experienced another court case with customers based on its aggressive advertisement and another court case in London regarding the provision of wheelchairs to physically challenged passengers. However, despite these unfavorable economic, political and legal challenges, Ryanair has faced, it remains a sustainable low-cost carrier and a serious competitor to other big airlines.

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Competitors of Ryanair

The major business rivals of the airline were the British Airways and the Aer Lingus. The former is one of the largest carriers in the United Kingdom based in the waterside near the Heathrow Airport while the latter is the local, national airline in Ireland operating from Dublin. Ryanair began facing a threat of the two airlines since its foundation in 1985, when the two former giants had established themselves in the European market charging 209 Euros for travel tickets. Ryanair decided to charge 99 Euros, and this made the business attract 82,000 passengers (Ryanair n.d.). The airline began directly competing with the two companies through the introduction of the Dublin-Luton route, and this was a major boost in the number of commuters. The two airlines were a great threat to Ryanair because the latter earned losses between 1986 and 1990 due to excessive price competition. However, some tactical strategies employed by the management to attract clients were lowering costs, proper care for luggage, and the frequency of trips among others (Ryanair n.d.).

By 1997, the Ryanair investment had performed well in the Dublin-London route and was competitive regarding punctuality with a percentage of 76.61, followed by Aer Lingus, British Midland, and British Airways respectively (Ryanair n.d.). In 2001, the airline established a base in Brussels, and it faced competition from Sabena and the Brussels Seventeen Airport. Upon landing in Frankfurt in 2002, the business encountered resistance from Lufthansa, and this issue ended up in court, although the juries ruled for Ryanair. In the same year, the airline emerged victorious over some competitors in terms of time keeping, as well as fewer cancelations and cases of lost luggage. Competitors followed the firm in this order: Easy Jet, Air France, Alitalia, Iberia, British Airways, Lufthansa, SAS and Aer Lingus respectively (Ryanair n.d.).

In 2002, the company acquired Buzz that was a subsidiary of the UK-based KLM introduced in 1999 to compete with other low-cost firms (Ryanair n.d.). However, Easy Jet, a cheap carrier based in the Luton Airport in London, still poses as a major threat to the Ryanair investment, although it is still behind (Ryanair n.d.).