Budgeted Airlines In The Airline Industry Management Essay

Budgeted Airlines In The Airline Industry Management EssayThis report in-depth analyzes the europiuman sky way of life Industry and reports the ch eachenges the budgeted argumentation lane faces in the industry and especially for Ryanair. Here it shows how structure, brass, leadership, culture environment charge in enact to see Ryanairs determine and growth in the disordered hail grocery. It cl earlyish states the Ryanairs authoritative dodge and identifying its immense term outline. The Business Plan ranges from an industry analysis to an internal financial cap powerfulness. An integrate arrangement of the functioning of the company in terms of human and technical operations, leadership, customer relationship and financial structure.This material critically analyses the internal functioning to create possible strategic positioning and discus any approach changes of Ryanair for its improved sustainability. It refers its capability, structure, system, leadership, cul ture, people and environment in the confused cost europiuman market. The analysis has been through with(p) by development some study theories such as 7s matrix, balance score card, double loop learning of Ryanair, ansoff matrix and culture web.Accordingly, this material primarily analyses the current demarcation strategies of Ryanair to understand the nature of their operations. Subsequently, conducts a PESTEL analysis, Porters five forces and value chain analysis to understand the environment of Ryanair, drivers of profit in the industry at contribute and the future and financial analysis. In addition to balance score card analysis also has been done to understand finance situation in the setting of Ryanair and to evaluate its performance.Finally, this report de dissipate recommend the recommendations where its applicable. The analysis of this report was complete with the support of the case information provided and with industry related information from schoolman books , journals, websites and new(prenominal) publicly available auxiliary data sources.IntroductionRyanair is an Irish respiratory tract started its operation in 1985 competing in European budgeted air hose industry in the recent years. Ryanair is one of the most profitable and key players in the European budgeted airway market. (Refer supplement 1) depressed cost commerce mildew was intruded by the US biased southwest in early 1070s. In 1992 Ryanair was the first to introduce scurvy-cost business model in European market. Easyjet is the briny low-cost business model competitor for Ryanair in European market,The reduction of the cost is the center period for low-cost business model. Some of the innovative choice make by Ryanair to maintain low-cost, no-frills service atomic round 18 eliminating traditional in-flight supply and by that reducing labour-related cost, use of on-line booking system, connecting point to point network using secondary airport, comfortable but not sp acious seats by that increasing seating capacity, use of similar fleets.This report carries out detail submit of Ryanait by analyzing Ryanairs current system and the management of the schema. It recognizes how the business functions and operations be affecting the customer and leadership with their overall strategy.Critical success factor of Ryanair currently Ryanair is facing lot if problems especially in cost strategy but it over dumbfound from these problems by adding new strategies and grow up in market come to the fore. It uses variant strategies to have Ryanair alive and to competitive with competitors. It gets a convinced(p) competitive returns from competitors. Ryanair become the first largest low cost airline industry in Europe. deep Ryanair is a warded for punctuality. It keep up times when flies through countries. Ryanair adopt new strategies to grow in market place and use tactics to keep low cost for flying and remain to get profits. Ryan airs goal is to meet t he need of stumbleling places in low cost. Critical success factor are low cost, customer satisfaction with price, reliable and comfort service for customers.Ryanairs main critical success factor is to provide low cost. For that it eliminates in flight services. seating adjustment and drinks but for their target market they prefer on time facilities, frequent departure and seat reservation.Low cost carrier business modelThe Low cost airline concept first was used in America by Pacific Southwest Airline in 1949. Southwest is at present grown to become one of the largest profitable airlines in the United States. European history low cost airline model started in late 1990s. Low cost airline business model could be defined by the following three key elements. (Refer Appendix 2)Simple intersection point No in-flight catering and catering on request with extra payment. Plane with beiger capacity with narrow seat. Only angiotensin converting enzyme class without any seat allocation.P ositioning Price-conscious business passengers. senior racy frequency point-to-point traffic using secondary airport. Aggressive marketing and competition with all transport carriers (Refer Assignment 1 appendix 6, p.25 and Appendix 10, p. 29)Low operate cost Uniform fleet low maintenance cost, reduced crews training cost, low airport fees. Low wages, high gear usage of recourses and reapingivity, simple boarding performance reduces ground waiting, high percentage of internet advance reservation, reduced clearing time and no hub service.Ryanairs current strategyRyanair is an Irish airline competing in the low cost European airline industry. They are the most profitable and key players in the market. Ryanairs main objective to establish leading low-fare schedule passenger airline in the European market through continued improvements and expanded efficient low cost service.Low fareRyanairs low price policy join ons price-conscious untenanted and business travelers otherwise t hey would have used other mode of transport such as train, couch and cars. Ryanair sell one way air rag for the schedule service by eliminating minimum stay requirement.Customer satisfactionRyanair achieved grater customer satisfaction by reduced cancellation and few lost baggage canvass to other airlines. Achieve better punctuality by using less congested secondary airport.Regular point-to-point flights on short-haul routsRyanair provides regular point-to-point flights on short-haul routes around major populated centers by connecting secondary airport. This benefited higher rate of on time departure and faster turn around tine. Point-to-point non stop flying benefited Ryanair by way of cost of providing service for connecting passengers, baggage transfer and cost associated with transit passenger.Market segmentEarly entrance in France, Italy, Scandinavian low cost airline market creates more profit brand recognition in the Europe budgeted airline industry. The success of the comp any is being able to attract more passengers at the both ends of their routes. This creates a name for Ryanair stating that Europe first number one no frills airline. Ryanair identify it maket growth through ansoff matrix (Refer Appendix 10)Competitive advantageThe main competitors for Ryanair in the low cost market are carriers including easyJet, FlyBe and ThomsonFly. All they try to attract authorisation customers by lowering the tatter price. In early stage favorable relationship with airport operators helped Ryanairs aggressive price until EU commission ruling in 2004 (Refer. Assignment 1, Appendix 11, and page number 30). contravention with EU commission gives free publicity across the Europe continent. (Refer Appendix 7)Business functioningInternal resources of the business and its functioning are extremely prominent for the business to prosper. Ryanairs important function and how this will affect business decision explained in SWOT analysis(Refer Appendix 15, Assignment 1- Appendix 9.p 28)Employees and Technical operations. tender-hearted resources are one of the most important functions in an organization. Ryanair keep their staff more happy and motivated. This they do by introducing incentive scheme for all useable employees and partake option scheme which allow employees to participate for the success of overall company.Customer relation.Ryanair continues to offer no frills low fare service to keep the ticket rate at minimum level. Also Ryanair uses regional airports instead of national airport in order to keep the ticket price at last-place level and helped them for their punctuality due to less congested in the airport. Customers are looking for cheapest way of travelling hence any bad publicity does not affect sales figures.Profitability.Ryanair have consistently year by year increased its profitability with customer satisfaction by keeping low cost ticket pricing and comfort service to the customers. Ryanair announced profitability despite bad year for airline industry such as gulf war and an outbreak of SARS. (Refer Appendix 6) financial statement published in Ryanairs annual report and also profit in euro for the period 2005 2008 and projection for 2009, passenger metrical composition and average fare for 2007Less operating costs Ryanairs operating cost is the lowest analyze to other European airlines. It control major schedule airline operating cost such as aircraft equipment cost, personal productivity cost, customer service cost and airport intervention and access costAircraft equipment costRyanairs aircraft acquisition strategy is to purchase single type aircraft. In 1998 Ryanair has taken a decision to purchase Boeings latest generation aircraft Boeing 737-800 replacing Boeing 737-200A and starts to use from 2005 onwards. Purchase of aircraft from single manufacture benefited Ryanairs barraging power for the new aircraft and cost advantages from personal training, maintenance and purchase and storage of s pare parts. Also it has greater flexibility in terms of schedule crews and equipment.Personal productivityRyanair control their labor cost by continuously increasing its productivity with passing competitive work force. Ryanair pay productive-based incentives for employees including flight attendants for in-flight product sales and payments based on number of sectors and ours flown by pilots and cabin crews with limit of industry standard of maximum number of hours. Ryanair average salary per employee is high compare to its competitor easyjet, Lufthansa, British airways, Lberia and Acer Lingus.Customer service costRyanair has entered into competitive log term third party agreement for certain airport passenger, aircraft handling and ticketing and other services. Approximately 96% of the ticket sales through Ryanairs website and telephone and by this eliminating travel agent commission cost.Airport access chargesRyanairs unceasingly high volume of passenger traffic many of the air ports benefit them to favorable contracts with those airport for access their facilities.Booking Advantage on internetThe Ryanairs internet booking system Skylight reservation system allows internet users to access Ryanair host reservation system to make a reservation and to pay the confirmed reservation in real time. The company advertises heavily about reservation system though newspaper, radio and tele imaging As a result 94% of the reservation comes through the companys reservation system.Safety and quality maintenanceRyanairs management fully committed for the safety and quality maintenance to the aircrafts. The company operates latest Boeing 737-800 with additional safety features inherent in it. Also the company committed to hire and training pilots, cabin crews and maintenance staffs in accordance with highest European airline industry standards.In other(prenominal) 24 years Ryanairs operating history, it does not had any major incident injuring pilots or cabin crews or pa ssengers. Although Ryanair aggressively practice low cost model, it gives high importance for the aircraft safety, maintenance, training and quality assurance.Increasing operating results through ancillary servicesRyanair provides various ancillary passenger services connected to its main air passenger service such as in-flight sale of food, beverage and merchandise and also it provides through telephone reservation officers and Ryanairs internet system accommodation service, travel insurance and car rentals.Ryanairs corporeal strategyThe Ryanairs corporate strategy (Appendix 3) has been defined much advance and its main objective developed before it commence. Emerge of Ryanairs corporate strategy is the final objective is developed during the course its life. Ryanairs business visor, mission, main objective please. (Refer Assignment 1, Appendix 1 and p. 16-17)Ryanairs business strategyRyanairs business strategy is to offer very competitive affordable fare for the airline users to reach their destination in the European market.Ryanairs long term marketing plane and its positionRyanairs long term marketing plans please refer Appendix 2 and its position please refer (Assignment 1 and p. 8 Appendix 6.p 25)Porters competitive strategy model for low cost carrierPorters (1980) competitive strategy model (Appendix 5) describes that there are three types of strategies are used by business for their long term survival. They are cost leadership, differentiation strategy, and market share and market segmentation strategy. These strategies are measured along with business strategic scope and strategic strength.Stuck in the middleOVERROLL LOW COST LEADERSHIPFOCUSSED DIFFERENTIATIONCOST FOCUSBROAD DIFFERENTIATIONDifferentiationNarrowMarket apostrophizeLow costBroadRyanairs business strategic scopeRyanairs business strategic scope is to become number one low cost airline in the European market for cost conscious business and leisure travelers.Ryanairs business strategic sc opeRyanairs business strategic scope is to become number one low cost airline in the European market for cost conscious business and leisure travelers.Ryanairs business strategic strength.Ryanair was first Europe discount airline capitalized by the EU decision to deregulate the airline industry stating that any European airline can operate anywhere in the Europe Its aggressive pricing and grater customer satisfaction for the punctuality, reduced cancellation and few lost baggage compare to other airline. In 2005 it became market leader in the low cost airline market.Cost leadershipUse of secondary airport Ryanair did not fly to the major hub airport bur instead it uses secondary airport some distance away from the main airport for low airport access charges.Rapid turnaround Ryanair maximize use of aircraft by good turn around the aircraft within 25 minutesPoint-to-point routing Ryanair fly point-to-point and it avoid cost connected with passenger and baggage transferBoeing aircraft Single aircraft family the being 737. It palace big being aircraft order just after September 11 2001 benefiting purchases price advantage.Aviation fuel Major portion of fuel porches hedged hence increase in fuel price not affected to the company.In-flight service No free in-flight service such as free drink or snacks. No refund for no-shows.Staffs and overhead Ryanair staffs are non-union and pilots and cabin crews get low salary but compensated with other benefits.Differentiation strategyRyanairs operation provided several positive features for the passengers towards its punctuality, reduced cancellation, few lost baggage compare with other carriers. Passengers always were assured to reach their designation on time with their baggage. Many other revenue generating service such as travel insurance, car hire, couch and train ticket.Market share and market segmentation strategyRyanair has taken grater market share in the low cost airline business in the European continent and it be came market leader in that sector. (Ryanairs route map in Europe Refer appendix 8)Organizational StructureDIRECTORPaolo PietrogrndeCHAIRMAN OF THE BOARD David Bonder manDIRECTORJames OsborneDIRECTORKlaus KirchbergerDIRECTORMichael HorganDIRECTOREmmanuel FaberDIRECTORKyran McLaughlin charge OPERATIONSDavid O BrienCOMMERCIAL REVENUESFHUMAN RESOURCEEWPILOTRCENGINEERINGMichael HickeyCUSTOMER SERVICECaroline Green intelligent SECURITYJKCOOMichael CawleyCFOHoward MillarCEO(Source www.ryanair.com, last update February 14th 2010)This diagram shows the organizational structure for Ryanair. The airline is operated with the name of Ryanair Ltd. Subsidiary for this Darley Investment Ltd. In this organization all international dealing are done by Ryanair.com. Nature of this business is aircraft trading. These boards of directors are responsible for the strategic view and functions which are in Ryanair Ltd. Chairman is Michael OLeary and other directors responsible other activities such as audit , executive, remuneration, nomination and the air safety committee.leadership.Ryanair fight for its survival in early 1990s. In 1992 Ryanair introduced low cost no frills business model in Europe market under the leadership of Mr. Michael O Leary. Despite huge success Mr. Michael O Leary has come under both praise and criticism about his leadership and management style. Financial Times Magazine Mr. Tim Jeans argue that Mr. Michael O Leary genius in his ability motivate people with single-handedly transforming European air transport. Mr. O Leary leader ship style doses not fit rigidly into one style. His characteristic highly task oriented controlling cost, aircraft acquisition, and rout development. Also at the same time he is highly people oriented both with customers and people. His outspokenness has made him to expose into public-eye. EU commissioner for Belgium describes him in the Financial Times as irritating and arrogant Creaton (2004). But former and present staffs prized hi s leadership style in an hearing with Financial Times Magazine. (Refer Appendix 4)There are three main characteristic of leaders in an organization Finley (2000). They areLeader should have well-set held visionMr. Michael O Leary took the leadership of Ryanair with very clear vision to the model the carrier on Southwest Airline and to create low fare no frills carrier in Europe.Leader should be able to communicate the visionExternal communication concern Ryanair was well recognizing one of the first budgeted airline in Europe. Internal communication concern he motivated and created incredible energy among the people to achieve the desired objective.Leader should be able to convert the vision into reality.Certainly the vision has turned into reality Ryanair grown and created a record profit low cost no frills airline in the European market. purificationThe culture web describes the paradigm of an organization and physical manifestations of an organizational culture. (Johnson and sc hools, exploring corporate strategy, p.230) culture basically explained the organizational behaviors. Culture will include stories, symbols, system, structure, routines and rituals.(Refer appendix 11)Ryanairs pricing strategyRyanairs cost leadership is the backbone for its lower piecing strategy. Ryanair is the lowest cost in Europe and its 40% low compare to closet competitor in Europe. (Refer Appendix 6)Implementation of gapStrategic implementation is complex and time consuming but success of an organization lies on this stage. However good the business or corporate strategy is, it is off little value unless use (Hubbard R.C, 2008, pg 349). Therefore, during this phase, strategy makers should consider the question of who implements that strategy, what must be done and how the strategy is implemented (Fletcher, 2001, p.2). Hence, 7S framework has been applied to Ryanair to identify gaps the issues that should be addressed during implementation phase(Refer appendix diagram 9)Recom mendationRyanair continues to attract customers with heavy advertisement stating that they are not going to charge furl surcharge with the aim to keep the fare low. Davey (2006) states that the figures release by the Ryanair shows that its low cost formula is continue to work.Ryanair in order to increase the business travelers who needs punctuality, the carrier reduce the turnaround time from 30 minutes to 25 minutes by dropping there freightage service even they new that they are going to lose 500,000 per year However budgeted airlines continues to enjoy its boom with low cost and opening new routes in the European market.If there is drop in demand Ryanair would certainly suffer and they might have to change their strategy by offering drink vouchers and devising alliances with hotel assemblages in order to offer complete package and attract more people to its carrier. Also Ryanair should pay attention technology changes happening such as on line check in and would able them to cut their cost.Ryanairs innovating action creates future sustainability. In future if they found new routes reach places quick it will bring more tradition of getting more passengers for Ryanair. Ryanair for low cost uses secondary airport it will cause inconvenient for some customers to reach their place so they have to consider this point to get a solution for customers to reach their place easier.ConclusionOverall RYANAIR is in good position when compared to other players. The strategies implemented seem to be more effective since they have helped to match RYANAIR with its external environment. The adoptability flexibility of RYANAIR to the environmental changes have contributed to the success of RYANAIR.Ryanair seems to be using their strategy sensibly which work for them. They aware the environment and understand the importance of monitoring and they are the first to come into low-cost market in Europe.However they constantly monitor the environment and any change they should be ready to change their strategy.The flexibility adoptability to environmental changes was possible especially because of the value adding factors RYANAIR has focused. The value chain of RYANAIR has been intentional to deliver the low cost concept by emphasizing only in value adding activities and by eliminating non value adding activities such as eliminating catering.In my point of view I believe RYANAIR was successful in managing the strategic management process by matching itself to its external environment. However, it does not have a major market share as the leader though it has beaten the market leader in many areas. Therefore, I suggest following recommendations for RYANAIR to achieve its potential improve its market share.ReferencesCavendish, Camilla, A policy that pretends we can all fly on the cheap is a policy that wont fly, The Times, 5 January 2006Doganis, R., 2001, The Airlines Business in the Twenty-first Century, Routledge, LondonFletcher J (2003) .Strategic man agement Study guide and plan Edith Cowan University Perth AustraliaHubbard, G. Rice, J. Beamish, P. 2008 Strategic management Thinking analysis action 3rd edition Pearson nurture AustraliaLynch, Richard (2000), Corporate scheme 2nd Ed. Pearson Education Ltd, ISBN 0-273-64303-7Miller A, (1998), Strategic Management, McGraw Hill, 3rd Edition. New York. Study Guide Strategic ManagementRyanair industry details retrieved on the 21st may 2010 fromwww.ryanair.comViljoen, J. Dann, S. 4th edition (2003). Strategic Management, Frenchs Forest, New South Wales Pearson Education Pty Ltd.AppendixAppendix 1Ryanairs IntroductionRyanair started its operation in 1985. In the first year more than 5,000 passengers traveled between South Eastern Ireland and London. The company expanded continuously and 600, 000 passengers traveled per year in 14 aircrafts by 1989.Past four years the cost increased substantially and ends up with loss of 20 million.In 1990 the current CEO Mr. Michael OLeary took over the management and conducted major changes in the company. Ryanair followed the low cost-low frills concept and reduces the routes from 19 to 5 by 1991. The company increased the fleet to 21 over the next 6 years and remarkable increase in passenger traveled in Ryanair due to its low pricing policy. European regulation restricted Ryanair to take advantage to implement low pricing policy.Ryanair took full advantage in 1997 open new routes in Continental Europe due to deregulation of European Union air transportation regulation. Ryanair completed 160 routes by 2001 and hubs established around the continent in London, Glasgow, Brussels, Frankfort, Milan, Now Ryanair is the most profitable and key players in the European budget airline market.Appendix 2Low cost carrier business model (Source MERCER management consulting 2002)Appendix 3COPORATE STRETEGY.Corporate ParentingParenting strategyPortfolio AnalysisBCG hyaloplasm directing StrategyGrowthStabilityRetrenchmentCorporate strategy basically explains about the direction of the firm. It go through in three ways. They are as followsDirectional strategyThis strategy includes three points which are growth, stability and retrenchment. Growth explains expansion and growth of the company. Here we are going to look at the growth berth of Ryanair. Stability explains ryanairs did not change its current activities. Retrenchment explains strategies reduce the companys level of activities.Portfolio Ill explain about the BCG Matrix. BCG Matrix is a best analysis part to analyzing and managing the performance of a business unit within the organization. It developed to identify the growth rate of an industry by classifying its business unit. This BCG matrix relies on lifecycle and examine curveRelative market ShareLowHighDOGSCASH COWSPROBLEM CHILDRENSTARSIndustry Growth Rate%HighLowThis BCG Matrix growth strategy explains the growth of the company. If we looked at this case study Ryanair is in stars position that means high industry growth rate and having high congeneric market share.COPORATE LEVELLowHighCost reduceNeed for local responsivenessHighLowGlobal strategyExport strategyMulti domestic strategyTransactional strategyRyanair is moving from merchandise strategy to transactional strategy. Export strategy which explains products are standard but can varied, market is usually main market, operation location done in home market, and strategy control is done by home. Here coordination level and local responsiveness is low.Transactional strategy explains the product are same as export strategy, market means all markets, operation location done in two way organizational structure, strategy control varies with a product are within global framework and coordination level as well as local responsive level is high.Ryanair moves from export strategy to transactional strategy to adopt more strategies to survive in the world. Ryanair evaluate on No Frills segment, low fare cost leadership, ancillary revenu e into focus differentiation and adopting transactional strategy and no fares relationship.Appendix 4Leadership vs. ManagementLeadership and management are two terms used to define a group behavior in a professional setting. Leadership and management are inter-connected and inter-dependent concepts.LeadershipManagementSetting up new goals, vision or planninga new strategyContorting the organizing to achieverealistic goals and objectivesManaging the group properlyHelp the leaders to achieve the goalson collective vision of the groupSeeks effectiveness do the right thingSeeks efficiency do things rightProvides direction to the groupEnforces controlThrives on opportunityLives for the job well doneMake people go down in history as greatmen to inspire generations.Only behavioral aspects that alterwith environment and requirementsLeaders are made, not bornAccording to Great Man theory, Leaders are born and not made. In my point of view leader are made and some or all of the following he lps them to become a great leader, their background, education, knowledge and experience, and their career path. If we further explain leadership as anyone in a position whose success requires the support of others can play the role of a leader. Leaders have ability to discuss, communicate, influence, and control others to do things is absolutely inborn to everything you achieve in life.Of course, everyone you meet has different values, opinions, attitudes, beliefs, cultural values, work habits, goals, ambitions, and dreams. Successful leader should have leadership traits. When you become capable in your job or skill, then you become skillful at understanding the motivations and behaviors of other people.Michael OLeary deeply believes leaders are made not born. Mr. Herb Kelleher is the one born with leadership quality the founder of original budgeted airline, Southwest Airline in the United States Mr. Michael OLeary is made leader who flowed budgeted Southwest Airline model in the European marketLeadership SkillsGetting and giving informationGetting and giving information is probably number one competency required from leaders. Leaders should be communicating effectively and must be able to exchange information effectively and accurately.In Ryanair Michael OLeary is the leader who gives decision to others to do. He has the charismatic power to control all its staff and work under him.Understanding the needs and characteristics of the classAs the group plans and carries out activities, Michael OLeary learns more about the individuals needs and characteristics.Knowing and understanding the resources of the GroupKnowing group peoples skills, attitudes, backgrounds and experience and to use an effective technique for bring a group together and creating commitment to common goals.Controlling the GroupA group exists for a purpose. As a leader exerts control, he needs to balances to get the jo