...Assignment 1: Case Study European Airline Industry Strategic Management Contents |Main Body |4-10 | |1 Introduction |4-5 | |2 Summary of macro-environment analysis |5-7 | |3 Summary of industry environment analysis |7-8 | |4 Other critical factors for the airline industry |8-9 | |5 Future directions/recommendations |9-10 | | | | |Appendices |11-26 | |1 Macro-environment analysis |11-16 | |2 Industry environment analysis |17-26 | Reference List 27 Main Body 1. Introduction The European airline industry is a vigorous industry with changing trends that relate to the overall European economy. Traditionally, the European airline industry was mainly comprised of full-service carriers, such as Lufthansa and British Airways. Nevertheless, this situation changed quite swiftly (Datta & Chakravarty n.d.). Government deregulations freed European airline markets from restrictions...
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...Budget airline industry has been profitable during last decade, and particularly Ryanair, as the largest European budget airline company has been vital in this area. Its success in past, issuses nowadays and importantly the sustainablility has drawn significant attention and offered a great oppourtunity for research. This case study will analysis the budget airline through its business model, evironment and industry and finally focus on Ryanair’s strategy position in order to explore its sustainability in future. The framework is briefly illustrated by following figure. Figure 1: Brief Framework of this Case Study The budget airline business model The first company in history to suggest the budget airline business model to the world was Southwest Airlines (SWA) in Texas, USA. At the beginning of 1970s, this company have launched first flights between three major cities in Texas i.e. Houston, Dallas and San Antonio at a price of 20 dollars, which was initiative at that time. It marked itself as budget airline and initiates a business model allowing it to offer scheduled flights service at a very low fare. It would focus on short-distance flights of typically 600 km or one hour with high traffic efficiency. Many strategic approaches of budget airline business model’s operations differ from the more traditional of full service airlines model. 6 main factors can be identified, which are illustrated in the table below: Budget airline | Full service airlines | ...
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...The European Airline industry has gone through a lot in the past century since the establishment of the first public airline after the World War I. Until a few decades ago most of these airlines were national and at least partially state owned, and most of the European countries had at least one, with direct government control. Significant change in this only came in the 1990’s with the appearance of the low cost airlines. While the business model existed for some time (first such in 1973 US), the appearance of these in the European market needed the liberalization brought forth by the EU, implementing the „Freedoms of the air” in three stages. In 1997 the first LCC (Low Cost Carrier), the Ryanair began its operation, and in a few years a few more followed, which gave the national and network airlines a new problem to the existing economic problem, shrinking market and others such as 9/11. By today the changes in the past two decades have shifted and diversified the industry, which was once a mature and to some level declining in structure. The new regulations, companies, investors and consumers have brought new life, the industry once again mature with fragmented characteristics. The ideal tool for the assessment of the airlines industry is Michael Porter’s five force model. It aims to find and demonstrate the forces in the microenvironment which influence the industry, internal and external as well. Threat of new entrants (barriers to entry) • High capital investment ˇ ...
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...Airline Cost Performance IATA ECONOMICS BRIEFING No 5 An analysis of the cost base of leading network airlines versus no-frills, low-cost airlines (LCCs) IATA Economics Briefing No 5: AIRLINE COST PERFORMANCE Mark Smyth Brian Pearce IATA, July 2006 Contents 00 Executive Summary 01 Introduction 02 The Low-Cost Challenge 03 Airline Cost Performance for US Airlines 04 Airline Cost Performance for European Airlines 05 Airline Cost Performance in Asia and South America 06 The Cost Efficiency Challenge 07 Service Quality – The Other Side of the Equation 08 Conclusions 09 Foreword by Giovanni Bisignani page 03 page 04 page 10 page 12 page 16 page 22 page 28 page 32 page 36 page 40 Appendix A Appendix B 00 Foreword Every airline is now a lower-cost airline. The worst financial crisis in the industry’s history over the last five years has forced all carriers to achieve cost efficiencies and higher productivity if they are to survive. Significant progress has been made in reducing non-fuel costs and in improving the efficiency of fuel use, but the challenge is on-going and central to the future prosperity of the industry. While network airlines have made significant progress in restructuring their cost base, they are often faced with a moving target. Low barriers to entry to the industry, combined with national or regional deregulation, have seen 1 new or restructured no-frills, low-cost operators...
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...MGT 6753 Industry Analysis Low-Cost Carriers in Europe Julian Geiger, Michael Schlottke, Marcus Schrade MGT 6753 Industry Analysis Low-cost carriers in Europe Industry Overview The market for low-cost carriers first emerged in the US with Pacific Southwest Airlines, pioneering the concept in 1949. The European market did not really develop until aviation deregulation came into effect in the 1990’s, making flights affordable for a wider range of customers. Building on the inclining demand for cheap flights mainly by private individuals (average annual growth of 9.4% for leisure travelers between 1996 and 2003 [11], Figure 2), the industry has experienced rapid growth since then. Most notably, Irish airline Ryanair, formed in 1990, and British company EasyJet, formed in 1995, were able to shape the European market (Figure 3). Germanwings and Air Berlin are additional major players in the low-cost carriers (LCC) market throughout Europe. PEST Analysis The evolvement of the LCC industry in Europe was only possible through one major political decision in 1997 – the deregulation of the European flight market. Before, the market for flights was largely controlled by the governments of European countries, trying to secure their respective national carrier’s market share. This led to high prices for European flights – airfares were roughly twice as much as those for comparable distances in the U.S. [1]. After lifting most restrictions and enabling European carriers...
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...company’s products and services. Mission, vision and values of the airline will be also explained. It evaluate company’s current strategy and the management of that strategy. It also gives a brief evaluation of Ryanair’s financial structure as well as an environmental analysis of the European airline industry and how this affects Ryanair. Each section of the following report represent the key findings. Introduction to company section includes Ryanair’s background, mission and vision statements, Corporate Social Responsibility policy, company’s stakeholders. External environment section include SWOT analysis. This analysis explain Internal (Strengthens and Weaknesses) and External (Opportunities and Threats) factors. Furthermore, PEST analyse is described. In order to understand company’s profitability in relevance to the competitors, the Porter’s Five Forces framework is used. In Financial sector the turnover , profit margins, operating profit, current ratio, solvency ratio, gearing ratio and the comparability of these during 2006-2008 period is explained. Using the Ansoft’s growth matrix the main strategic direction that Ryanair follow was indentified. The methods of development such as low cost, no- frills model, finding new markets for existing products, opening new routes are outlined and analysed. Conclusions and recommendations was explained using a SPACE . Introduction to Company 4.1 The largest low-fare European company Ryanair was set up in 1985 by Cristy and Tony Ryan...
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...How did the deregulation of air transportation in Europe foster entrepreneurial behavior and innovation in the European airline industry over the last twenty years? Case studies: SAS Airline & Ryanair Master Thesis in Entrepreneurship and Dynamic Business Contexts Spring 2007 Supervisor: Håkan Bohman Entrepreneurship Master Program Authors: Gilles Helterlin and Nuno Ramalho Acknowledgements We would like to express our gratitude to all who have contributed to the realization of this Master Thesis. A warm thank to our supervisor, Håkan Bohman from USBE (Umeå School of Business), for his guidance, his precious help and his advises during the last months. To Mr. Lundvall, from LFV (Luftfartsverket), Mr. Valinger from Scandinavian Airline and Mr. Wilsberg from SAS Braathens, Jessica Eriksson and Thomas Pettersson from USBE, thank you for your availability, willingness in answering our questions and for their so precious collaboration with interviews, comments and suggestions. Thank you also Sweden for the wonderful moments we have spent here. We will never forget your nature (your elks), your cold winter (-30°C), your long nights in winter and your short nights in late spring!! It has been a great experience and adventure up there in Northern Sweden!! We will miss you… Finally we would like to thank particularly the Studentexpedition for its kindness, without forgetting our family and friends (from Sweden, France, Portugal and Greece) for their everlasting daily support...
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...Easyjet Airline was established in 1995 by Sir Stelios Haji-Ioannou a Greek Cypriot as part of EasyGroup Holdings Ltd. He envisaged it as a low cost airline which could impact on the existing domestic market in the UK which was at the time dominated by large British companies such as British Airways and British Midland. The Company started with two leased airplanes and began operating from London Luton to Glasgow and Edinburgh In 1996 they began operating from Luton to Amsterdam and now in 2014, operate on 633 routes across more than 30 countries and own 217 Airbus aircraft. They employ over 8,000 people including 2,000 pilots and 4,500+ cabin crew and in 2013 they flew over 60 million passengers They now claim that “over 300 million people within a one hour drive of an EasyJet airport” (Easyjet About Us 2013) The obvious move for the airline for further growth may now be outside of Europe and India may be the best market to consider. PESTLE Analysis Political/Legal Up to April 1997 the European Airline Market was regulated strictly and each county controlled their own airline companies. After 1997 and deregulation the European market opened up for carriers and subsequently for example an Irish low cost carrier like Ryan Air was allowed to operate between two other European countries. Since then European routes have increased by140% ( Ingdahl W. “Flying has never been safer” Spiked 19 03 2014) This was followed by the EU/USA Open Skies Agreement allowing any airline of either...
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...Master’s thesis M.Sc. in EU Business & Law An analysis of the European low fare airline industry - with focus on Ryanair Student: Thomas C. Sørensen Student number: 256487 Academic advisor: Philipp Schröder Aarhus School of Business September 13, 2005 1 Table of contents 1. Introduction 1.1. Preface 6 1.2. Research problem 6 1.3. Problem formulation 7 1.4. Delimitation 7 2. Science and methodology approach 2.1. Approaches to science 2.1.1. Ontology 2.1.1.1. Objectivism 2.1.1.2. Constructivism 2.1.2. Epismotology 2.1.2.1. Positivism 2.1.2.2. Hermeneutics 9 9 9 9 10 10 10 2.2. Methodology 2.2.1. Types of research 2.2.2. Types of data 2.2.2.1. Quantitative data 2.2.2.2. Qualitative data 2.2.2.3. Primary and secondary data 11 12 13 13 13 14 2.5 Reliability and validity 15 3. Theoretical framework 3.1. The structure of this thesis 16 3.2. Theory on strategy and competitive advantage 3.2.1. The Positioning School 3.1.1.1. Theory on Porter´s Five Forces model 3.2.1.2. Theory of Generic Strategies 3.2.2. The Resource-based School 3.2.2.1. Theory on SWOT analysis 18 24 20 23 25 27 4. The low fare airline business model 4.1. Introduction 28 4.2. Differences between the LFA model and the FSA model 4.2.1. The service factor 29 29 2 4.2.2. Turnaround times 4.2.3. Homogenous fleet 4.2.4. Point-to-point travel vs hub-and-spoke travel 4.2.5. Higher seat density 4.2...
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... Seite 1/53 REPORT ABOUT EASYJET Analyses about Industry, Market, Competition and chosen strategy Reinhard Fellner Wien, am 09.06.2002 C:\Users\rf\Documents\A R C H I V 311013\F 160108\B820_Strategy\TMA\TMA01\TMA01_B820rf.doc I R M E N R E I N H A R D 301109\MBA FILES Druck: 20.11.13, 22:42 REPORT ABOUT EASYJET Seite 2/53 Executive Summary Deregulation has seriously changed the environment and structure of airline industry. Out of STEP analysis I have identified the following ain issues: Deregulation will stimulate competition, but also market growth Lower prices will cause focus on costs Focus on security measures will increase costs There is no need for added values in connection with prestige Analysing the airline industry by Porter’s “Five Forces” I have stated: Big Player and/or Alliances fight a price war, often using a second brand (Buzz, etc.) Big Players have not identified and reacted on the change in environment Few structural changes to support the need of cost effectiveness und to bring them in line with new customer requirements Because of the very static picture I have supported that analysis by BCG strategic model: BCG's Strategic Enviroments Matrix Many Source of Advantage FRAGMENTED Airline Industry SPECIALIZATION 2nd brand for Budget Segment STALEMATE Budget Airlines VOLUME Few Small Size of Advantage Big Global airlines which come from the „Fragmented Segment“ with a 2nd brand...
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...Introduction and History 2. The Mission Statement of easyJet 3. Competitive Analysis (Porters five competitive forces) 4. Marketing Mix 5. SWOT Analysis 5.1 Internal Analysis – Strengths and Weaknesses 5.2 External Analysis – Opportunities and Threats 6. Situational Analysis 7. PEST Analysis (Marketing Plan) 8. Conclusion 8.1. Strategic Issues facing the airline Industry 8.2. easyJet’s future 9. Appendices 1. Introduction and History A successful example of a European no frills airline is easyJet. Stelios Haji-Ioannou (Greek) founded the company in 1995. It is based on the low-cost, no-frills model of the US carrier Southwest. The concept of easyJet is based on the belief that demands for short-haul air transport is price elastic. That means, if prices for flights are being reduced, more people will fly. Traditionally airline concepts are based on the assumption that airline traffic grows in line with the economy and that cutting prices will only lead to a decrease in revenues. With the introduction of the ‘no-nonsense’ concept to the European market, after its deregulation in 1992, easyJet has proven this theory wrong and goes from strength to strength by actually increasing the size of the market and more recently by taking away passengers from the majors (see www.easyjet.com for passenger figures, financial data and employee statistics). Today, it offers 125 routes from 39 European Airports (see www.easyjet.com for route launch dates), with Luton, Liverpool...
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...Ryanair Strategic Analysis Introduction Ryanair is one of the biggest airlines of Europe that offers the lowest fares, and has set up 729 courses from 32 bases. It is the largest airline globally with regard to passengers internationally, but not in terms of profits. A significant growth has continued since its inception Ryanair, which was approved by the European aviation industry liberalization in 1997 for him. The Stansted Airport in London his main base but the headquarters of the company are located in Ireland at Dublin Airport. In the year 2009, The Michael O'Leary leader of the body began to provide technology for mobile phones in their plane. This allows passengers to use their phones on airplanes, but at higher cost. Ryanair has tried to buy Aer Lingus twice, in 2006 and 2008, but failed both times. This paper discusses the Ryanair's sustainability strategy and how it impacted the company in the near-term future. Ryan air's Current Strategy The purpose of Ryan Air is to establish itself as the leading low-fare airline in Europe, willing to travel by improving and strengthening the offers by starting its low fares services. Ryanair aims to offer preferential tariffs to develop expanded traffic, while at the same time maintaining the relentless focus on cost containment and operational efficiency. Ryanair offers cornerstone of a sense, therefore, the elimination of the smallest of all obligations of the host of tourist services to Ryanair, despite the tariff...
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...The current economic climate has had a direct impact on the Irish airline industry. People have less disposable income and as a result Dublin airport has witnessed a decline in passenger numbers since 2008. Figures released by the DAA show a significant decline in passengers from 23.5 million in 2008 to 20.5 million in 2009; a decrease of 13% and it s expected that numbers will fall even further in 2010 to 19 million passengers. Ireland is one of the few European countries to impose a 10 travel tax on tourist travelling to Ireland. This along with the 40% increase in airport charges (which is being used to pay for Terminal 2) is considered to be one of the main reasons in the decline of seat capacity which dropped by 140,000 in April 2010 alone and the fall in Irish air traffic by 13% so far this year. Growth has returned to countries which have ditched this travel tax and reduced its airport charges. According to Canadian energy economist Jeff Rubin the maximum an airline company can pay for a barrel is $80 dollars, any higher and the company cannot make a profit, $80 dollars is the breakeven point. Oil prices have been steadily rising since January 2009 and economists have predicted that this year the price of oil will rise to $80 per barrel which could prove detrimental to the profitability of the airline industry. In April 2010 the eruption of an Icelandic volcano caused Irish air traffic to come to a halt. The closure of Irish airspace caused a sharp decline in trips to...
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...Case study: EasyJet: The Web’s favorite airline Introduction In modern world, easyJet is becoming one of leading airline companies in Europe. When people want to buy cheapest airline tickets, they always consider easyJet. This essay will have three sections. Firstly, analyze the structure of the industry in which easyJet competes. Secondly, talk about the industry attractive after later 1990s. Lastly, some evidence will be provided to suggest that easyJet has competitive advantage. Structure of the industry analysis - five forces model The business structure was influenced by industry competition; the industry competition depends on five basic competitive forces which were threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products or service and rivalry among existing firms (porter, 1980). Threat of new entrant: EasyJet airline belongs to airline industry, new entrants want to go into this industry need enough capital and the equipments in this industry were all expense. In order to build up an airline company, the founder needs to have enough money to buy or lease some planes. So the new entrants have a high cost of entry. In addition, the new potential entrants also need some extra capital to pay for the losses due to less of experience. Low-cost tickets in EasyJet were the significant competitive advantage. The new entrants were hard to exceed EasyJet. So the threat of new entrant has low competitive to EasyJet...
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...Economic Analysis on Budget Airline—Taking Ryanair as an example . 1. Introduction Ryanair Ltd. is a pioneered Irish low-cost airline, located in Dublin, Ireland. In 2013, Ryanair was both the largest European airline by scheduled passengers carried, and the busiest international airline by passenger numbers, according to its annual report in 2013. From its official website, data shows that Ryanair operates more than 1,600 daily flights from 72 bases, connecting 184 destinations in 30 countries and operating a fleet of more than 300 new Boeing 737-800 aircraft. The latest news about Ryanair could be found on its corporate website (http://corporate.ryanair.com), saying that “Ryanair has recently announced firm orders for a further 280 new Boeing 737 aircraft, as well as options for 100 more Boeing 737 MAX 200s, which will enable Ryanair to lower fares and grow traffic from 90m this year to over 150m p.a. in 2024. Ryanair currently has a team of more than 9,500 highly skilled aviation professionals, and has an industry leading 30-year safety record”. It is a very typical case for economic analysis. The tragic news about the wreckage of Airasia QZ8501 hit the world on 28th Dec 2014, which put the budget airline in the front of the storm again since it is not the first news about airline crash in 2014. Budget airline is elastic in terms of the speed to repose to the demand change and it makes efforts to sell out its all seat using differentiated...
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