Strategic is a set of action which is design to achieve a particular task or goal. Strategic planning is a systematic process where a people make a decision about the future outcomes. Strategic planning is a right direction to lead organization from where it is now and where would be in five to ten years.
Ryan air:-
Introduction:-
Ryan air was established in 1985 and it is very old and very successful low cost air line of Europe. Actually Ryan air was an independent air line in inland for the first time. In 2001 most people believed that Ryan air was similar to wool mart and southwest air line of the Europe. Ryan air is one of the most popular airlines company in world with 37 bases and 950+ low fares cost routes across 26 countries with 150 destination currently Ryan air have 210 Boeing 737-800 aircraft and company further ordered 102 new aircraft. Currently about 7000 people are employed with Ryan air and are expected that 66 million people carry by Ryan air current fiscal year.
http://www.ryanair.com/en/about
Ryan air basic effort is a low price air line:-
Ryan air started offering a low price with no frills service between London and Ireland. Catlin, Declan and Shane Ryan three brothers where the basic share holder of the Ryan air. They started this air line with the share capital of just 1 pound and only with 25 members of the staff. Their father Toney Ryan who was the chair man of Guinness peat aviation (GPA) air craft leasing company landed first air plane to Ryan air which was fifteen setter turbo commuter plane which as a tiny operating aircraft.
Ryan air said that they were ready to grow their strategy and return more share to share holder if it fails to make a deal to purchase new planes from Boeing before and the end of the year.
Ryan air strategy and long term goals:-
Ryan air objective is to establish itself in Europe leading low fare air lines by improving and expanding its offers to their low fare services. Ryan air this strategy was to increase passengers while they maintain and cutting the cost and operating efficiencies. The main points of Ryan air strategy are as follows.
Low fares:-
Ryan air low fares are design to enhance the demand from fare conscious people and business traveler who might have used another form of transportation instead of flying in the plain. Ryan air sells their seats on one way basis to minimize the stay requirement from all travel schedule services. Ryan air competitors usually do not operate one way pricing policy so a direct comparison with other air line is not possible. In July 2004 Ryan air introduced a fair promotion offering 1 millions seats on certain routes for just 0.99 euro which excluded government taxes and passenger service charge and they offered a similar promote scheme in august 2004 by offering 900000 seats on some routes for just point 0.90.
Customer service:-
Ryan air delivered the best customer service performance in its peer group. Ryan air has fewer last bags and cancellation than all of the rest air line in Europe. Ryan air achieved this by purely focusing strongly on the execution of the service by operating from less busy air ports.
Point to point and short routes:-
Ryan air provided point to point flight on short routes to less busy air ports in and round major population center and destination. At the end of 31 March 2004 Ryan air flew for 91 miles and approximate 1.2 hours flight durations they provided frequent service because of short haul routes.
Ryan air chooses secondary air ports with convenient transport to major cities and regional air port because they are less busy than the main air port. And because of that they had on time departure and rapid turn round time, less terminal delay and more competitive air port access and handling cost.
Cost cut:-
Ryan air management done a good job in cutting their cost by reducing and controlling basic for expenses involved in running major air line
Air craft equipment cost.
Personal productivity.
Customer service cost.
Air port access and handling cost.
Air craft equipment cost:-
Ryan air basic strategy for controlling air craft equipment cost was to buy used air craft. From 1994 to 1998 Ryan air purchase used Boeing 737 -200A air craft that was at the date of purchase with an average age of 23 years. Later in 1998 Ryan air bought next generation air craft which was Boeing 737-800S and they will continuous significantly increase the size of its fleet. Management believed that the turns of Boeing contract a very favourable to Ryan air.
ii. Personal productivity:-
Ryan air control its labour cost by improving the productivity of its productive work force. At the year end of March 31 2004 productivity improvement was 21 present on the year ended march 31 2003.
iii. Customer service cost:-
Ryan air agreed on commutative terms with third party contractors at some air port for passenger and air craft handling ticketing and some other services that can be more cost effective provided by third party. They attempted to obtain fewer rates for such services by negotiating multiyear contract on fixed prices or linked to periodic inflation. Their own internet booking facility allows them to eliminate the travel agent commission.
iv. Air port access and handling cost:-
Ryan air control their air port access and service charges by a using those air ports which offers competitive rates because of that Ryan air had a record of delivering high volume passenger growth at many of such air ports which allow favourable contracts on competitive rates to access their facility. Ryan air further reduced its air port charge by using less expensive gates when possible and outdoor boarding rather than more expensive jet ways.
Long term goals:-
Their long term objective to have the large amount routes and low fares of European air lines. Ryan air is strongly focusing on up holding a high level of growth. 88% of European market is covered by 2 major companies, easy jet and Ryan air for a low cost carrier. Ryan air success to this date is partly sue to day fast pace which industry is developing and as this industry will not grow as fast as it should in future so Ryan air have to seek other ways to sustained their top performance in the industry. The main long term objectives are as fallows
Increase existing routes:-
Ryan air average flights per day compare to easy jet a very low this mean that Ryan air is losing their business on such customer who need more faxable time table so to increase their business and to capture to more market they have to focused on increasing their flights on existing routes.
New routes:-
There are so many viable routes still not used by low fare air lines. Ryan air can open new routes where the competition is more expansive the cost it attract customer with the cheaper no frill option from to 2002 there is 33% increase in routes from 2001.
Operating base:-
Ryan air must expand their operating basis and net work.
Expand in central and eastern Europe:-
Eastern Europe is becoming a tourist point of interest from all over the Europe and for business traveller due to expansion of European Union. Ryan air however does not cover most of these popular destination, some other low cost air lines have already set up their business over their but still not all the routes a covered so there is still a strong opportunity for a competitive business in this area.
Expand in north Africa:-
There are also very popular destination for both tourist and North African people who have migrated to Europe. Air lines currently dominate North Africa but there is not low cost air line so by offering low cost flight to these destinations Ryan air can easily capture this market effectively. Ryan air purpose should be to seek and negotiate with potential air port in these countries.
Reducing cost:-
Ryan air has the lowest cost compare to its competitors but they can still reduce their cost by reducing their operating expenses.
Sky bus introduction and strategy:-
Introduction:-
Sky bus was a new low cost air line in the industry by early 1990 but wasn’t successful until year later. Sky bus in 2004 modelled their business after Ryan air they manage to develop and ultra low cost no frills business modal and started flying in May 2007 after receiving approval from FAA and us department of transportation.
Strategy:-
Sky bus started their business modal identical to Ryan air and their ticket were sold for as low as 10 dollar one way and passengers have to pay government taxes and extra, like preferred seating food and drink etc. Sky bus introduced no of strategy to keep a cost down. Their automatic system like ticketing check in at the air port cut the cost of employee travel agent commission and lots of other operational expenses.
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Everything was online they dint had a phone number, most of the time they used secondary air port to keep plains running on time. The biggest expense for any air line is its fleet sky bus fleet was currently around 7 air bus A319S with 65 air craft ordered for the price of 3.7 billons to be delivered over 12 years time. Sky bus provided nonstop point to point flights across the country.
Sky bus to increase to profitability they started generating from on flight sales of goods food drinks and clothing and lots of different item. There are following points of strategy
Low fares:-
Sky bus started offering ticket as low as 10 dollar one way. Their prices started increase when more ticket was sold for that flight. They mention that there were 10 seats for 10 dollar. Sky bus some of the lees popular routes they were give in a way ticket for 20.08 dollar plus taxes and fees to bring in the New Year. Sky bus ticket prices for the rest of fares were accepted to be around half of the price of the other air lines but these fares didn’t include any taxes and other charges, the cheapest round trip for an adult was almost 40 dollar.
Extra fees:-
European low cost carrier charged extra fees almost everything. Hand caries were free but checked bags had an additional charge. First 2 baggages were less than 50 pound with an additional bag the charge of 50 dollar per bag.
Cost reduction:-
In order to minimize the operating cost sky bus purchased uniform equipment which saved the training cost for the employee. Sky bus used secondary air port which or less congested and these air ports had less access fee charges. And other way of cost reduction was they ticket booking was online they didn’t even had a phone number for customer service that eliminating the cost of reservation call centre and travel agent commission.
Revenue:-
Cutting the cost was priority for sky bus but the revenue was their primary focus, their air craft were out fitted with gift shops selling almost everything on food to clothing and toiletries. They advertise inside and outside the plane which included or had been tray table carpets and body exterior etc.
Comparison and outcomes of Ryan air and sky bus:-
Ryan air owned 103 air planes across 27 countries with 127 destinations, financial asset of the firm is around 4634.2 millions. Ryan air employee’s number is 35000. Ryan air also received award for profitability. Ryan air was succeeded in provided low fare to the passenger and also gain profit. They also got more profit in the shape revenue from ancillary services.
Sky bus was short leaved domestic low fare air line that modelled itself after Ryan air this air line however failed in the air due to rising fuel cost and a bad down fall in the economy in just one year time. Sky bus Capet their fare their lows by charging extra fee for extra amities like food drink priority etc. This privately held company raised 160 million dollar in starter from different investor.
Sky bus was notorious for poor customer relation, sky bus hoped to be the low cost air line in America by offering one way ticket for just 10 dollar (not included taxes and fees). Sky bus offered 17 routes to different destination by using secondary air port.
Swot analysis of Ryan air:-
]
strength
weakness
Marketing strategy.
Strong brand awareness and reputation.
Strong aggressive pricing strategy.
Low fare cost advantage in European air line.
First mover advantage.
Better prices compare to its competitors.
Online booking reducing the operational cost.
Uniform fleet saved the training cost.
On time flights by using secondary and less congested air port.
Modernized fleet which saved more cost on employees.
Short turnaround time.
Point to point short haul flights.
Low on overheads.
Limited expansion possibility.
Increasing air port access fee which can increase the operational cost.
Poor human resources.
Distance of secondary air port from destination.
Ordered air craft used more fuel.
Increasing fuel prices.
Customer loyalty.
Low cost competitor in the market,
Poor customer service.
High turnaround time can be more costly because it will take more fuel and more emission of carbon dioxide.
Applying more taxes can be highly effective on companies’ reputation.
Secondary air port being away from the destination for customer.
Opportunity:-
Ryan air can benefit from deregulation of air line industry in the European market.
New countries in the European Union or very big opportunity for Ryan air to expand their business in such country.
There would be more routes opening to holiday resorts and business destination.
Ryan airs other opportunity to expand their business in Asia to capture more market.
People starting moving from Middle East country to Europe because of UN stay able environment that will increase more business for Ryan air.
Benefits from less exposure to geo political risks.
Economy slow down actually helped Ryan air because of change of corporate culture steeling customer from higher carrier as customer seats low fare air lines.
There is still a potential to capture more market in Europe.
Threats:-
The fuel prices depend on the oil market.
Depended on economic cycle.
Entrance of new low fare competitor in the European market.
Court decision can be difficult for Ryan air to expand their business and it will raise the cost in the futures.
There is limited growth in south European market.
Using of order air plane can be more costly.
Ryan air and easy jet a neck to neck with each other that will limit the growth and routes can become a battle field.
Increase in air traffic will increase air port charges.
Rising duty charges for fuel can limit its growth.
Environmental charges can reduce its potential growth and price stimulation.
Porter five forces of Ryan air:-
Bargaining power of suppliers:-
There is only one main supplier for Ryan air (Boeing).
There are only to possible suppliers of plane (Boeing and air bus).
Switching from one supplier to another is highly cost effective.
Prices of air line fuel are directly related to de cost of oil.
Secondary air ports have less bargaining power.
Bigger air ports have more bargaining power but Ryan air policy is try and avoid these air ports.
Bargaining power of customer:-
Customers are highly price conscious.
Switching from Ryan air line to another air line for a customer is relatively simple because it’s all online.
Customer always knows about the cost of services.
Customers have no brand loyalty.
New entrant:-
There are some barriers to entry.
Need to have high capital investment.
Limited slots make it difficult to find suitable air ports.
Price war on existing routes.
Need to have low cost base.
Threat of substitute:-
Customers can change air lines at any time.
There is no close customer’s relationship.
Switching from one air line to another is quite simple.
Other kinds of transport like trains ferries cars etc.
Competitive rivalry:-
Air line market is highly competitive.
Low cost policy can be copied easily.
Less routes available because there is high competition between the low cost air lines.
If there is competition on the routes and Ryan air have a big pressure on prices therefore less profitability.
There is not much difference in the services, price is the only factor.
Swot analysis of sky bus:-
Strength
Weakness
A least low fare air line in Europe.
No frill business.
Short haul route.
Potential expansion in business.
Product awareness.
Selling on board.
Skilled professional.
Increasing fuel pricing only one supplier for the air plane.
Maintains and operational cost rising.
Entrance of new low fare competitors.
Opportunity and threats:-
opportunity
Threat
Opportunity to grow in new European Union country.
Short turnaround time.
Opportunity to grow in US market to capture more market.
Increasing fuel prices.
Increasing operational expenses.
Fewer profit margins.
Entrance of new competitors.
Conclusion:-
Ryan air has proved in the air line industry that how the air line will have to perform and the management factors have to focus to stay strong in low cost market. The air line industry is very complex so management should be very care full about making any decision. Because any bad decision can lead to a high cost that can affect the business.
Ryan air operated a low cost, short haul, point to point routes. Ryan air operates 74 air craft’s including 41 Boeing next generation air craft’s. Ryan air used secondary air port which are less congested and had a low air port access fee.
Sky bus air line begins flying from port Columbus air port on 22 May 2007. Sky bus marketed their self as ultra low fare carriers by selling their tickets as low as 10 dollar per ticket. Sky bus business was no frill business that means they charge for almost everything like priority seating food or drink etc.
Just over ten month time sky bus made its final flight; the air line which becomes famous for its 10 dollar fare had quite flying. This decision was made after the board meeting and it’s been said that company has lost millions of dollar. The companies CEO plain this on the rising fuel pricing and bad down fall in the economy sky bus started off well and their attracted more customer in summer but sky bus hit rough patch during winter. The air lines have to cancel more than dozen flights on Christmas and the day after. Sky bus tried to overcome the combination rising the fuel pricing and down fall in the economy and because of that company’s directors announced that our financial position is not good so we had no choice but to cease the operations.
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