Ryanair PESTEL Analysis | Business Teacher
Although exact details are unknown of those future regulations governing air traffic between the UK and other EU countries, in case agreements fail to ensure restriction-free flights between the UK and EU, this political outcome could reduce EU airlines access to the UK market (and vice versa, UK airlines would also lose their unrestricted access to the EU) (Aviation Voice, 2017). Ryanair is an airline registered in Ireland (Ryanair, 2017), however, as the airline maintains large bases in the UK, unfavourable Brexit outcomes could negatively influence not just Ryanair, but other low-cost airlines’ operations in the UK (Kilpatrik, 2017).
It is unavoidable to mention that in case a recession will occur in the UK after its complete leave from the EU, low-cost airlines’ earning potential in the UK market will decline (as there is a close correlation between economic performance and the demand for leisure travel) (Rodionova, 2017). However, it is not expected that the UK’s economic problems will notably influence the EU’s economic performance, so as long UK-based airlines are able to reposition its bases in the EU (to capture potential growth opportunities), the low-cost airline industry may be able to manage the Brexit-invoked economic uncertainty (Boffey, 2017).
Low-cost airlines’ expansion is mostly attributable to the growth in disposable income of the middle class and the accompanying lifestyle changes that characterise Generation Y travellers able to afford multiple short-trips each year (BCG, 2013). In contrast to previous generation travellers, generation Y fliers have completely different expectations: Millennials expect a high a level of customer service without having to pay a premium and generally value those airlines that offer advanced technological solutions to manage itineraries (BCG, 2013).
In reference to the social changes occurring in the airline industry, there is a growing evidence that only those airlines will survive that are able to integrate digital channels into their distribution and marketing strategies (Accenture, 2017). Past generations (e.g. Generation X) placed less emphasis on technology, however, for Generation Y travellers, technology is extremely important (Accenture, 2017). Generation Y travellers have the desire to remain constantly connected with their social environment, which suggests that airlines need to adopt a different digital communication strategy to reach out to their target audience (PWC, 2016). Moreover, the increased reliance on technology offers airlines an opportunity to gain a deeper understanding of customer behaviour by analysing customer data voluntarily shared on digital platforms (such as social media) (PWC, 2016).
The most recent concern for the industry is that as heat waves are becoming a frequent phenomenon (temperatures rising above aircraft maximum ground operations temperature), airlines may have to seek an alternative operations strategy to adjust to climate change (Perkins and Varinsky, 2017). Even if Ryanair is using a modern and fuel efficient aircraft fleet, there is a growing distress regarding low-cost airlines contribution to carbon emissions (Griffiths, 2015).
The legal challenge the European airline industry is facing revolves also around the Brexit referendum (FT.com, 2017). In addition to the political and the economic uncertainty of the UK, details about the future aviation laws governing UK flights (in the EU) are unknown (FT.com, 2017). In the case of the hard Brexit scenario, airlines with flights between the UK and EU countries will be subject to restrictions that could reduce the demand for air travel between the UK and the EU (Tovey, 2017). Ryanair’s recent commentary showed that suspending all flights between the UK and the EU is a well probable outcome if EU and UK decision makers will not reach legal consensus on this matter soon (based on Ryanair’s decision to gradually diversify from the UK, there is a prevailing pessimism in the industry, expecting the hard Brexit scenario) (Carroll and Topham, 2017).
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- Kilpatrik, R. (2017). U.K. Airlines Must Relocate After Brexit Or Lose European Routes. [online] Fortune.com. Available at: http://fortune.com/2017/03/23/ryanair-easyjet-europe-brexit-iag/ [Accessed 22 Jul. 2017].
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- Perkins, M. and Varinsky, D. (2017). Heat waves will keep more airplanes on the ground in coming years, new research suggests. [online] Business Insider. Available at: http://www.businessinsider.com/airplanes-grounded-heatwaves-climate-change-2017-7 [Accessed 22 Jul. 2017].
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