SWOT Analysis of Ryanair | Business Teacher
Ryanair was the first airline established in Europe following the low-cost airline business model, hence the organisation has a large amount of accumulated expertise in the industry (Creaton, 2008). It is also the largest airline in Europe, transporting more passengers than any other airline in the region. This implies that Ryanair has a strong presence in most European markets, which is a kind defence against competing firms (Reuters, 2017). Due to its large size, the organisation is able to exploit economies of scale and scope that keep ticket prices low (Creaton, 2008). The airline maintains an extensive online ticket reservation system through which customers could manage their itineraries without relying on a travel agent that translates into further cost savings (Ludgren, 2015). The organisation’s stable financial performance (Ryanair, 2016) enables growth in new markets and to eliminate competition through predatory pricing. Finally, as Ryanair is a large airline (often the largest airlines at many airports), it enjoys a strong bargaining power against its suppliers, which s an additional strategically important area to control expenses (The Irish Times, 2014).
Despite the fact that Ryanair is among the most successful low-cost airlines in the world, its cost conscious focus created a series of problems. First of all, even if Ryanair has been able to grow each year since its establishment, its reputation is far from being favourable in most of its markets served – Ryanair is frequently associated with poor customer service, tricky service agreements to increase ancillary revenues (e.g. ambiguous baggage policies) and unfair pricing practices that mislead customers (as shown by the number of advertising litigations Ryanair has faced so far) (HuffPost UK, 2017). Whilst sensitivity to seasonal fluctuations and economic performance is rather the weakness of the low-cost airline industry in general, as low-cost airlines are primarily chosen by leisure travellers, any sudden change in the demand (e.g. in the aftermath of the European terror attacks) could influence Ryanair’s earnings across its markets (Marketrealist.com, 2017). Ryanair is not diversified into other complementary segments of the aviation industry (e.g. cargo or maintenance), which increases the airline’s exposure to low-cost travel demand volatility. Ryanair has a strong market presence in the UK that exposes the airlines to Brexit risks, however, the recent Ryanair annual report emphasised that the airline will pivot its growth away from UK markets to focus on continental Europe to combat this weakness (Ryanair, 2016).
Apart from the Brexit uncertainty, Ryanair possesses a variety of opportunities to sustain its growth. The massive aircraft orders (to be delivered over the next ten years) enable Ryanair to strengthen its market position in Europe while simultaneously reducing its environmental impact and fuel consumption through the utilisation of state-of-the-art aircraft (a critical success factor in the low-cost airline industry) (Farrell, 2014). Further to this, while the feasibility of long-haul low-cost flights is debated, analysts suggest that the demand for transatlantic long-haul flights could increase in the future; currently, this market is dominated by traditional airlines with a higher cost structure than airlines following the low-cost business model, so there might be unexploited growth opportunities for Ryanair (Airlineratings.com, 2017). Finally, Ryanair has implemented a companywide programme to improve its customer service and perception that is another opportunity to outperform rival firms in in the increasingly competitive low-cost airline industry in Europe (consistent with Generation Y travellers’ demand for quality customer service) (Ryanair, 2017).
Contrary to Ryanair’s ambitious growth plan, there are certain external factors that the organisation cannot control (and reasonably predict), such as fuel prices, currency movements (particularly the pound’s exchange rate against the euro) and any external event that influence the demand for air travel (e.g. terror threat or an economic recession) (Wyman, 2016).
- Reuters (2017). Ryanair seizes Lufthansa’s crown as Europe’s biggest airline by passengers. [online] Reuters UK. Available at: http://uk.reuters.com/article/uk-lufthansa-traffic-idUKKBN14U1P4 [Accessed 22 Jul. 2017].
- Rodionova, Z. (2017). Ryanair is cutting back on flights from the UK after Brexit vote. [online] The Independent. Available at: http://www.independent.co.uk/news/business/news/ryanair-flights-brexit-eu-referendum-easyjet-british-airways-fares-prices-a7154366.html [Accessed 22 Jul. 2017].
- Ryanair (2016). Annual Report. [online] Available at: https://investor.ryanair.com/wp-content/uploads/2016/07/Ryanair-Annual-Report-FY16.pdf [Accessed 22 Jul. 2017].
- Ryanair (2017). History of Ryanair | Ryanair’s Corporate Website. [online] Corporate.ryanair.com. Available at: http://corporate.ryanair.com/about-us/history-of-ryanair/ [Accessed 22 Jul. 2017].
- The Irish Times. (2014). Ryanair in €17bn deal for 200 Boeing aircraft. [online] Available at: https://www.irishtimes.com/business/transport-and-tourism/ryanair-in-17bn-deal-for-200-boeing-aircraft-1.1922102 [Accessed 22 Jul. 2017].
- Tovey, A. (2017). Aerospace industry warns against ‘hard Brexit’. [online] The Telegraph. Available at: http://www.telegraph.co.uk/business/2017/06/14/aerospace-industry-warns-against-hard-brexit/ [Accessed 22 Jul. 2017].
- Wyman, O. (2016). Airline Economic Analysis 2016-2017. [online] Oliverwyman.com. Available at: http://www.oliverwyman.com/our-expertise/insights/2017/jan/airline-economic-analysis-2016-2017.html [Accessed 25 Jul. 2017].