Ryanair and its low cost flights in Europe

Marketing plan II

  Marketing plan  II

TABLE OF CONTENTS

  Page  

  Executive Summary  I

1  Introduction: Ryan Introduction: Ryanair Holdings plc  1

2  Situation Analysis  1

2.1  Analysis of the internal environment  1

2.2  Analysis of the customer environment  3

2.3  Analysis of the external environment  3

3  SWOT Analysis  4

4  Marketing Goal and Objectives  5

5  Marketing Strategies  6

5.1  Target customer profile  6

5.2  Product  6

5.3  Price  7

5.4  Place and Process  7

5.5  Integrating Marketing Communications (Promotion)  7

5.6  People and Physical Evidence  9

6  Marketing Implementation  9

7  Projected Profit and Loss Statement  10

8  Evaluation and Control  13

9  Conclusion  14

  List of references  15

  Marketing plan  II

  Appendices  

Appendix 1  : Ryanair’s strategy ( www ryanair com )  17

Appendix 2  : Characteristics of the major competitors compared to Ryanair’s  21

Appendix 3  : Current resources and structural issues of Ryanair  22

Appendix 4  : Executive Summary of the macroenvironmental analysis  24

Appendix 5  : SWOT Ryanair in more detail  25

Appendix 6  : Customer segmentation of low cost airlines in general  27

Appendix 7  : Major European low cost carrier  28

Appendix 8  : Construction of Ryanair’s Value Chain  29

Appendix 9  : Cost advantage of low cost carriers  30

Appendix 10  : Evaluation, Control and counter measures  31

Appendix 11  : Porter’s five forces for Ryanair (extra)  33

Marketing plan 1

1 Introduction: Ryan Introduction: Ryanair Holdings plc

Company Background: Ryanair Holdings operates the first of all founded low cost scheduled passenger airlines in Europe. Starting in 1985 Ryanair followed the example of Southwest Airlines, introduced the low cost concept in Europe and became market leader in the low-cost airline market by consequently saving costs. The company is headquartered in Dublin, Ireland, employs about 4,200 people, operates with a fleet size of 120 Boeing 737-800, carries approximately 35 Mio passengers a year and had a turnover of 1,692.5 Mio € in 2006 with a net profitability of about 10 % (Ryanair 2007, pp.2-3).

Mission Statement: Ryanair will become Europe’s most profitable lowest cost airline by rolling out our proven ‘low-fare-no-frills’ service in all markets in which we operate, to the benefit of our passengers, people, and shareholders (Ryanair Report, 1997).

‘Ryanair’s objective is to firmly establish itself as Europe’s leading low-fares scheduled passenger airline through continued improvements and expanded offerings of its low-fare service.’ (Ryanair 2007, Strategy, pp.1-4, see Appendix 1).

2 Situation Analysis

2.1 Analysis of the internal environment

Current Performance

Ryanair, with its 35 Mio passengers in 2006, is the market leader in the intra-European low-cost airline market - closed-packed with Easyjet and followed by Air Berlin. Appendix 2 gives a detailed overview by a comparison of the three major competitors. Ryanair’s profitability remains surpassing on a high level of around 20 %, while its competitors only reach 6% and less (Arthur D Little 2004, pp.7-8). The following table compares the latest financial and operational results of Ryanair, Easyjet and Air Berlin, whereas the Positioning-Portfolio illustrates Ryanair’s pure low cost strategy.

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Table 1: Comparison of financial results and operations 2006

Source: Own compilation from web sites of airlines

Market Positioning on the European Airline Market:

Current resources and structural issues

Ryanair works with a tight and compact organizational structure and with a clear strategy. Its main strength is the big financial reserves it has earned since years, which is estimated on 2 billion Euros (International Herald Tribune 2006). These savings and the airline’s profitability enable it to survive in a crisis or compete in price fights. This economical advantages result from its learning curve in aggressively optimizing production costs. In this regard Ryanair has kept its cost low also because of outsourcing services (see also Appendix 8 “Value chain”) to specialty operators and aggressively behaving towards suppliers like ground handling or airports. A very detailed description of “resources and structural issues” is attached as Appendix 2.

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2.2 Analysis of the customer environment

Ryanair’s main target customers are people within Europe who mostly travel for private purpose, for example, who visit friends and relatives ¹ go on city-sightseeing trips. They are price-sensitive with a lower income level or other preferences and less willing to pay for the add-on services onboard. Flying has developed to be a daily commodity like going by bus. ² On the other side nowadays even business travelers use low cost carriers like Ryanair to save travel expenses. An increasing part of the customers purchase their flight tickets either on the airline’s website on their own rather than they authorize travel agency to book for them.

2.3 Analysis of the external environment

As long as the European political situation stays stable and the economy continues to grow, air traffic will increase simultaneous with a high rate of 7% - meanwhile the purchasing power is good and people want to spend their money. Additionally, people become more price-conscious in their consumption, which increases competition in the market, whereof Ryanair as a costeffective operator profits from. Furthermore Ryanair uses the Internet as new technological advancement to reduce its distribution costs. ³ Besides the proceeding liberalization of the aviation market, the Europeans become environmentally conscious, thus the European Commission counteracts by integrating the airlines flying in or to Europe into the existing EU-ETS ⁴ . However, this measurement would decelerate its economic growth and lead to higher ticket prices. Indeed, the sustained high level of the oil price is the biggest cost factor of an airline, but Ryanair with its much better and more effective cost structure can compensate this fact in competition to other airlines.

¹ Visiting friends and relatives are so-called VFR-travelers

² Beside the growing demand for air travel generated by a ulation, falling ticket prices and an increasing customer acceptance for flying create more demand for air travel (Mercer growing pop 2002)

³ Over 90% of all seats on Ryanair flights are sold over the Internet, making Ryanair one of Europe’s biggest Internet retailers (Binggeli & Pompeo 2002, p.89).

⁴ EU-ETS (=EU Emission Trading System)

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3 SWOT Analysis

Ryanair has an exceptional capability of optimizing their production cost efficiency and there-

fore maintains the leading position among the European low cost carriers. The only weakness

that has to be stressed out is its concentration on small regional airports, which may result in a

reduced ability to be a focus for certain customer groups. However, this can be interpreted as

⁵ LCC = Low Cost Carrier

⁶ Experts expect a market adjustment in the low-cost airline sector and a so-called “winner takes it all”-effect, whe-

reat the big players Ryanair, Easyjet and Air Berlin will survive due to its size and financial power (Groß and Schröder 2005). Several acquisitions support this impression of a market consolidation: Easyjet acquired Go in

2002; Ryanair bought Buzz in 2003 and big shares of Aer Lingus in 2006; and Air Berlin absorbed DBA in 2006

and LTU in March 2007.