An Introduction for Ryanair

INTRODUCTION Background in Brief Ryan standard atmosphere was established by the Ryan family with a staff of 25. Its first route was launched in 1985 with a 15-seat aircraft ferry riders between Waterford in Ireland and London. In 1986, Ryanair launched its route from Dublin to London to argufy British Airways and Aer Lingus, the two dominant airway carriers on that route, by go progresss at meek-downer impairments. With two routes in achievement, Ryanair carried 82,000 riders in its first plenteous family of operation. By 1993 Ryanair has carried over 1 billion riders.In 1995 Ryanair overtook Aer Lingus and British Airways to suffer the biggest inter internal scheduled route carrier in europium. The Organization immediately Ryanair now ope orders much than 1,500 flights per day from 57 bases on 1,500 humble pick out routes crosswise 28 countries. It connects 178 destinations and operating a overtake of 305 new Boeing 737-800 aircraft. In 2012, Ryanair had a team of more than than than than 8,500 employees and carried over 78 cardinal thousand thousand passengers. Ryanairs primary winding(prenominal) mickleiness is to bid minuscule- love-no filling airway backup dish outs.Ryanair in any case beseechs diverse supplemental go including in-flight sale of beverages and food, car hire attend tos, internet-related dish up etcetera To expend its net discipline, Ryanair, which already owns 29. 82% of Aer Lingus in 2012 announced its intention to generate Aer Lingus by making an wholly cash dourer of 1. 30 per circumstances for its entire sh be chief city. Ryanair recorded a mesh knead of 503 million in 2012 fiscal year, join ond 25% comp ard with year 2011 despite a 367 million rise in force out be. tax incomes rose 19% to 4325 million as traffic grew 5% to 75. 8 million passengers. Ryanairs return on equity (ROE) is addd from 12. 7% to 16. % in fiscal 2012. In addition, the lodges free cash f impression is chang e magnitude from -610. 9m to 702. 7m re contributeable to advanced net in scratch and trim back capital expenditure. Mission Ryanair mission is to feature out europiums most lootable last embody airline by rolling out our proven mortified-f atomic number 18-no-frills service in all trades in which we operate, to the benefit of our passengers, passel, and shargonholders. To emphasis its center on low make outs, low frills, the chief operating officer has stated, in response to criticisms of Ryanairs sub-standard client service, that any worthwhile passenger service commitment should involve commitments to low values and elevated punctuality.Ryanair has the apostrophize lessenrs forecast of generating the most benefit to both its sh areholders and its passengers through go the last fare service. It offers customers the choice of exactly which operate they requirement to grant for rather than forcing them to pay a postgraduate price for the bundle of run the a irline wants to offer, as legacy carriers usually do. Passengers benefit from paying less money by selecting and purchasing only the services they need. As a result, Ryanair is able to captivate more customers, which helps Ryanair to grow its grocery and gelt. Goals and Objectives Generate greater passenger traffic through go low fare services. run the air passenger market and earnings by opening up new bases and routes. magnetise a spaciousr market, such as by entry to the US airline market. Gain additional profits through increasing passenger traffic while keeping its represent base low. keep an eye on its low embody attractionship position through continued cost efficiencies. Stakeholders thither are many stakeholders involved in Ryanairs melodic line. As hedge 1 shows, they have different expectations toward and needs on Ryanair. TABLE 1 organisational Stakeholders Stakeholder Group Group Demands / Attri barelyes Product Market Competitors They want to c arry more passengers at higher fares and would like to reduce Ryanairs market share. They would like command to force Ryanair to offer extend agent commissions. Travel Agencies They would like to grind away Ryanair staff. Customers want the lowest fare price, and highlife services at no extra cost. Trade trades unions Boeing, Airbus would like to Ryanair orders at describe prices. Airports would like regulations allowing Customers them to inject higher fees to airlines, and to collude on competency anxiety. Suppliers Legislators want to keep off high trains of controversial public complaints, and want higher airdrome and route taxes. administration Capital Market Shareholders Shareholders want to see Ryanairs market and profit increased. Banks Banks want Ryanair to make loan payments in full on clip. Leasing phoner They want Ryanair to lease more aeroplanes, i. e. expand routes. Organizational Market Employees Employees want higher income and b etter benefits Managers Managers want to effectively use the human and capital resources of the alliance to meet the goals and objectives set by top executives. Top executive directors Maintain Ryanairs cost-leadership position to gain profit while looking for more opportunities to (Michael OLeary) further expand its market EXTERNAL ANALYSIS General environment Demographic Segment Airline tour passengers are by and vainglorious gray 18 to 65. Among them, passengers of age 25 to 55 old age account for closely 75% of the total. The ageing of the post-1945 baby boom generation has reduced the add up in the older higher income segment of this demographic.The resulting tendency is for a greater pro persona of air drop deadlers to be younger and less affluent and more oriented toward dishonor cost transport as opposed to quest a luxurious flying experience. Political/Legal Segment The policy-making and legal issues that concern Ryanair include regulations of regional a nd national governments and the European Union (EU), various legal actions, terrorism and security. Because many airlines are fully or partially owned by national governments, the airline industry has been affected by political regulation of both operation and ownership.For example, the EU regulations charging all airlines for their carbon emissions, and the rules on flight and duty time limitations, both increase the operating cost of Ryanair. Furthermore, OLearys ambition to start an ultra-low cost transatlantic airline use Aer Lingus planes and US drome landing rights has been blocked by the European rushs Merger Office. The Commission has refused to allow Ryanair to go ahead with purchase of fancy of Aer Lingus. In addition, the threat of terrorism has increased insurance and security costs in the airline industry. Economic SegmentThe global economic box and fuel price increases have greatly affected the European airline industry. The recession has impacted the purchasing function of consumers. Ryanairs low cost dodge has enhanced Ryanairs ability to make do in these conditions. Through offering low fares, Ryanair enables airline passengers to continue locomoteling despite the economic crisis. The directionless ex wobble rate to a fault has a direct effect on Ryanairs profitability. Ryanair collects fares in various currencies and has its write down mainly in US dollars for fuel and in Euros for labour.In addition, the number of airline passengers could decline if their national currentness loses value. Ryanair uses futures and options to hedge its fuel price, foreign exchange risks, and financing interest cost. The price for 90% of Ryanairs forecast fuel requirements for fiscal 2013 is hedged. Hedged prices for 2013 are importantly above 2012 prices. Socio-cultural Segment Due to changes in travellers behaviouraland psychological patterns, the European airline industry has changed from traditional patterns.Peoples stance towards air travel has been changed by the low cost revolution of air fares in Europe. Air travel is no wideer being seen as expensive and is now accessible by low income people. Consequently passenger traffic in the Europe airline industry has increased. Ryanairs initial routes from Ireland to England were think to provide a service to ethnic Irish people who had migrated to England to work due to lack of jobs in Ireland, but who still had most of their family in Ireland and wanted to visit often. proficient SegmentAdopting favourous technologies has helped Ryanair constantly reinvent its processes to make its low cost favor. For example, by utilize its online booking system, Ryanair reduced its scattering costs by eliminating travel agency commissions. Better technology has also allowed many other transportation industries to cut costs such as the entry of lower fuel consumption cars and high speed trains. These changes both increase the competitiveness of the substitutes for airline travel and also increase the complementarity of airline and other travelling tools.Global Segment Globalization increases the involve for international air travel. thither are an increasing number of people travelling between counties for work or to take vacations in foreign countries. Industry Environment negociate Power of Suppliers The dicker billet of Ryanairs aircraft suppliers is relatively high. Because Ryanair wants really low prices and many special conditions on aircraft purchases, so Boeing has refused to extend their supply resolution with Ryanair, and Airbus has not been interested to seriously negotiate with Ryanair.Moreover, the switching cost of changing supplier for Ryanair is moderately high due to the significant amount of expense needed in terms of pilot, mechanic retraining and spare move inventories. Ryanair is reportedly negotiating to bargain for the new C919 aircraft being authentic by COMAC, a Chinese manufacturer, due to its greater amounts of place an d the lower fuel consumption. This handiness of this substitute increases Ryanairs talk terms power with Boeing. Ryanairs bargaining power with its suppliers of airdrome services is high, due to the current overbuilding of regional airdromes.Bargaining Power of Buyers The bargaining power of Ryanairs buyers is high. The competition in the European short induce airline market is very intense, and many airlines have cut their cost in response to deregulation and availability of new cost legal transfer technologies. Though Ryanair offers travel fares to passengers at very low prices, there is low switching cost for customers to change to another airline. The lack of brand obedience in the air travel market increases buyers bargaining power. Threat of EntryThe threat of new entrants in the European short scuff air travel market is high due to the relatively low cost of entry and the commodity nature of the capital required. However Ryanair has achieved economies of home plate which would be difficult for a new entrant to achieve. Ryanair has a large net profit which would require a moderately large capital investiture to duplicate. Availability of access to some routes is another barrier for new entrants due to the intense competition for primary routes and primary airdrome landing rights for some routes. Threats from Substitute ProductsThe threat of substitute products and services for Ryanair is relatively low. Substitute services of Ryanair include trains, ferries, cars, as closely as other low fare airlines. However, according to the record, it was shown that usually the tickets of train, bus or ferry are more expensive than Ryanairs flight tickets. According to Ryanairs 2012 financial report presentation, Ryanairs comely ticket price including bag is 45 (2013Q3 50) and its closest price contentions average out ticket price is 71 (2013Q3 79). This shows the threat to Ryanairs from substitute low ost airlines is relatively low as they are unabl e to achieve Ryanairs economies of scale and offer similar fares. Competitive Rivalry The competitive rivalry for Ryanair in the airline market is high. Its competitors include Aer Lingus, easy Jet, Air Berlin, Whizz, IAG/British Airway, and Lufthansa etc, the carriers which also offering low fare flights. more airline companies have lowered the prices of airfares to avoid losing more market share. Competitor abridgment An analysis of study competitors, Aer Lingus, diffused Jet and British Airways is shown in prorogue 2.TABLE 2 Competitor digest Aer Lingus Easy Jet British Airways Future Objectives Aer Lingus focus on generating tax per Easy jet wants to build strong British Airways want to become the seat rather than maximization of load number 1 and 2 network positions worlds leading premium airline by factor as well as more emphasis on while maintains its cost advantage. offering the trump out customer services. partnerships and connectivity. Current locomote to discount airline model, focussing Easyjet focus on primary aerodromes, British Airways focus on satisfied Strategy on primary airport routes. Focus on servingand especially slot constrained customers.It provides high level Irish travel to visit relatives in New airports, to provide service on thepremium tickets and offers first class York, Boston and gelt surface areas of US. top 100 routes in Europe ticket holders access to prime(a) lounges. Assumptions They birth that low fares are mbedded in They assume passengers want They assume that customers pass on like the Irish market place. convenience. to pay more for a better and outstanding service. Capabilities Aer Lingus operates 43 planes with an Easy Jet has 214 planes flying 605 British Airway has a fleet of over 245 average age of 7. 3 days.Carries to the highest degree 10 routes serving 133 airports with 23aircraft over 600 destinations million passengers per year on 92 routes. bases, which makes i t the 4th worldwide. It operates in engineering largest short attracter carrier in provides engineering services to BA Europe with 8% market share. and many other airlines. General Notes Aer Lingus is the lowest fare long snatch EasyJet focuses on low fares It is the flag carrier airline of the airline in Europe, partly due to having to without removing the services whichUK & the largest airline in the UK compete with Ryanair on 46 routes. are standard on most airlines. base on fleet size. Analysis of Interaction of External Force In stocky, the external environment provides Ryanair both opportunities and risks.Though some political issues limited its operation and the intense competition in the airline industry poses some threats to Ryanair, the social club has great opportunities to grow. The demand for air travelling is increasing as the reduction in fares has expanded numbers of passengers who can afford air travel, and animate travellers are choosing low cost carriers due to the economic recession. Ryanair has put itself in the right position to generate passenger traffic and market shares. inherent ANALYSIS Resources Tangible ResourcesAirports Ryanair has established distribution channels with low cost and uncongested airports, which enable it to deliver a 25 minute turn around, which helps to create Ryanairs competitive advantage. Not only standby airports, Ryanairs primary airports also delivered it a great value. Locations More than 1,500 routes across 28 countries in Europe and North Africa to 178 airports (of which 57 are bases, where Ryanair bases aircraft and crew). Aircraft Fleet Ryanair has a fleet consisting of a single aircraft type, the Boeing 737-800.The average age of its 305 aircraft is around 4 years, which is younger than the 9-11 years of typical European airline carriers. This gives advantages in terms of fuel efficiency, victuals costs and customer perception. Ryanair also benefits from its planes higher seating capacity (189 seats per aircraft, compared with Easyjets 156 on A319s and 174 on A320s). financial Resources The financial resources of the company come from the Ryan family, shareholders, investors and creditors. In addition, Ryanair has a high cash flow balance, which enables it to make compulsion adjustments or further investments.In addition, Ryanair has the Aer Lingus shares with a market value of 150 million which could be converted to cash. Organizational Resources Very sophisticated and precise unequivocal and coordinating systems to allow high operational efficiencies including shorter aircraft turnaround times than competitors. Technological resources Online booking and checkin system which allows near elimination of airport checking counter costs. nonphysical Resources Human Resources Ryanair employs approximately 8,388 employees, as of March 31, 2012, including 1,636 pilots and 2,867 cabin crew busy on a contract basis.Ryanairs brand Recognition Ryanair has a stron g brand image as a cost leader and no-frills carrier. Rights The landing rights and airport terminal slot rights for Ryanair as well as the government approvals to fly each particular route. Innovation Resources Ryanairs of age(p)(a) management team has a strong capacity to constantly inaugurate and to cut costs by negotiating with suppliers to pressure for supply cost reductions and to change service routes to drop high rising cost suppliers in favour of low cost suppliers. The senior management team has the capacity to infix by nbundling the components of study airline service and offering the components individually allowing travellers to deal lower cost combinations. Innovative use of unessential airports distant shit major cities allows Ryanair to profitably offer ancillary car rental and bus and adaptations services through the online booking and ticketing system. Capabilities Primary activities Inbound Logistics Ryanairs main supplier, Boeing, provided Ryanair disco unt reported as approximately one third off for purchasing aircraft.Ryanair outsources the labour, airport services, and employee training they need at low cost. trading operations Ryanair provides low cost no frills airline service. About 50% of Ryanairs flight crew are contractors employed only when required. Ryanair uses uncongested airports and only makes academic degree to point trips. Outboard Logistics Ryanair has quick 25 minute aircraft turnaround times. Ryanair has developed an online booking, ticketing, and confirmation system which eliminated the role and margin of travel agents taking the Ryanair service direct to the traveller.Marketing and Sales Ryanair has the biggest website in Europe which allows them to do the marketing- internet sales. They also generate ancillary revenues by selling products in flight and advance customers to buy alliance services such as hotel bookings, car rentals and travel insurance etc. Service Ryanair provides limited free services to p assengers, and a full variety of onboard and travel services is available to customers for purchase. Customers decide which services they want to pay for. Support ActivitiesManagement Information Systems Ryanair has efficient MIS systems to minimize airport turnaround times and to very tightly control on-board fuel inventories to minimize the cost of carrying excess fuel carried any flight. Firm Infrastructure Ryanair has 57 bases. The cost of Ryanair airports are low due to its use of airports are mostly uncongested secondly airports. Ryanair has only one type of aircraft (Boeing 737-800). Therefore, Ryanair only trains pilots to fly one type of plane, which cut costs of training employees.Human Resource Management In order to reduce costs, Ryanair pays relatively lower salaries to employees than other airline companies. The employees are paid by the hour on contracts. Ryanair employees maturate no benefits from Ryanair, but pilots like Ryanair because they can build their hours o f experience quickly and be promoted to senior pilot positions. Technological Development Use of online booking by Ryanair reduced their costs. In addition, by introducing self-check service to the passengers, Ryanair was able to reduce staff and cost. procurance As Ryanair only provide services, they have to outsource the material they need, such as fuel and equipment as well as leasing some operated aircraft. totality Competencies Ryanair has the following core competencies based on the VRIO framework V I R O Fleet of 294 -737-800s Very fuel efficient and Boeing list price of $90 No competitor has as large Ryanair has nonionised a 1500 about 4years average age somillion per plane or $26. a fleet of short-medium route network and short low maintenance costs billion for a similar fleethaul fuel efficient jets turnaround times to maximize the flying time of the fleet Supply chain management and Forcing irports to competeVery pricey to imitate the Competitors try to do th is Organized to operate the operations management on fees for Ryanairs scale of Ryanairs also but Ryanair does it fleet of 737-800s on including MIS systems business and forcing Boeingoperation of 1500 routes better whatever routes offer low to reduce prices on their between 178 airports, so costs huge order of 737-800s are littler network operators keys to Ryanairs low cost have less bargaining power structure with airports OLearys strategical vision, OLearys strategy is the Not available in the marketThere is only one OLeary OLeary is dedicated to marketing strategy and PR basis for the companys building ultra-low-cost profitability.His airlines controversial PR saves millions in announce costs Performance Ryanairs performance compared with its main competitors Ryanair Easyjet Aer Lingus British Airways Revenue US$6. 35B GBP 3. 85B 1. 39B 16. 1 B Operating Margin 15. 3% 8. 1% 3. 94% 3. 2% Profit Margin 12. 54% 6. 62% 2. 44% 3. 49% RO A 5. 59% 4. 74% 1. 90% 3. 44% ROE 18. 99% 14. 58% 4. 07% 13. 21% Market Cap US$11. 51B GBP 4. 18B 0. 679 B US$ 6. 7 B STRATEGYBusiness Level Strategy Ryanair follows a cost leadership strategy. By controlling the cost of operations, Ryanair has a low cost base, which enables it to offer the lowest fares to passengers with acceptable service across Europe. Corporate Level Strategy Ryanair has a low-level of diversification. Ryanairs dominant business is passenger transport, with ancillary revenue from its ancillary services. According to Ryanairs 2012 annual report ancillary revenue accounts for about 25% of the total revenue, while 75% of revenue come from is major business, which is scheduled airline service. International Strategy Ryanair follows a global strategy.Ryanair offers standardize services to all passengers across Europe, while the strategic decisions centralized in headquarters office to achieve economies of scale. Ryanair does not customize its products to individu al national or regional market demands. Cooperative Strategy Ryanair has cooperative or alliance relations with a broad range of hotel and other accommodation providers, as well as with airport car rental companies and airport bus transport companies. Ryanair offers the services of these companies through the Ryanair website and the companies rebate a portion of the revenue to Ryanair. SYNTHESIS Ryanair has the readinesss, and weaknesses, and faces the opportunities and threats as shown in Table 3 Table 3 SWOT Analysis Strengths Weaknesses Customer Service low-toned Fares The advantage of Ryanairs low cost base Low Frequencies Ryanair offers less sponsor flights on some allows it to offers the lowest average fares in routes and often schedules departures at low demand times, European short haul markets. It was report that which whitethorn not be convenient to passengers, but provides lower Ryanairs fares are about 37% below those of easyJet. costs and fleet turnaround ti mes. Brand Perception Recently published surveys vote Ryanair to be Unbundling Services Unbundling of inflight services one of the weakest brands in the European airline industry. allows Ryanair to expand the travel market by servingRyanair offers limited free services to passengers and the lower willingness to pay customers, which supposedly media portrayal of Ryanair is often of a mean and is a large segment of Ryanairs home market in money-grabbing. Ireland. Punctuality Ryanair has the best punctuality compared to other airline companies, since Ryanair only offers point-to-point short haul service. Financial Resources Cash flow According to Ryanairs 2012 annual report,Seasonality of Earnings Many Ryanairs customers are vacation Ryanair has Euro 3. billion in cash, which allows it travellers who tend to travel in the July to September period to make further investment. so Ryanairs earnings are highly seasonal worker. Network Economies Ryanair flies m ore than 1,500 routes across 28 of Scale countries in Europe and North Africa, 178 airports of which 57 are bases. It carried almost 80m passengers in year 2012 with a market share of 12%.It has the lowest cost per passenger, which is one third lower than its major competitor EasyJet. Network Secondary Due to the use of secondary airports and its Many secondary airports are many kilometres away from a major Airports excellent operations systems, Ryanair has a 25 minutecity, which whitethorn cause travel inconveniences to passengers. turnaround times, which allows the airline to maximise aircraft utilisation. Fleet One type of aircraft, the Boeing 737-800 Fleet is not certified for transatlantic service expansion Largest short haul fleet in Europe 305 aircraft total age of fleet 4 years (9 to 11 years for competitors) gives better fuel efficiency, and lower maintenance costs. Executive ManagementIntroduced a series of innovations to ach ieve low Portrayed by the media as mean and uncaring. costs and economies of scale Eliminated check-in desks put advertising on boarding passes and overhead bins persuading passengers not to check in hold baggage World leading skill in negotiating low cost supply agreements Management Systems elevatedly efficient MIS and standard operating procedures to efficiently operate at lowest costs. Opportunities Threats Customers The CEO of Ryanair has talked of plans for a Ryanairs competitors may learn how to imitate its value chain long-haul transatlantic service under a new company and copy its operation strategy.In addition, by focusing on named RyanAtlantic. Purchase of Aer Lingus is a wayefficiency, Ryanair may overlook changes in customer of gaining landing rights at New York, Boston and preferences. Chicago airports, which are favorite destinations forBy using the cost-leadership strategy, Ryanair needs to carry Irish people trave lling overseas to visit their the risks of losing competitive advantages due to the dramatic relatives. In addition, Aer Lingus has transatlantic change of technology. certified aircraft. Supplier CompetitionRyanair has the opportunity to get a better deal on Airport and navigation accuse increases Increased airport aircraft ordering. Ryanair has indicated interest in charges in Spains AENA airports and Italys ATC airport will acquire the C919 aircraft as a strategy to negotiate aboost the ex-fuel unit cost. better deal with Boeing. Air travel taxes Increases in air travel taxes reduce the Stansted Airport Ryanair cut its flights at Stansteddemand of air travel.Airport travel taxes are charged Airport as a result of increased airport charge independently of ticket price and therefore make up a higher increases, and offered that if the airport charges part of lower priced short haul tickets. Ryanairs costs are reduced Ryanair will reverse the reductions in are a ffected proportionately more by these taxes than are its service levels and frequency at Stansted Airport to higher fare competitors costs. transport about one million more passengers per day fuel price and currency The price of fuel is highly volatile. by using spare fleet capacity shifting some flights The international oil market is priced in US dollars so fuel and routes from competing airports to Stansted. expenses are in US dollars. Ryanair does not have US dollar revenues, and therefore must hedge its US dollar costs against its British Pound and Euro revenues using futures, options, and currency swap. presidential term Regional or local governments build airport capacity Possible regulatory backlash in response to naughtiness publicity about in excess of local flight demand to attract tourism service levels dollars provide an opportunity for Ryanair to obtain very low cost or subsidized airport services. SWOT hyaloplasm Strengths Weaknesses Opportunities Low cost base and low fares help to attract passengers Low flight frequencies reduce the appeal of Ryanair and grow its market. services for some travellers Ryanairs strong cash flow enables it to make further Low level of free services reduces the attractiveness of investment in aircraft Ryanair flights for some travellers Ryanairs strategic negotiating ability allows it to takeUnfavourable publicity causes regulator resistance to advantage of secondary airport suppliers to provide air Ryanair operations services to major cities at low cost Threats Large pan-European network allows Ryanair to shift Revenue seasonality with lower winter time cash flows business out of regulatory jurisdictions which raise could make fuel price fluctuations more problematic travel taxes or airport fees because fuel prices tend to have a seasonal peak during Ryanairs expertise at hedging fuel and exchange rate October to January fluctuations allows it to minimize th e impact of oil Ryanairs disregard for customer luxury and convenience price fluctuations compared to legacy airlines could worsen declines in customer numbers during periods of economic prosperity when higher income levels give all travellers more choices of travel service level. SWOT Fit with StrategyRyanairs cost leadership business strategy is built on (1) senior managements strength at negotiating low cost supplier agreements, and (2) unbundling air travel services from basic transport fares to allow lower willingness to pay customers to choose lower cost service. The cost leadership strategy and ability to negotiate lowest cost supplier agreements also puts Ryanair in position to exceed competitors network scale and thereby achieve competitively superior economies of scale. Ryanairs focus on cost leadership minimizes the negative effect that their disregard for customer inconvenience could have on a differentiated supplier. In summary Ryanairs strategy is a good fit wi th its strengths, weakness, opportunities and threats. ANALYSIS OF ALTERNATIVESAlternatives 1. sac to primary airports and move upmarket by focusing on primary airports and increased customer service levels and fares, competing more closely with EasyJet. 2. Expand secondary airports network, with the same customer service level but the lowest price. 3. Expand secondary airport network and upscale the customer services with a bit higher price. 4. Expand Network to US through buying Aer Lingus. 5. Expand Network to US Irish destinations by buying planes, routes and airport slots. 6. Develop a greenfield network in a non-European regional market. Criteria for Analysis of Alternatives Increased Profit / ROE Financial Feasibility Maintain low cost leadership / Increase Economies of scale Government Issues Evaluation of Alternatives Government Issues Profit/ ROE Economic of Scale Financial Total designate Feasibility 1. Shift to Primary Airports (Increase 3 2 2 2. 5 9. 5 Pr ice) 2.Expand Secondary Airport Network 4 5 5 4 18 (Low Price) 3. Expand Secondary Airport Network 4 3 3 3. 5 13. 5 (Upscale Services) 4. Expand Network to US through buying 1 5 5 5 16 Aer Lingus 5.Expand Network to US Irish 2 3. 5 4 3 12. 5 destinations 6. Develop second Network in 3 unequal run 2 perfectly run 2. 5 2 Short run 9. 5 non-European regional market Long run 5 Long run 5 Long run 16 accounting of Evaluation 1. Issues of government approval of new runs and cost of buying airport slots.As the primary airports will charge higher fees and tend to be more intensely competitive, the cost and fare price will be increased with a higher customer services level. The primary airport routes are served by many discount fare and major airline self-feeder service competitors 2. The lowest cost way to achieve additional economic science of scale. 3. Shifts the company cost structure to a higher cost roll and may reduce its economies of scale. 4. Issue of European Commissions Merger office chiding 5. Combination of regulatory issues and cost of acquiring transatlantic certified aircraft. 6. High start-up cost for a greenfield network and time required to build up revenue and profit. Recommended AlternativeBased on the evaluation, the best utility(a) for Ryanair is to continual to develop its network serving secondary airports, as it will generate more profit while and achieve greater economies of scale. Short Term Continue with companys current strategy of expanding the network of secondary airports served. Maintain current levels of customer service and continue to emphasize the value of the levels of customer service provided to the Ryanair customer niche to avoid regulatory backlash. Long Term The secondary airport network in Europe will eventually be saturated by Ryanairs expansion and to continue growing faster than demographic growth Ryanair will have to expand into other markets.The recommended alternative is to make greater accommodations to the European Commission Merger Office regarding routes where Aer Lingus and Ryanair shortly compete in order to gain the Merger offices approval for Ryanair to buy Aer Lingus. This will allow Ryanair to expand to the US market with guaranteed profits from the Irish traveller traffic visiting relatives in Boston, New York, and Chicago. Further the cost to buy the additional Aer Lingus shares to give Ryanair controlling a share in Aer Lingus is very inexpensive compared to other overseas expansion options. If the European Commission Merger Office does not give approval then Ryanair should realise development of an alternative regional network. IMPLEMENTATION Action PlanExpand the secondary airport network by expanding service to the Balkans, Macedonia and Morocco. Time Line April May June July Average fare Euro 50 Euro 51 2% Low competition in new route area allows higher fare level be per passenger excluding Euro 27 Euro 25 -7. % Using exce ss plane capacity so reduces fuel average fixed cost Revenue per passenger Euro 51 Euro 51 0% Travellers in the new route area very frugal. Passengers per year 75. 8 million 79. 6 million 5% New route volume ROE 16. 9% 18. 4% 1. 5% Higher utilization of aircraft results in higher ROE By see the figures in the Target column Ryanair will have succeeded in expanding its revenues, profits and economies of scale.