Operating and Commercial Performance of Ryanair Airline: Analytical Essay

Introduction

The purpose of this report is to evaluate the operating and commercial performance of Ryanair Airlines. This paper begins by briefly looking at the operational characteristics of the company, will follow with the marketing and competitive situation followed by the financial performance and It will conclude with the environmental policy of the airlines.

Ryanair, founded in 1984, has their headquarters in Dublin, in Ireland, and its first operational base is London Stansted. part of Ryanair Holdings is Ryanair Uk, Ryanair Sun and Ryanair Lauda. The company was inaugurated in 1984 when the first flight departed from Waterford and landed in its final destination, London Gatwick.

Ryanair runs with more than 400 Boeing 737-800 aircraft and one 737-700 used as a charter airplane. It’s fast expansion, and the low-cost business model has characterized the company which now serves more than 35 countries between Europe, Africa and the middle east with 84 bases connecting over 200 destinations.

Ryanair usually chooses to fly to and from secondary airports or little ones, typically situated outside the central city, this helps the airlines to reduce costs benefiting of lower landing tariff and quick turnaround. For example, it flies from Weeze, which is 70 km away from the central city of Dusseldorf. Despite this, sometimes the secondary airports are not that far from the central city or in some cases even closer for example Roma Ciampino (anna.aero, 2019).

Ryanair operated in a point-to-point model as a substitute of the traditional hub and spoke model, that is when the Flyers have to swap aeroplane in transit at the main airport (anna.aero, 2019).

According to the Ryanair web site in 2017, it was the first European airline to have transported over 1 billion customers (Corporate.ryanair.com, n.d.).

Operational characteristics

Routes:

Ryanair has more than 50 bases in Europe, It has a significant presence in France, Germany, Italy, Poland, Spain and the United Kingdom. At the moment the biggest market is Italy with 14 bases and 9 non-base airports. During the year 2018, 3,765 new programmed services have been launched from airline; it represents a 6.8% increase over the preceding year.

Ryanair was the first airline for new air services, and the US was the principal country for new networks.

As seen above Ryanair connects over 200 destinations around the world (anna.aero, 2019).

Figure 1(Ryanair Europe coverage, 2019)

Ryanair has maintained the denomination that it obtained in 2017 for the number of new routes launched, and it added to its map 218 airports. A number which many other airlines are nowhere near. Marrakech and Frankfurt has been added the newest routes with 16 and 14 services correspondingly. Despite the fact that Ryanair is the top airline ranking for the major new routes, it has launched 60 routes less in 2018 than the years before. In 2017 it launched more than double as connections as the second-placed Eurowing (anna.aero, 2019). According to BBC, Rynair is dropping the flies to Poland and to Malta. It is also reducing the flights operating to London Stansted and Manchestairs airport. This is happening because of the weak request from the uk market and the tax UK Air Passenger Duty (APD) (BBC News, 2019).

Passenger traffic :

[image: /var/folders/dd/rd2hvs9n17j567y_cxtdswnw0000gn/T/com.microsoft.Word/WebArchiveCopyPasteTempFiles/Ryanair-passenger-growth.jpg]

Ryanair Holdings Plc published in 2018 another year of slowdown passenger growth as a result of a battle with unions, not good weather and air traffic control and pilots' strikes.

The growth was of 8% compared to 2017, smaller than the previous year which was 17% compared to 2016 (Perez, 2019).

Comparing Ryanair to the other airline companies, Wizz had a 20% growth in passengers in 2018. Ryanair had a load factor in the first half of 2017 of 94.7% and 96% for the other part of the year. Compared with the competitors, EasyJet had one of the lowest load factors with 92.1% (Jarvis, 2018).Figure 2 (Ryanair passengers’ number, 2019)

Financial performance

Profitability:

According to the article written in the Financial Times in 2019, Ryanair has been faced a profit warning, due to the fall of the airfares more than expected. The company announced at the beginning of the year that the final report would be down of over a billion due to a predicted drop of 7% in ticket prices. Over the previous 16 months, the airline had devastating service disruptions due to the staff that strike in 2017 to the summer of 2018 and causing the cancellation of many flights (Spero, 2019). The cabin crews are requesting a “fair living wage” and a contract based on their language and law rather than Irish (BBC News, 2018). According to BBC of the end of 2018, the higher oil prices, the low fares and strikes hit the profits and the enthusiasm of investors (BBC News, 2018).

At the beginning of the year, Ryanair was down by 40% compared to the previous year, while competitors such easy jet has dropped off a quarter and Hungary’s low-cost airline decreased of 14%. According to Daniel Roeska, an analyst at Bernstein the strategy of the company at the moment is to focus on ancillary services for example, reserved seats that in other words they prefer to have more passengers even at lower fares (Spero, 2019).

Looking at the table 1, 2 and 3 of the FY Ryanair annual report we can see that in the last five years the profit has increased.

From the year 2014 to 2015 it increased of 25% and 43% the followed year, the increase of the following two years has not been dramatic as the past as the profit increased of 6% on 2017 and 10% on 2018 due to the reason seen above.

The introduction and prospect of Brexit is considered a considerable threat to the company because there is a risk that on the event of hard Brexit the company’s UK shareholders may be considered as non-EU. That means that they may reduce the English shareholders to ensure that Ryanair will remain owned by the majority of EU shareholders (BBC News, 2018).

Costs and Revenues:

One of Ryanair’s strengths is to have a very low cost. On FY18 the unit prices fell of 1%.

For the FY19 Ryanair is investing in people, systems and business, it will deliver a new Boeing aircraft B737-MAX-200, the airplane will be 16% extra fuel-efficient also it will have 4% more seats and 40% less noise emissions. It will reduce the unit cost massively over the next 6 years. The staff cost is expected to rise by 200 m. Which means higher pay for the employee. Ryanair is expecting the unit cost to grow in the next year by 9% (Ryanair Investor Relations, 2018).

The staff cost grew by 34% due to the increase of the pilot salary and flight hours (BBC News, 2018). In 2018 has started the negotiation with the pilot's unions and cabin crew regards them requests due to an incredibly dramatic and well-documented strike by the media. The higher pay rate, improved rotas and job security, are the improvements that the airline is making to make sure that it will be an employer choice. The company is hiring many pilots and cabin crew including lots coming from bankrupt airlines like Air Berlin (Ryanair Investor Relations, 2018).

[image: ]As already seen, Ryanair’s strong point is the capacity of maintaining the cost very low. Any other EU airlines can equal or even arrive close to Ryanair unit cost. According to the report, the fuel is better circumvented than most European competitors (Ryanair's Corporate, 2018).

To support this statement, figure 3 shows how significant is the difference between the other airlines, the main difference is the Airport, the choice of the company to fly on the second airports (Ryanair's Corporate, 2018).Figure 3 ( Europe's Lowest Costs, 2019)

Revenue is the amount of money a certain company gets from its clients in conversion to sales.

It is the top item on an income report where the costs and expenses are deducted to get the net income (Macrotrends, 2018). Ryanair in the last 5 years have had a steady growth on revenue as shown by the table 1, 2 and 3.

The growth has been not dramatic but steady around 10% every year apart from 2017 were it grown just 2% from the year before.

Table 1 (FY 2018 results, 2018)

Table 2 (FY 2015 and 2016, 2016)

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Table 3 (FY 2015/ 2014, 2015)

Compare with competitors

American airlines are the world most lucrative airline according to table number 4, followed by Delta airline. Part of the profitability comes from the fact that airlines have added seats on their aircraft in recent years. Also, the low oil price has been a significant contributor.

[image: Top 10 economic profit generators, by absolute dollars (2012-2016)]To have a clear comparison with Ryanair, there is an essential factor to consider, the dimension of the airplane (Consultancy.uk, 2017).

American Airlines is the largest carrier in the world with 1,556 aircraft, Delta 1330 aircraft,

United Airlines 1229 aircraft, International Airlines Group 464 aircraft and Ryanair 349 aircraft (Consultancy.uk, 2017) .

To conclude Ryanair is the second European most lucrative airline and the six- world wise

Table 4 (Top 10 economic profit generator, 2018)

Competitors

Main competitors:

Ryanair has numerous low-cost competitors. Around 60 new low-cost airlines have been formed in 2004.

The main competitors for Ryanair are Easy jet and Wizz Air because they are the one that tend to keep a low prices and extended routes.

Comparing the three companies on the main points, the results are that All of them have an extensive network, and each has some unique routes; however, Wizz Air is offering flight to the US and Asia. All of them have a random seat assignment system for the customers who don’t buy packages or don’t pay for the additional upgrade. Regarding reliability, Ryanair had had a period with many strikes, much more than its competitors (Nukina, 2018).

Ryanair has a strong sense of competition, and it treats all companies that are trying to compete in a very competitive way. It has been blamed for dropping prices significantly just to cut their competitors. An example of competitivity happened in 2003 when MyTravelLite starts to compete on the Birmingham/Dublin route then Ryanair creates very competing flights on certain MyTravelLite routes until they pulled out (anna.aero, 2016).

EasyJet is Ryanair’s principal competitor. In 2004 it started new routes in Irland. Before that moment EasyJet was never directly competing with Ryanair on its territory.

When in 2012, WizzAir moved its flight operations to new low-cost Warsaw Modlin Airport, Ryanair started numerous routes identical to Wizz Air (anna.aero, 2016).

Alliance:

Alliance is an arrangement among different airlines with the aim of pool resources. The main benefit is the reward system. The main alliance are Star Alliance, One Worls and Sky team (Boon, 2018).

Ryanair is not part of an alliance for the reason that it doesn’t fit the company's business model, it took the decision of not have any interaction with other airlines.

Marketing strategy:

The main reason why the growth of Ryanair is the small price it offers. It practices a different strategy to arrive at the lowest cost level it practice outsourcing (Leeham News and Analysis, 2019). For example, the pilots are not employed by Ryanair, but they are all contract pilots, another strategy is the decision to fly from secondary airports; this is the main difference from EasyJet, it main competitor witch fly from the main ones. The figures show an average of Ryanair's tariffs compared to other low-cost airlines. This significant gap gives a real understanding of the effective marketing strategy they act (Leeham News and Analysis, 2019).

The Chief Executive Officer Kenny Jacobs affirm that the marketing of the company has focused on delivery. Ryanair operates on the philosophy of having as much as digital expertise is possible to avoid to pay the advertising on or Google (Rogers, 2017). The chief declared that the company doesn’t spend any money on Google but it’s by far the most researched airline, he also affirmed that the company is right on social and always talk with the press and it’s very accessible. Ryanair is expanding its additional products, selling holidays and car rental servicing and offering tailored packages for members of MY Ryanair. This means that is taking the way of personalizing the marketing approach (Rogers, 2017).Table 5 (Airlines compared fares, 2019)

Environmental policy

In March 2018, Ryanair published a new Environmental Policy called Europe’s Greenest Airline. In this policy, the airline commits to helping to fight climate change and it looks to lower noise pollution and CO2 emissions (Ryanair Corporate, 2018). The plan goal is the reduction of global impact and local impact.

According to Ireland (2018) Ryanair invested billion into the fuel-efficient airplane and allowed the client to offset the carbon fee of their flight.

Ryanair promises to decrease noise and emissions through the new “next generation” airplanes. These new planes, 737-MAXs, are fuel-efficient, and quieter and will continue to decrease the local noise by up to 40% per seat and air quality (Ryanair Corporate, 2018).

The mission of the plan is to achieve by 2030 an emission rate of 61.4 gr of CO2 for flyer km. iN spring 2019 will further reduce noise by up to 40% per seat;

The plan explains the main point of the reduction of the emissions such us the increase of load factors to 94%, the wingless, high density and light-weight seats (Ryanair Corporate, 2018).

However, According to the EU Trasport and Environmental Group, Ryanair is part of the top 10 biggest polluters. The airline is the first that does not operate a coal-fired power plant to be part of it. (BBC News, 2019)

Plastic pollution is a threat to our planet, Ryanair is one of the few airlines to have introduced the policy of eliminating non-recyclable plastics. The company will work together with its suppliers to replace non-recyclable plastics with favorable solutions for the environment such as a paper cups. Ls solution will be fully in place in the next five year’s time across the entire operation (Ryanair Corporate, 2018).

Off Set:

Ryanair from 2018 offer to them customers the option on the booking process to do a donation to offset carbon emissions. Environmental Charities will annually benefit from this deliberate guest domination (Ryanair Corporate, 2018). The charities are First Climate, Renature Monchique, the Irish Whale & Dolphin Group and Native Woodland Trust.

According to an article of the Jornal.it, the EU’s verified Emission report has discovered that Ryanair was in the top 10 for carbon polluters in Europe.

The data shows that the airlines produced over 9 million of tonnes of carbon dioxide in 2017, the date was shocking because is the first time that a company that is not running a coal-fired power plant is into the list. the airline's defense itself says that it has more than 400 aircraft and a loading plan over 94% on average (McDermott, 2019) .

Conclusion

The present research aimed to evaluate the operating and commercial performance of Ryanair airlines.

This report has shown that the airline in question, Ryanair, has experienced as dramatic financial growth over the past few years. Ryanair has constantly, for many years, scored and higher than many of its competitors. This is for many reasons, but the main credit has to be awarded to their strategic decisions when it came to the extra light seats and the choice of flying to secondary airports. This growth has been not only, under the financial aspect as Ryanair kept the unit cost lower than the competitor ensuring the best low fairs, but the airline has created many new routes and bought new airplanes.

Despite this, the company has aspects to improve such as the relationship with the cabin crew and the pilots, the result of many strikes from a variety of different members of staff, but also for these actions to have been so heavily documented in the press meant that the airline is required to act for the sake of its own reputation if nothing else.

As well as the emission because however, it releases environmental policy, “Europe’s Greenest Airline” it is in the ranking of the top 10 polluter airlines. Said that In the next few years, Ryanair has a keen focus on decreasing the unit costs and reducing the emission.

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