Ryanair is an Irish airline company founded in 1984. It’s a low-priced airline service provider headquartered Ireland, with its primary operational bases at Dublin and London airports. Ryanair became the largest European budget airline in 2016. The company transported more international passengers than any other airline did in the same year. It has more than 300 boing aircrafts. It has been popularized by the characteristics of rapid expansion and low-cost business models. Ryanair’s route network serves through Europe, North Africa, and Middle East that covers the routes of 40 countries.
The strategy of Ryanair is gaining leadership in the airline base by cost optimization. They focus on reducing expenses involved in running a major scheduled airline. However, the most important contribution to the Ryanair low cost base comes from labour productivity.
This study will explore Ryanair’s PESTLE analysis in terms of politics, economical, social, technological, legal, and environmental perspective.
PESTLE Analysis of RYANAIR
Political Analysis
If the passengers’ tax increases to a higher rate from the existing low rate, it will have a negative impact on the sales of ticket. The UK government increased the tax more than three times in the last 24 years both on the long distance and short distance journey. This can make the tourists scared. Also, for short journeys, people can choose other ways such as buses or trains. For either cases, these could reduce the profit of RyanAir.
Economic Analysis
Oil price has experienced so many hike in the previous year. But it started to fall again recently. This will add marginal benefit to RyanAir.
The weakening of the pound created a strong barrier and impacted negatively. UK airline industry, in return, experienced a squeeze on passenger spending on leisure travel expenses.
Recently, RyanAir concentrated on the growth of short-haul capacity which will increase the air traffic in the running year. However, the profit for the year declined as the investment went for capacity growth.
Social Analysis
British people have become much interested in holiday travelling than before. “Nine out of ten people went away on holidays”, a new report says. This changing habit of British people will influence in long and short distance travelling. As a result, this will contribute to the sales increment gradually as the low-cost flights are mostly preferred by UK passengers.
Technological Analysis
The current generation is very much attached with the internet, especially with social networking. This facilities could allow the airlines to attract more people to travel with them. Also, some airlines have the facilities to inform the customers which movies will be played while in travelling. Plus, the rising mobile banking system will allow the passengers to book air tickets in advance and make payments if necessary.
Legal Analysis
For Brexit, RyanAir may require to comply with the both regulations imposed by UK and EU. This will create difficulties for the airline company to do business in low cost strategy. Also, there might be flight suspention from different places in EU. That may close down the operation in different places.
Environmental Analysis
Carbon footprint has become to an alarming point. There might be restrictions on carbon emission from the EU. It may create problems to conduct operations for airline companies.
Related Reading: Environmental Risk Assessment
Internal and External Analysis to find out the Strengths and Weaknesses of RyanAir.
Strengths
From applying low-ost business models to the highest ticket seller, Ryanair took the first place. So, this company has business model specific expertise. In 2017, Ryanair carried more than 1 billion customers which gave them first place among all other European airlines. It is said to be the largest airline in Europe. This gives the RyanAir a great advantage to compete with the closest competitor in the market as it can achieve the economies of scale. Last, this airline has its extensive ticket booing system which allows the passenger to book tickets online without taking helps from any other intermediaries.
Weaknesses
It has a bad reputation of customer services and unfair pricing practices. As it’s a low cost airline, its target market is the mid income familiies who are solely dependent on this type of airlines for leisure travelling. Any impact on external policy change will affect the revenue very badly. Also, there is not any service diversification which may not reduce any uncertainty. It’s highly dependent on low cost travelling segments. It is also exposed to the Brexit risks.
Strengths and Weaknesses Interrelation with External Macro Factors (PESTLE)
In the macro environment analysis, we have found some key external factors that directly bring position and negative effects to the airline industry and so to the Ryanair Company. We also conducted the internal and external analysis to find out the strengths and weaknesses of the company. Now we will interrelate the external macro factors with the strengths and weaknesses of Ryanair.
The increase of tax may affect the customer base very badly that could reduce the profit margin of Ryanair as we found a strong customer base of mid income families in the internal strategic analysis. However, Ryanair has the first mover advantage in this type of business model. This will definitely help the airline to grab the highest sale among all.
As the travelling habit of this generation is changing and they are travelling more frequently, their first choice will be RyanAir as it has the strongest presence in the EU market.
As the current generation is strongly internet dependent, the strong ticket booking system of the airline will definitely influence the generation to be closely attached with service.
After the Brexit, Ryanair may need to comply with both of the regulations but still it will survive because it has the low cost business model specific expertise, as we found in the strength analysis part.
Bottom Line
The study explored the Internal Strategic Analysis and PESTLE Analysis of Ryananir to find out how these things are having an impoact on the airline business of RyanAir. The study alos showed they ways Ryanair can resolve problems created by external environment factors.
Sources
https://www.independent.co.uk/travel/news-and-advice/ryanair-profits-boeing-737-max-airline-budget-a8921336.html
https://www.bbc.com/news/business-46916389
https://www.independent.co.uk/travel/news-and-advice/abta-british-travellers-holiday-europe-flight-shame-campaign-a9147226.html
https://www.yieldplanet.com/millennial-travellers/
https://corporate.ryanair.com/about-us/history-of-ryanair/
Hey Guys! My name is Richard Andrew. I am a contributor to the Strategy Watch. I have finished my graduation with a major in Economics. My interest areas are Economics, Financial Analysis, Stock Analysis, and Business Strategy.