The European airline industry is one of the most heavily regulated and protected sectors. In most parts across Europe, carriers were state-owned and therefore enjoyed a legal monopoly over domestic traffic. Governments controlled the entry of foreign companies by means of restrictive bilateral Air Service Agreements (ASA). The implementation of the ASA allowed the carriers that were registered in each signatory to operate commercial services. However, in general, the countries were allowed to use only its state-owned flag carrier.
In 1980, the European Community adopted new strategies in order to liberalize the intra-European air service. This deregulation aimed to substantially reduce the EU member states' ability to restrict the entry of foreign companies. Since April 1997, the European airline companies have been allowed to provide passenger services on domestic routes within the EU member states. In other words, a particular airline company is allowed to travel to other destinations across the EU member states even if the airline company has not been registered in the destination country (e.g. Nice-Reims served by Easyjet).
In the beginning, the restoration of the deregulation of airlines favored the flag carriers which monopolized the market. But later, it allowed other companies to enter and compete against the state-owned flag carriers. Such is the case of Ryanair, the Ireland-based company and the most successful Low Cost Company (LCC). In 2005, the company transported 35 million passengers. Moreover, the company has the best operating margin around 25% (see table 2).
Growing at an annual rate of 20%, this LCC already controls around 7% shares of the of the EU market in terms of passengers' number. However, as we can see in table 1, its market penetration still differs significantly among EU member-states compared to Ireland and the UK.
[...] dollars. The company is exposed to fluctuation of change, which can heavily influence the consolidated result of the company. Lately, the weakness of the dollar was profitable to Ryanair, but today the value of the Euro is decreasing and affects the company. Opportunities Thanks to the European expansion, a lot of new destinations have opened up. Ryanair has the possibility to establish new air link with these nations. The company still has the opportunity to increase its market shares in Western Europe; in fact, the LCC market shares could be more than double. [...]
[...] 9 What changes would you recommend to Ryanair's approach? 10 Appendix 12 Bibliography 15 European Airline Market The European airline industry is one of the most heavily regulated and protected sectors. In most parts across Europe, carriers were state-owned and therefore enjoyed a legal monopoly over domestic traffic. Governments controlled the entry of foreign companies by means of restrictive bilateral Air Service Agreements (ASA). The implementation of the ASA allowed the carriers that were registered in each signatory to operate commercial services. [...]
[...] Nevertheless, twenty four airports that Ryanair serves operate with the slot allocation regulation. Its main bases (London (Stansted), Barcelona (Girona), Milan (Bergamo) and Rome (Ciampino)) work with this system, but it is not sure that in the future Ryanair will be able to obtain the sufficient number of slots to operate. In fact, if the company wants to increase its volume of flights, Ryanair may encounter an impossibility to find acceptable arrangements. As we mentioned earlier, Ryanair operates in a highly competitive marketplace, with a large number of new entrants, flag carriers and charter airlines which are competing throughout Europe. [...]
[...] It can be said that Ryanair has well and truly established itself as the leading low cost airline in Europe. From now on, its aim for the future must be consolidating its actual position. Ryanair's strategy appears to be sustainable for the most reasons mentioned above, but we can also say that it is perfect, as we will see in the following paragraphs. What changes would you recommend to Ryanair's approach? We have demonstrated that Ryanair's strategy and approach of the European market is undoubtedly successful. [...]
[...] Since Ryanair has betted on a substantial growth of its activity to repay its loans contracted with Boeing to constitute its aircraft fleet, the company is dependent of the economic situation of the LCC. Increase of low cost competition; the flag carriers are beginning to fight back by launching their own LCC subsidiary. Limited growth on the Western European market; this region is already well served. Customers are very price sensitive; they do not hesitate to switch companies in order to get better prices. Easyjet is already well established in primary airports and could want to compete with Ryanair in regional airports. [...]
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