An Introduction for Ryanair

INTRODUCTION Background in Brief Ryanair was established by the Ryan family with a staff of 25. Its first alley was launched in 1985 with a 15-seat aircraft ferrying passengers amid Waterford in Ireland and London. In 1986, Ryanair launched its route from Dublin to London to challenge British Airways and Aer Lingus, the two dominant air hose carriers on that route, by disco biscuiting f bes at light tolls. With two routes in accomplishment, Ryanair carried 82,000 passengers in its first full year of operation. By 1993 Ryanair has carried over 1 one thousand thousand passengers.In 1995 Ryanair overtook Aer Lingus and British Airways to become the biggest international scheduled route carrier in europium. The Organization To twenty-four hours Ryanair now proceeds more than 1,500 flights per day from 57 levels on 1,500 slump fare routes across 28 countries. It connects 178 destinations and operating a expire of 305 smart Boeing 737-800 aircraft. In 2012, Ryanair had a team of more than 8,500 employees and carried over 78 million passengers. Ryanairs main business is to provide low-fare-no filling air hose business business usefulness.Ryanair excessively offers conglomerate ancillary services including in-flight sale of beverages and food, car hire services, internet-related services etc. To expend its network, Ryanair, which already owns 29. 82% of Aer Lingus in 2012 announced its plan to acquire Aer Lingus by making an all cash offer of 1. 30 per share for its entire share capital. Ryanair recorded a profit of 503 million in 2012 fiscal year, increased 25% compared with year 2011 despite a 367 million rise in terminate termss. tax tax revenues rose 19% to 4325 million as avocation grew 5% to 75. 8 million passengers. Ryanairs return on equity (ROE) is increased from 12. 7% to 16. % in fiscal 2012. In addition, the companys broad cash turn tail is increased from -610. 9m to 702. 7m due to towering net income and subjectd capital expen diture. Mission Ryanair mission is to become atomic number 63s some fat lowest exist airline by rolling out our proven low-fare-no-frills service in all market places in which we operate, to the benefit of our passengers, people, and shareholders. To emphasis its focus on low fares, low frills, the chief executive officer has stated, in response to criticisms of Ryanairs sub-standard client service, that any worthwhile passenger service commitment should involve commitments to low prices and high promptitude.Ryanair has the appeal minimizers aim of generating the most benefit to both its shareholders and its passengers done offering the lowest fare service. It offers nodes the choice of exactly which services they fatality to give in for quite an than forcing them to turn out a high price for the bundle of services the airline requires to offer, as legacy carriers usually do. Passengers benefit from paying less money by selecting and purchasing only the services they ne ed. As a result, Ryanair is able to attract more customers, which helps Ryanair to grow its market and profits. Goals and Objectives Generate greater passenger duty through offering low fare services. wave the air passenger market and network by opening up new bases and routes. Capture a large market, such as by entry to the US airline market. Gain supererogatory profits through increasing passenger traffic while retention its cost base low. Maintain its low cost leadership position through keep backd cost efficiencies. Stakeholders There are many stakeholders involved in Ryanairs business. As Table 1 shows, they have different expectations toward and demands on Ryanair. TABLE 1 Organizational Stakeholders Stakeholder Group Group Demands / Attributes Product Market Competitors They want to carry more passengers at high fares and would handle to reduce Ryanairs market share. They would like regulation to force Ryanair to offer trip out agent commissions. Travel A gencies They would like to organize Ryanair staff. Customers want the lowest fare price, and luxury services at no extra cost. Trade Unions Boeing, Airbus would like to Ryanair orders at list prices. Airports would like regulations allowing Customers them to outpouring higher(prenominal) fees to airlines, and to collude on capacity management. Suppliers Legislators want to avoid high levels of controversial public complaints, and want higher airport and route taxes. government crown Market Shareholders Shareholders want to see Ryanairs market and profit increased. Banks Banks want Ryanair to make loan payments in full on time. Leasing Company They want Ryanair to hire more planes, i. e. amplify routes. Organizational Market Employees Employees want higher income and better benefits Managers Managers want to effectively use the human and capital resources of the company to meet the goals and objectives focalize by top executives. Top Executives Maintain Ryanairs cost-leadership position to gain profit while looking for more opport unities to (Michael OLeary) and expand its market extraneous ANALYSIS General Environment Demographic separate Airline be active passengers are mostly aged 18 to 65. Among them, passengers of age 25 to 55 years account for almost 75% of the total. The ageing of the post-1945 baby boom generation has reduced the numbers in the older higher income incision of this demographic.The resulting tendency is for a greater proportion of air travellers to be younger and less affluent and more oriented toward cast down cost transport as opposed to desire a luxurious flying experience. Political/Legal Segment The political and legal issues that concern Ryanair include regulations of regional and national governments and the europiuman Union (EU), various legal actions, terrorism and security. Because many airlines are fully or partially owned by national governments, the airline diligence 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 costs of Ryanair. Furthermore, OLearys competition to start an ultra-low cost transatlantic airline using Aer Lingus planes and US airport landing rights has been blocked by the European Commissions merger Office. The Commission has refused to allow Ryanair to go ahead with purchase of control of Aer Lingus. In addition, the threat of terrorism has increased insurance and security costs in the airline industry. Economic SegmentThe global economic recession and supply price increases have greatly affected the European airline industry. The recession has restoreed the purchasing military group of consumers. Ryanairs low cost strategy has enhanced Ryanairs ability to compete in these conditions. Through offering low fares, Ryanair enables airline passengers to conti nue travelling despite the economic crisis. The drifting exchange rate also has a direct effect on Ryanairs profitability. Ryanair collects fares in various currencies and has its expense mainly in US dollars for fuel and in Euros for labour.In addition, the number of airline passengers could decline if their national currency loses value. Ryanair uses futures and options to parry its fuel price, foreign exchange risks, and financing interest cost. The price for 90% of Ryanairs announce fuel requirements for fiscal 2013 is hedged. Hedged prices for 2013 are crucially above 2012 prices. Socio-cultural Segment Due to changes in travellers behaviouraland psychological patterns, the European airline industry has changed from traditional patterns.Peoples perspective towards air travel has been changed by the low cost revolution of air fares in Europe. Air travel is no longer being seen as high-ticket(prenominal) and is now accessible by low income people. Consequently passenger traf fic in the Europe airline industry has increased. Ryanairs initial routes from Ireland to England were intended 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. Technological SegmentAdopting advantageous technologies has helped Ryanair constantly reinvent its processes to maintain its low cost advantage. For example, by using its online booking system, Ryanair reduced its diffusion costs by eliminating travel agency commissions. Better technology has also allowed early(a) transportation industries to cut costs such as the innovation of tear down 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 demand for international air travel. There are an in creasing number of people travelling between counties for work or to take vacations in foreign countries. Industry Environment Bargaining Power of Suppliers The bargaining force of Ryanairs aircraft suppliers is relatively high. Because Ryanair wants very low prices and many special conditions on aircraft purchases, so Boeing has refused to extend their supply contract with Ryanair, and Airbus has non been interested to seriously negotiate with Ryanair.Moreover, the switching cost of changing supplier for Ryanair is moderately high due to the signifi finisht amount of expense needed in terms of pilot, mechanic retraining and spare parts inventories. Ryanair is reportedly negotiating to buy the new C919 aircraft being developed by COMAC, a Chinese manufacturer, due to its greater amounts of seats and the lower fuel consumption. This availability of this substitute increases Ryanairs bargaining power with Boeing. Ryanairs bargaining power with its suppliers of airport services is hi gh, due to the current overbuilding of regional airports.Bargaining Power of Buyers The bargaining power of Ryanairs buyers is high. The competition in the European short incline airline market is very intense, and many airlines have cut their cost in response to deregulation and availability of new cost saving 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 loyalty in the air travel market increases buyers bargaining power. Threat of EntryThe threat of new starting motors in the European short haul air travel market is high due to the relatively low cost of entry and the commodity nature of the capital required. However Ryanair has procured economies of scale which would be difficult for a new entrant to achieve. Ryanair has a large network which would require a moderately large capital investment to duplicate. Availability of access to some routes is anot her barrier for new entrants due to the intense competition for first election routes and primary airport 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 comfortably 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 average ticket price including bag is 45 (2013Q3 50) and its closest price competitors average ticket price is 71 (2013Q3 79). This shows the threat to Ryanairs from substitute low ost airlines is relatively low as they are unable to achieve Ryanairs economies of scale and offer similar fares. Competitive controversy The competitive rivalry for Ryanair in the airline market is high. Its competitors include Aer Lingus, easy f ountain, Air Berlin, Whizz, IAG/British Airway, and Lufthansa etc, the carriers which also offering low fare flights. Many airline companies have lowered the prices of airfares to avoid losing more market share. Competitor Analysis An analysis of study competitors, Aer Lingus, Easy Jet and British Airways is shown in Table 2.TABLE 2 Competitor Analysis Aer Lingus Easy Jet British Airways Future Objectives Aer Lingus focus on generating revenue 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 lead gift airline by factor as well as more emphasis on while maintains its cost advantage. offering the best customer services. partnerships and connectivity. Current Moving to rabbet airline model, focusing Easyjet focus on primary airports, 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 kale worlds of US. top 100 routes in Europe ticket holders access to premier lounges. Assumptions They assume that low fares are mbedded in They assume passengers want They assume that customers will 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 flicker of over 245 average age of 7. 3 years.Carries about 10 routes serving 133 airports with 23aircraft over 600 destinations million passengers per year on 92 routes. bases, which makes it the 4th worldwide. It operates in engineering largest short haul 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 haul EasyJet focuses o n 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. based on fleet size. Analysis of Interaction of External Force In summary, 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 company 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 existing 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. INTERNAL ANALYSIS Resources Tangible ResourcesAirports Ryanair has established distribution channels with low cost and unconge sted airports, which enable it to deliver a 25 minute lapse, which helps to cook Ryanairs competitive advantage. Not only secondary 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 image, the Boeing 737-800.The average age of its 305 aircraft is around 4 years, which is younger than the 9-11 years of normal European airline carriers. This gives advantages in terms of fuel efficiency, maintenance 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 emergency 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 controlling and coordinating systems to allow high available efficiencies including shorter aircraft turnround propagation than competitors. Technological resources Online booking and checkin system which allows near elimination of airport checking counter costs. Intangible Resources Human Resources Ryanair employs close to 8,388 employees, as of March 31, 2012, including 1,636 pilots and 2,867 cabin crew employed on a contract buttocks.Ryanairs Brand Recognition Ryanair has a strong 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 thanksgivings to fly each particular route. Innovation Resources Ryanairs major(postnominal) management team has a strong capacity to constantly innovate 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 of age(p) management team has the capacity to innovate by nbundling the components of major airline service and offering the components individually allowing travellers to choose lower cost combinations. Innovative use of secondary airports distant form major cities allows Ryanair to profitably offer ancillary car rental and bus and accommodations services through the online booking and ticketing system. Capabilities Primary activities Inbound Logistics Ryanairs main supplier, Boeing, provided Ryanair discount reported as approximately one third off for purchasing aircraft.Ryanair outsources the labour, airport services, and employee training they need at low cost. Operations Ryanair provides low cost no frills airline service. active 50% of Ryanairs fl ight crew are contractors employed only when required. Ryanair uses uncongested airports and only makes point 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 encouraging customers to buy alliance services such as hotel bookings, car rentals and travel insurance etc. Service Ryanair provides limited free services to passengers, 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 turnaroun d 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 get no benefits from Ryanair, but pilots like Ryanair because they can build their hours of 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 Ryana ir only provide services, they have to outsource the material they need, such as fuel and equipment as well as leasing some operated aircraft. Core Competencies Ryanair has the hobby 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 organized 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 costly to imitate the Competitors try to do this 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 smaller network operators keys to Ryanairs low cost have less bargaining power structure with airports OLearys strategic 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 advertising 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% ROA 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 regularize 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 individual 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 the se companies through the Ryanair website and the companies rebate a portion of the revenue to Ryanair. SYNTHESIS Ryanair has the strengths, and weaknesses, and faces the opportunities and threats as shown in Table 3 Table 3 SWOT Analysis Strengths Weaknesses Customer Service Low Fares The advantage of Ryanairs low cost base Low Frequencies Ryanair offers less frequent 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 may not be convenient to passengers, but provides lower Ryanairs fares are about 37% below those of easyJet. costs and faster turnaround times. 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 lo wer willingness to pay customers, which supposedly media portrayal of Ryanair is often of a regard as 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 plosive consonant to make further investment. so Ryanairs earnings are highly seasonal. network Economies Ryanair flies more 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 compet itor EasyJet. Network Secondary Due to the use of secondary airports and its Many secondary airports are many kilometres away from a major Airports beautiful operations systems, Ryanair has a 25 minutecity, which may 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 Average 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 achieve 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 Highly 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 travelling 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 charge increase s change magnitude airport aircraft ordering. Ryanair has indicated interest in charges in Spains AENA airports and Italys ATC airport will buying 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 percentage of lower priced short haul tickets. Ryanairs costs are reduced Ryanair will reverse the reductions in are affected pro rata 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 so me flights The international oil color 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. Government Regional or local governments build airport capacity possible regulatory backlash in response to bad 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 Matrix 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 Ryanai r flights for some travellers Ryanairs strategic negotiating ability allows it to takeUnfavourable publicity causes regulator electrical 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 the 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 S trategyRyanairs 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 slide by 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 with its strengths, weakness, opportunities and threats. ANALYSIS OF ALTERNATIVESAlternatives 1. Shift 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 th e 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 Point Feasibility 1. Shift to Primary Airports (Increase 3 2 2 2. 5 9. 5 Price) 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 Short run 2 Short run 2. 5 2 Short run 9. 5 non-European regional market Long run 5 Long run 5 Long run 16 Explanation 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 feeder service competitors 2. The lowest cost way to achieve additional economics of scale. 3. Shifts the company cost structure to a higher cost curve and may reduce its economies of scale. 4. Issue of European Commissions Merger office rebuke 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 alternative 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 currently 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 re latives 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 consider 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 Costs per passenger excluding Euro 27 Euro 25 -7. % Using excess plane capacity so reduces fuel average stiff 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 meeting the figures in the Target column Ryanair will have succeeded in expanding its revenues, profits and economies of scale.