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Ryanair SWOT & PESTLE Analysis

ID : 52215053 | Feb 2018

COMPANY PROFILE - Ryanair

Business Sector : Aviation

Operating Geography : Europe

About Ryanair : Ryanair is an Irish airline established in 1984 and is headquartered in Dublin, Ireland. It is the largest European carrier in terms of passenger volume in 2016 and is largely characterised by the successful implementation of the low-cost business model. It has over 11,000 employees as of 2016.

Ryanair Revenue : Euro 6,648 million - FY ending 31st March, 2017

Competitive Analysis of Ryanair

The SWOT analysis for Ryanair is presented below:
Strengths
Weaknesses
1. Established in the European market covering more than 200 destinations and 1800 routes
2. Strong balance sheet and consistent shareholder returns
3. Ryanair’s low cost base is a key competitive advantage
4. Ryanair operates point-to-point flights within short distance locations
1. Labor Relations and change in employee compensation arrangements could impact Ryanair’s business
2. Aggressive fleet expansion may result in overcapacity in the near future
Opportunities
Threats
1. Ryanair has good scope to increase ancillary revenues through myRyanair
2. Focus on customer experience through Always Getting Better (AGB) program
1. Weaker GBP post Brexit to put downward pressure on prices
2. Fluctuations in fuel prices can affect the company’s business model and profitability
3. Competition from other low cost regional carriers

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Detailed SWOT Analysis of Ryanair

 

Strength

1. Established in the European market covering more than 200 destinationsand 1800 routes: Ryanair has the most comprehensive coverage by any airline across destinations in Europe and North Africa. It covers more than 200 destinations across 33 countries with more than 1800 routes. Ryanair also has the leading market share of 15% overall in Europe as of 2016 and also is the leading player in five countries and the Central and Eastern Europe (CEE) region. With 86 bases and a fleet of 427 aircrafts, Ryanair served over 120 million customers in FY17.

2. Strong balance sheet and consistent shareholder returns: Ryanair has a fairly strong balance sheet with low debt of €244m as of FY17. Share buybacks by Ryanair have also resulted in enhanced shareholder returns. In FY16 Ryanair returned €1,104m to shareholders via share buy-backs and has returned an overall €4.2bn to its shareholders since 2008. Further, Ryanair has announced plans for a €600m buyback in FY18. The company has also paid special dividends amounting to €1,512 over the last decade.

3. Ryanair’s low cost base is a key competitive advantage: Ryanair pioneered the low cost operating model in Europe in the 90’s and its passenger volume has significantly increased from 0.9 million in the year 1992 to 120 million passengers in FY17. This growth in passenger volumes can be attributed to the low fares charged by the airlines with average fares in FY17 being €41, 24% lower than its nearest competitor, Wizz Air. It has achieved these targets by maintaining low operating costs and high load factors. Its fleet has a single aircraft type - Boeing 737-800s which helps it to control acquisition, training and maintenance costs. It also strives to maintain high worker productivity by emphasizing on productivity-based pay incentives. Ryanair also strives to reduce airport access and service charges by focusingon airports that offer competitive prices.

4. Ryanair operates point-to-point flights within short distance locations: Frequent point-to-point service on short haulroutes to major and regional airports across population and tourism centers helps Ryanair garner high passenger volumes while keeping costs under control. Short routes eliminate need of frill services like meals and entertainment and also direct flight avoid costs of baggage transfers and transit assistance which help to save on overall costs. For FY16, Ryanair’s average flight duration was of 1.8 hours with average distance covered being 762 miles.

Weakness

1. Labor Relations and change in employee compensation arrangements could impact Ryanair’s business: Ryanair’semployees in Europe with the exception of U.K. operate on Irish employment contracts as required under Irish tax laws, as Ryanair’s aircrafts are registered in Ireland.Many governments have initiated challenges to these contracts and if Ryanair is forced to concede to the challenges it may result in increased compensation, insurance and other benefits.The breakup of U.K. from the EU after the Brexit vote may also lead to change in employment contracts under various jurisdictions as applicable.

2. Aggressive fleet expansion may result in overcapacity in the near future: Ryanair expects its passenger volumes to touch nearly 180 million per year by 2024 and has planned fleet expansion accordingly. However if growth in passenger volumes decline due to competition or political or economic factors, it may result in overcapacity straining Ryanair's financials.

Opportunity

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Threat

This section is available only in the 'Complete Report' on purchase.

References

1. Ryanair Annual Report 2016: https://investor.ryanair.com/wp-content/uploads/2016/07/Ryanair-Annual-Report-FY16.pdf

2. Ryanair FY17 Presentation: https://investor.ryanair.com/wp-content/uploads/2017/05/FY17-Presentation.pdf

3. Ryanair FY17 Results: https://investor.ryanair.com/wp-content/uploads/2017/05/FY17-Results.pdf

4. Wizz Air SWOT: ultra-low costs drive high growth and margins, in spite of Ryanair competition: https://centreforaviation.com/insights/analysis/wizz-air-swot-ultra-low-costs-drive-high-growth-and-margins-in-spite-of-ryanair-competition-251605

5. Ryanair to expand fleet faster to steal a march on struggling rivals: http://www.telegraph.co.uk/business/2017/05/30/ryanair-ticket-prices-set-fall-7pc-year/

The PESTLE analysis for Ryanair is presented below:
Political
Economical
1. The uncertainty over Brexit to be a challenge for the business environment
2. Frequent terrorist attacks in Europe will have adverse effect on air travel demand impacting Ryanair
1. Oil prices are expected to remain around $50 a barrel, aiding operational margins
2. Weaker GBP post Brexit to put pressure on fare prices
Social
Technological
1. Consumer preference of high speed rail over airlines on short haul routes
2. Consumer willing to spend more on ancillaries if ticket cost is less
1. Enhancements in digital platforms (mobile and website) to improve customer experience
Legal
Environmental
1. Ryanair is subject to lawsuit by European Commission for receiving state aid at certain European airports
2. Brexit may require Ryanair to comply with dual, UK and EU regulations
1. EU regulation of emissions for airlines may increase costs for Ryanair
2. Operates young fleet of Boeing 737-800NG aircraft with fleet age under 6 years and has lowest emissions intensity amongst peers
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Detailed PESTLE Analysis of Ryanair

 

Political

1. The uncertainty over Brexit to be a challenge for the business environment: UK’s departure from EU in March 2019 brings in significant uncertainty with regards to the aviation business environment. If UK remains in Open Skies agreement with EU, thinks shall be status quo for the Ryanair and the UK aviation industry. However there is a high possibility that UK will not remain in Open Skies and until the final terms are decided, uncertainty shall prevail. Thus Ryanair will have to focus on growth away from UK for the next two years until Brexit is complete.

2. Frequent terrorist attacks in Europe will have adverse effect on air travel demand impacting Ryanair: There has been an increase in a spate of terrorist attacks which have targeted counties like UK, France, Belgium and Germany over the last two years. Governments and intelligence agencies have stepped up efforts to combat the same. These attacks have already affected tourism, albeit to a small extent. However, if these attacks continue, the tourism industry will get affected and consequently the demand for air travel will go down impacting Ryanair.

Economic

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Social

This section is available only in the 'Complete Report' on purchase.

Technological

1. Enhancements in digital platforms (mobile and website) to improve customer experience: Ryanair began a major push into digital with the introduction of myRyanair two years back. Post-the launch there have been major enhancements to the Ryanair website and app in line with the airline’s ongoing ‘Always Getting Better’ initiative. In April 2017, Ryanair implemented the New Relic Digital Intelligence Platform which will give it real-time insights into the health of their web and mobile digital platforms. This will not only significantly improve digital customer experience but will also result in monitoring third parts services on Ryanair websites and enhance the cybersecurity aspect of Ryanair's platforms.

Legal

1. Ryanair is subject to lawsuit by European Commission for receiving state aid at certain European airports: Ryanair is involved in litigation with the European Commission regarding state aid at airports such as Lübeck, Klagenfurt, Paris (Beauvais), La Rochelle, Carcassonne, Cagliari, Girona and Reus and TârguMures. In addition to the above Ryanair faces allegations of unlawful state aid in other national courts in Europe specifically in regards to deals with Frankfurt (Hahn) and Lübeck airports. The outcome of these litigationsmay affect the operations and financials of Ryanair.

2. Brexit may require Ryanair to comply with dual, UK and EU regulations: Post the Brexit referendum and the trigger of Article 50 by UK's Prime Minister, it is officially set to leave the European Union in due course of time. The terms of exit are yet to be finalized, but a hard Brexit will mean that Ryanair will have to comply with different regulations across EU and UK. Also the open skies agreement between UK and EU might cease to exist which may lead to Ryanair suspending its UK flights

Environmental

This section is available only in the 'Complete Report' on purchase.

References

1. Ryanair Annual Report 2016: https://investor.ryanair.com/wp-content/uploads/2016/07/Ryanair-Annual-Report-FY16.pdf

2. Ryanair FY17 Presentation: https://investor.ryanair.com/wp-content/uploads/2017/05/FY17-Presentation.pdf

3. Ryanair FY17 Results: https://investor.ryanair.com/wp-content/uploads/2017/05/FY17-Results.pdf

4. Wizz Air SWOT: ultra-low costs drive high growth and margins, in spite of Ryanair competition: https://centreforaviation.com/insights/analysis/wizz-air-swot-ultra-low-costs-drive-high-growth-and-margins-in-spite-of-ryanair-competition-251605

5. Ryanair to expand fleet faster to steal a march on struggling rivals: http://www.telegraph.co.uk/business/2017/05/30/ryanair-ticket-prices-set-fall-7pc-year/

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Ryanair SWOT and PESTLE analysis has been conducted by and reviewed by senior analysts from Barakaat Consulting.

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