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Airline Industry in the EU

Airline Industry in the EU

  1. 1. EXTERNAL ENVIRONMENT ANALYSIS:<br />AIRLINE INDUSTRY IN THE EU<br />
  2. 2. CONTENT<br />Airline Industry<br />Porter’s 5 Forces<br />Theory<br />Airline Industry<br />Ryanair<br />Threat of Entry<br />Threat of Rivalry<br />Threat of Substitutes<br />Threat of Buyers<br />Threat of Suppliers<br /><ul><li>Conclusions
  3. 3. Sources</li></li></ul><li>1. Airline industry: one of the least profitable industries...<br /><ul><li>The International Air Transport Association (IATA) forecasted losses of $4.7 billion in 2009.
  4. 4. Industry revenues expected to fall by 12.0%.
  5. 5. Between 2000 and 2009, airlines lost $49.1 billion, which is an average of $5.0 billion per year.</li></ul>Sheshi, Jolic, Iruretagoiena<br />
  6. 6. 2.1. Porter’s 5 Forces: Theory<br />Level of Threat in an Industry<br />Five Forces Model of Environmental Threats: Adapted from Strategic Management and Competitive Advantage: Jay B.Barney, William S.Hesterly<br />Sheshi, Jolic, Iruretagoiena<br />
  7. 7. 2.2. Porter’s 5 Forces: AI<br /><ul><li> Intense rivalry leads to</li></ul> price competition<br /><ul><li> High ratio of fixed costs
  8. 8. Lots substitutes (train, ship, etc.)
  9. 9. Suppliers bargain away</li></ul> most of profits<br /><ul><li> Not concerned about</li></ul> small airlines.<br /><ul><li> Possibility to rent a</li></ul> plane, lease a gate,<br /> or start-up with one<br /> single plane<br /><ul><li> High price sensitivity</li></ul>Sheshi, Jolic, Iruretagoiena<br />
  10. 10. Europe’s largest low fair airline.<br />Headquartered in Dublin, Ireland and employs over 6,600 people.<br />Some of its major competitors include, Aer Lingus, Air France, British Airways, easyJet, Lufthansa, and Alitalia.<br />Adapted from: Datamonitor Company Profiles<br />Sheshi, Jolic, Iruretagoiena<br />
  11. 11. 1. Threat of Entry<br />High capital investment<br />Restricted slot availability makes it more difficult to find suitable airports<br />Compete on limited routes<br />Capital Intensive<br />Sheshi, Jolic, Iruretagoiena<br />
  12. 12. 2. Threat of Rivalry<br />The market of low-fare airlines is highly competitive<br />Rivals: Aer Lingus, Easy Jet, Air Berlin, German Wings, Virgin Express, Air France, Lufthansa<br />Policy of bundling low frills and low prices together as an advantage<br />Low levels of existing rivalry for Ryanair<br />Sheshi, Jolic, Iruretagoiena<br />
  13. 13. 3. Threat of Substitutes<br />Substitute products or services are determined by different factors such as current trends, brand loyalty or change in technologies <br />Alternative products with lower prices and better performance<br />Substitutes: trains, ferries, buses, cars and other low fair airlines <br />Global environmental awareness, economic downturn<br />Sheshi, Jolic, Iruretagoiena<br />
  14. 14. 4. Threat of Buyers<br />Buyers have a big power (price)<br />Ryanair’s extra fees policy<br /> “If you want good service, go to someone else. […] You only fly with us because we’re cheap.”<br /><ul><li>Other companies focusing on the Social Media strategy“If Ryanair embrace social media it could be a good opportunity for them to […] update their reputation.”</li></ul>Sheshi, Jolic, Iruretagoiena<br />
  15. 15. 5. Threat of Suppliers<br />Different suppliers historically: Embraer EMB 110 Bandeirante, Hawker Siddeley HS 748, BAC One-Eleven, ATR 42, Boeing 737-200, Boeing 737-800<br />Ryanair, a valuable customer for Boeing (2009)<br />Negotiations with the suppliers when talking about innovation in designs (“stools with seatbelts”)<br />Sheshi, Jolic, Iruretagoiena<br />
  16. 16. Opportunities and Threats<br />Opportunities:<br />Economic downturn<br />Growing demand for low cost airlines<br />Increase the frequency of existing routes<br />Expand in the EU zone<br />Threats:<br />Increase in low fare competition<br />Fluctuating oil prices<br />Threats to security<br />Global environment awareness, involvement of airlines in EU emission trading system<br />Sheshi, Jolic, Iruretagoiena<br />
  17. 17. Conclusions<br /><ul><li>Airline Industry had important losses
  18. 18. High competition between airlines
  19. 19. Customer loyalty based on low-cost
  20. 20. Alternative products
  21. 21. Further negotiations with suppliers
  22. 22. Analysis of the Opportunities & Threats</li></ul>Sheshi, Jolic, Iruretagoiena<br />
  23. 23. Sources<br />http://www.ethicalcorp.com/content.asp?ContentID=7112<br />http://www.utalkmarketing.com/pages/Article.aspx?ArticleID=17218&Title=What_Ryanair%E2%80%99s_social_media_strategy_means_for_the_wider_travel_industry<br />http://econsultancy.com/uk/blog/6195-ryanair-marketing-genius-or-reputation-madness<br />http://www.supplymanagement.com/news/2009/ryanair-cancels-boeing-order/<br />http://www.supplyexcellence.com/blog/2009/07/07/ryanair-boeing-standing-stools/<br />http://www.501places.com/2010/09/customer-loyalty-have-ryanair-got-it-right-after-all/<br />http://www.ihateryanair.org/<br />http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=6&hid=110&sid=f898526e-eb62-40f0-9d54-b2818206b890%40sessionmgr12<br />Sheshi, Jolic, Iruretagoiena<br />
  24. 24. THANK YOU FOR YOUR ATTENTION!<br />Sheshi, Jolic, Iruretagoiena<br />

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