eg777er
Posts: 1782
Joined: Fri Feb 04, 2000 11:11 pm

Ryanair's Long Term Business Plan

Thu Jul 22, 2004 8:05 pm

Hi,

As I look at the latest incident involving Ryanair and BAA, in which the former is claiming that BAA are overcharging for landing fees contrary to an alleged agreement, it prompted me to put onto paper what I have thought for a long while.

Ryanair's low fares and business model are based on a fundamentally short-term series of 'deals' which will eventually come to an end, so ending their low fares and competitiveness.

For example, Ryanair do not have a unionised workforce. Once they reach a certain size, this will become inevitable. A unionised workforce will increase costs. Fares will have to rise.

The EU is outlawing all state support (i.e. route support) from airports. This has already caused Ryanair to pullout from Brussels-South. Fares will rise again when this is repeated across the continent.

I guess my point is that Ryanair relies on 'deals', either with its workforce, or BAA, or who knows how many other 'actors', that are unsustainable. When they have to take on the liabilities that other airlines do....like unions....then they won't be able to offer fares any lower than the competition.
 
7LBAC111
Posts: 2427
Joined: Sun Jul 18, 2004 9:17 am

RE: Ryanair's Long Term Business Plan

Thu Jul 22, 2004 8:09 pm

It does seem to make sense, and if that happens, people wont pay higher fares to fly to secondary airports.
Debate is what you put on de hook when you want to catch de fish.
 
greasespot
Posts: 2955
Joined: Sat Apr 24, 2004 10:48 am

RE: Ryanair's Long Term Business Plan

Thu Jul 22, 2004 8:14 pm

MOL will just shut it down at that point I think.

GS
Sometimes all you can do is look them in the eye and ask " how much did your mom drink when she was pregnant with you?"
 
matt777
Posts: 476
Joined: Wed Oct 24, 2001 8:55 am

RE: Ryanair's Long Term Business Plan

Thu Jul 22, 2004 11:42 pm

Ryanair will grow, employees may unionize, labor costs will get a bit higher, and then it depends on management what will happen. Or you increase fares or you start cutting other costs (are there things left to cut?).

Also if FR grows, it will achieve more economies of scales, reducing unit costs. So maybe there is a trade-off.

Anyway, if FR employees unionize, new competitors that don't have that high cost will give tough competition and may eat up FR's market share. But small carriers have other costing problems, such as low-pricey credit, high fixed costs (e.g. advertising).

I personally think that Ryanair does use it's power in someway to get rid of some expenditures, but their business plan is very precise and it has been proven that it works. Look at Southwest that it has several hundred planes and it still ensures low-cost low-fares.

Regards from Italy,
Matias  Smile/happy/getting dizzy
 
trent900
Posts: 496
Joined: Wed Dec 17, 2003 6:06 am

RE: Ryanair's Long Term Business Plan

Thu Jul 22, 2004 11:55 pm

Ryanair currently pay £20 to the cleaning company to clean each 737-800. As you can guess this company is making a loss out of it so have decided to cancel the contract (which will be cheaper to do then clean the aircraft). FR have now put tenders out to every cleaning company around but guess what, they told them go find someone else. Word spreads about FR's way of business so in the end no one will want to sign a contract with them. Is this the way to run a proper company? They seem to have forgoten that all the other suppliers that work with them are also trying to cut costs etc, etc. I think this will be part of their downturn.

Trent.
 
7LBAC111
Posts: 2427
Joined: Sun Jul 18, 2004 9:17 am

RE: Ryanair's Long Term Business Plan

Fri Jul 23, 2004 12:02 am

The sooner the better....

Can you tell I'm not an FR fan?
Debate is what you put on de hook when you want to catch de fish.
 
trent900
Posts: 496
Joined: Wed Dec 17, 2003 6:06 am

RE: Ryanair's Long Term Business Plan

Fri Jul 23, 2004 12:05 am

Im not an FR fan either and I even work for them ... does that make sense or what  Nuts

Trent.
 
LJ
Posts: 4103
Joined: Wed Nov 17, 1999 8:28 pm

RE: Ryanair's Long Term Business Plan

Fri Jul 23, 2004 4:41 am

Also if FR grows, it will achieve more economies of scales, reducing unit costs. So maybe there is a trade-off.

This is a popular misconception. Like every business, the airline business also follows the "law" oif diminishing returns. The "law" says that at a certain point the additional gain will become less and in a worse cse becomes negative if you grow.

Ryanair's cost structure will rise if only because its employees will earn more due to the fact they've worked more years for the company. You'll see this at any company after a few years.
 
ei2ksea
Posts: 436
Joined: Wed Jul 21, 2004 11:17 pm

RE: Ryanair's Long Term Business Plan

Fri Jul 23, 2004 4:44 am

For an economics lesson we could also talk of diseconomies of scale which build up as a company grows above a certain size. My trouble with Ryanair is that this conquer all attitude to the European market has to come to an end some day. The market is finite and with the number of bases and routes that they fly - surely there will be a time when they can expand no more?
Next Flight: DUB-BOS (EI), BOS-DEN-PDX (SWA), SEA-BOS (AS)
 
trident2e
Posts: 1286
Joined: Sun Dec 28, 2003 3:38 am

RE: Ryanair's Long Term Business Plan

Fri Jul 23, 2004 4:52 am

Eg777er - your post is factually incorrect. The EU is not outlawing route support, simply ensuring that all airlines have equal access to those deals. Ryanair has not pulled out of Brussels- South; it still operates on no less than 11 routes from there.

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