The Ryanairs Low-Cost Airlines Pricing Strategies - Case Study Example

The Ryanair’s Low-Cost Airlines Pricing Strategies Executive Summary The study analyzes the pricing policy that was adopted by Ryanair. Ryanair is the main Europe’s low-cost carrier. Recently, air passenger transport industries have been revolutionized by the entry of the carriers that are relatively cheap in the market. Ryanair is one of the low-cost carriers introduced in US by the Southwest in 1992 (Alessandro 2008, p115). However, the company received competition from the Easyjet. It is the stunning results of the low-cost carriers that have striked the desire for study or research by the academics. The business operates with low-cost models that enable them to lower their prices. However, the low-cost carriers do not have some of the comforts like in the previous carriers. It is due to the elimination of such comforts that allow them to offer cheap flights. Many studies have extensively analyzed the low-cost business attaching to them the directives of the low-costs as well as the entrepreneurship’s roles in the Industry. One of the reasons behind the success is the existing containment of costs. One of the key factors is the passengers’ willingness to pay despite the ever changing prices, unlike the “traditional” passenger. In the airline businesses, the revenue maximization is linked to the maximization of profit from each flight in the industry (John 2013, p123). Today, a significant factor in the choice carriers is represented by pricing. The full-cost carriers choose Price discrimination techniques depending on the different fare classes, overbooking techniques and customer loyalty schemes. On the contrary, the low-cost carriers use dynamic pricing. It is because of the dynamic pricing that enable people to purchase air tickets for less than V10.00 with the exception of the taxes to various European destinations. This paper focuses on the low-cost carriers pricing policies, providing an extensive analysis of the Ryanair. Ryanair is the primary founder and developer of the European cost carriers.Ryanair is at profit maximization while the passengers prepare to incur the high costs whenever the flight date approaches. The study aims at identifying the contextual and competitive factors behind the option of average fares together with the relative changes in the foods. The study concentrates or focuses on the pricing policies of Ryanair compared to the characteristics or state of the company’s airport network. The results show that fare system is innovative of the pricing strategies in the previous years. In addition, the fares depend on the prevailing competitions from other companies. Literature Review and Conceptual Model The study refers to two major literature fields. They include the dynamic pricing techniques and the model of the low-cost business. The interest of the study is to establish the reasons behind the extraordinary performance of the low-cost carriers in the air flight industry. The other interests include the air industry’s average profitability compared to the current trend. Researchers have carefully examined and investigated the cost-effective policy that facilitates the models of the low-cost businesses. John (2013, p123) focused specifically on cost benefits can be derived from the cheap carriers out of their operational choices. According t them, no single element drives the competitive advantage in the air transport industry. Instead, the cost benefits are attributed to the all the options available in the market. From Longitudinal survey approach, the brand image focus and productivity are crucially associated with the financial distress. On the other side, the market-share is linked to the financial distress. The first company’s which experienced competitive advantage explains the possibility of maintaining leadership ion the low-cost business. In most cases, such companies, for instance, Ryanair had first-hand information from their experience in the market. Therefore, it is possible to lead the team for a better part of the competition. However, a good low-cost strategy could never be reused by the other company’s hence the success. Deviation from the initial low-cost business models impacted the cheap companies (John 2013, p125). .Therefore, there is need to investigate the different strategies used by the carriers before trying them out keenly. The replicated strategies do not work well the much low-cost businesses failed or could not maximizing profit. The other important element for this study is the revenue analysis. It is the revenue generation that distinguishes the full-cost airlines from low-cost carriers. Studies show that both full-cost airlines and the low- cost carriers both consider the pricing strategy important in managing their businesses. For instance, both employ sale of tickets via the internet which has seen the prices decrease (OECD 2010, p10p). The results can be attributed to the existence of the ‘‘efficiency of electronic markets’’. The low-cost model success is dependent on the fragile balance that exists between load factors, fare levels, and operating costs. The revenues structure, as well as the price determination, are equally significant just like the cost minimization in profits equations. The aim of the extensive analysis of the policies and the fare levels is to understand the major factors that contribute to the achievement of the low-cost carriers. The analysis als helps in understanding the existing competition between the low-cost carriers. In the thorough market competitiveness evaluation, there is need to consider the fire dynamics. This work analyzes Ryanair's pricing strategies against its operating contexts. First, the study handles the demand curve that is derived from the Ryanair's prices Alessandro 2008, p114). In explaining the foundation or basis of the study are the macroeconomic principles that are provided by dynamic pricing. , airlines handle perishable goods that are sold at different times and places with the aim of profit maximization. The provision of the sales during a flight can be strictly compared with the sale of the perishable goods. The pre-determined capacity and conditions must, however, be taken into account. The literature investigates the themes of yield management and dynamic pricing. I have singled out the conditions necessary for an optimal dynamic pricing. The other part of the literature discusses on optimal pricing policies since demand influences the price trend. The studies mentioned above assume a cost function that is continuous. Other studies also guess the existence of limited price ranges. However, the present study uses a continuous function since Ryanair offers wide price ranges (Alessandro 2008, p112). The focus on price dynamics leads to many interesting questions. Quite a number of travelers are now well conversant with the increasing prices or fares as the flight approaches. According to…..price trend depends mainly on the existing trade-off between the high risk of seats unavailability and the potential price waiting. In this case, the series of minimum prices is determined by the demand curve’s functional form as well as the overtime adjustment of the demand curve. The study analyzed the actual price ranges on all the Ryanair's routes extensively. The aim is to validate the hypotheses made during the study o fit the comprehensive empirical sample. The inferences about the booking trends are made possible by the estimated demand curves. In goods that have a deadline, there is the possibility of defining and implementing optimal pricing strategy. The presence of the competitors in the market influences the demand structure. In addition, the opportunities for the travelers to opt for an alternative flight also affect the structure of demand. The classical studies have focused on the average fare levels without considering the available options provided by the full-cost competitors that change the low-cost carriers (OECD 2010, p107). Indeed, the cheap pricing strategies have not been widely studied in most cases. Studies have examined and investigated the fare evolution on London-Paris route. Due to indirect and direct competition, the traditional model do not apply in this case. The availability of other airlines that can affect the low-cost carriers pricing strategies has not been established (Dillingham 2008, p101). Studies on the analysis of routes such as the Nottingham East Midlands route to the airport have only revealed an impact of the price competitive structures. Historically, the fare patterns offered by the airlines are vital in price leadership situations. Price leadership is where an a stronger airline sets the prices that are then followed by the other airlines.in examining the Amsterdam-London and Berlin-London routes, it was founded that full-cost and low-cost markets separately coexist. Therefore, cheap carriers among themselves just like the full-cost carriers. The reason for the isolation is the distinct levels of services between the carriers. Methodology and Instruments A convincing project proposal must have a proper method. This part is divided into three parts or aspects: method of data collection, method of data analysis, questionnaire analysis and interviews. The primary collection of data and analysis adds to this list. For instance, the survey on “your journey by Ryanair plane”. This is a supplementary for questionnaire’s design and planning in the methodology section. Survey questionnaire entails the questions in writing for collecting information about Ryanair’s operations. Data Collection Method The research will employ both secondary and first resource….lower pricing theories searched above are to ensure Ryanair's pricing strategy research impacts. -         First of all, industry news and industry report will be mainly gathered through the internet. This will help in studying the effects of Ryanair's lower price strategy on its competitiveness. -          Resources of Ryanair including the lower pricing strategy and annual report will be gathered through Ryanair's website and database. This will allow the discussion of Ryanair's profit earning as influenced by the lower pricing strategy. -          Moreover, 250 pieces of the named questionnaire will be distributed at the airports to collect particular data that support the research’s objective of “Impacts of Ryanair's lower pricing strategy on its target consumer focusing”. Data Analysis Method Both qualitative and quantitative methods are used in analyzing the data in this report. Qualitative analysis, also called non-quantitative analysis relies on the practical experience, analysis capabilities, and subjective arguments to infer the developments trends and nature of things. This method belongs to prediction analysis methods. Here, the qualitative analysis is for summarizing Ryanair's strategies used to the competition. It will be used mainly in the literature review. The quantitative method will be used to study specific objects in general so as to obtain overall statistical results. Here, the quantitative analysis is used for data percentage analysis (Broadbent 2009, p39). Preferably it will be used in the sections of questionnaire result analysis and the market analysis. The later quantitative competition result analysis will be used to evaluate Ryanair's competition strategy success more clearly and numerically.  Sample questionnaire will be used since it has many advantages. First, the questionnaire is simple and easy to operate. Secondly, questionnaires ensure more reliable data since the problem has fixed choice answers. Therefore, surveys reduce the differences resulting from the variations. Lastly, the use of questionnaires promotes simple data coding, interpretation, and analysis. This is because the survey uses sample representative. Questionnaire Analysis The research releases 250 copies of questionnaires by posting or distributing to Ryanair’s customers present at the airport.However, the collection is 238 copies only. Hence, there is 95% recovery rate. The composition of the survey Questionnaire People are carefully tasting and experiencing Ryanair's lower price strategy; there are various things worth learning. The set questionnaire will illustrate some clues tin support of more moderate pricing strategies by Ryanair Without the exception of Ryanair airlines’ age-oriented customer groups (question 1), usual travel frequency per person (question 2), the customers’ methods of booking (question 3),customers’ selected cabin rank (question 4), customers’ travelling purpose (question 5), customers’ ticket reimbursement plan (question 6), reasons for choosing Ryanair (question 7), comfort during the ride (question 8), and finally whether the price of drink or food is reasonable (question9).These are the important factors associating with successful lower price strategy of Ryanair.   Survey Questionnaire’s Data Analysis Your Age: After analysis the results are: Ryanair’s customer comprises of young people. Customers’ ratio ages from 22-34 stands for 30. 35-44 34.6% was accounted for 5%. Air Travel Times in Recent one Year They regularly travel by plane. About 90% boarded the airlines ten times in last one year. How did you obtain your ticket? Most of them book on the net.   Which chamber did you board? About 50.4% prefers economy class cabin. The objective of your Journey: They had different purposes including touring and doing business Source for the money for ticket paid by themselves Reasons for preferring the Flight (Multiple Choices) Frequent Flier Card, Discount Ticket, and Service were the main reasons though the facilities were not as anticipated.   Comfort about Ryanair Only 23.4% agreed on Ryanair's comfort. Ryanair's food prices 46.2% thought the food is expensive. Interview I will carry out a formal interview in collecting secondary date for the research. The airport officials including the cabin crew are the people who will be interviewed. Work Plan Date Activity Designing the project proposal Data Collection Data Analysis Report Writing In the work plan, I require adequate time to allow the sequential stages as illustrated above. The activities may take 1-2 weeks. Budget Item No. of Items Total cost Questionnaires 250 $ 250 Remuneration of research assistants _ $ 1000 Stationary _ $ 30 Transport _ $ 50 TOTAL $ 1330 The research requires questionnaires, stationary, fare expenses and remuneration rewards. As indicated above I will need a total of $ 1330 to carry out the research. However, there s need for allowances for the research assistants whenever they go out to collect the data. Such benefits are meant t motivate the officials perform to their best. The research requires an individual who is relevant to the data collection methods. I have more information on the various methods of data collection, hence qualify to lead the proposed research. In addition, the research needs someone is familiar with the Ryanair airport for extensive data collection. Again I am familiar with the airport. Bibliography Dillingham, G. L., 2008. Aviation and the Environment, available at:http://www.gao.gov/new.items/d08706t.pdf Broadbent, S., 2009. Ryanair Hit out at British Airways Iberia Merger, Available at http://news.dealchecker.co.uk/Ryanair-Hit-Out-at-British-Airways-Iberia-Merger-0111353842645.html OECD, 2010. Guidelines for Cost-effective Agri-environmental Policy Measures.New York, NY; OECD Publishing. Ben-Yosef, E., 2009.TEvolution of US Airline Industry: Strategy and Policy, Netherlands: Springer Alessandro. C., 2008. The Airline Industry: Challenges in the 21st Century. Springer Science & Business Media. Christoph. M. L.,2011. Ryanair and strategic analysis: An analysis on the.Malaysia; GRIN Verlag. John. M. C., 2013. Why Europe Matters: Case for European Union. USA; Palgrave Macmillan Ben-Yosef, E., 2010.Evolution of Airline Industry: Strategy and Policy, Netherlands: Springer Scott. C & Janet. T., 2012. Environmental Economics and Management: Theory, Policy, and Applications. Boston, MA; Cengage Learning Volker. K. P., 2013. Low-Cost Business: A Focus on Germanwings Strategy. Malaysia; GRIN Verlag. Appendix  1．Your Age： 16-21 22-34 35-44 45-54 55-64 Over 65 2．Air Travel Times for the Recent one Year 1-3 4-6 7-9 10-15 Over 15   3．How did you obtain your ticket?   Ticket Booking Office  Online Booking  Phone Call Booking 4．Which chamber did you take? First Class Business Class Economy Class 5．The Purpose of Journey: Business Touring Others 6．Source of the money used in ticket Paid by Employers Frequent Flier Award Paid by Yourself Others 7．Reasons for the preferred Flight (Multiple Choices) Airlines Reputation Safety Flight Schedule Flight Punctuality Aircraft Type Service Frequent Flier Card Discount Ticket Travel Agency Arrangement 8．Comfort about seat of Ryanair Satisfied Generally happy Is not concerned 9．Food prices of Ryanair Satisfied Generally happy Is not concerned Generally expensive   8．Comfort of Ryanair’s seat Satisfied Generally happy Is not concerned 9．Ryanair’s food prices Satisfied Generally happy Is not concerned Generally expensive Read More