The billion. The top three most profitable airlines
The major engine that powers the globalization of businesses is the airline industry. Before the 70s, the airline industry was mainly owned and managed by government. Therefore, there was no free market competition and there were few airlines. However, after a deregulation that included the airline industry worldwide after 1970’s, entrance barriers lowered. Consequently, this created the opportunity for many new start-ups of airline companies, thus engendering the competition in the industry.
Especially, this had lead to a competition on the prices and services provided on-board. Yet not excluding many other fronts.
In the middle of this competition, in order to survive, arises the need for re-strategizing of the existing and new start-up airline companies. The wielding environment of the airline industry is continually evolving, herewith composing an impressive challenge for the survival of the industry.
European Carriers had a successful year in 2015. Despite low economic growth, they achieved an operating profit of : $ 7.4 billion in 2015, by surpassing that of 2014’s which was: $ 1 billion.
The top three most profitable airlines of Europe were: Lufthansa, Ryanair, and IAG.
But the main question is whether the dramatic changes will continue in the future. In point of fact inputs, such as fuel, labor cost and aircraft leasing, can become much more expensive, in the near future resulting in a slowdown in this growth. Yet, not ignoring the fact that also an explosive growth can become a threat to the low-cost philosophy, and induces higher wages and a more compound management structure
Air traffic is programmed to grow in the long-term, driven by global GDP growth.
Anyway, an another possible scenario for the European market that has reached a certain level of maturity, as in any competitive market, of short-term excess capacity, and then bankruptcies, mergers and takeovers can occur.
Value: The most significant capability that Ryanair posses , and which gives value to customers, but also meets customers’ critical factors are low-cost flights. Which, thus consequently gives competitive advantage for the company. Ryanair’s cost-conscious culture, and size, lower its costs compared to competitors and addresses opportunities of low-priced fares that competitors do not attend to.
Rarity: Bases of value creation at Ryanair that are rare include short-haul flights with a single type of air-craft Boeing 737, and flying between secondary airports. Flying point to point allows it to quickly turn around flights. It gets 50% more flying hours per day out of its aircraft than its hub-and-spoke rivals. And flying between secondary airports far away from the central city, keeps Ryanair in the way of offering up to 30% lower fares for customers, yet of course providing significant savings for Ryanair. These, we can assume that represent competitive advantage for the airline company.
Inimitability: Capabilities of Rynair that cannot be imitated by its competitors, or it would be difficult for such a thing, are its aircraft, human resources and brand.
Aircraft is possibly difficult to substitute, that’ why it can be classified as rare. And furthermore Ryanair’s aircraft Boeing 737 adds value as a lower-cost airliner, delivering efficiency and probably the most important one, safety.
At Raynair, they greatly take advantage of their valuable, rare and inimitable capabilities through a great organization and management. Nonetheless also through controversial strategies of their CEO-s. Even that it may be considered as non-human and rude for passengers, in fact they find it convenient. For example, when recalling O’Leary’s statements that the average customer doesn’t deserve the baggage service treatment and therefore he should carry his bags or pay extra, consumers like the option of choosing with or without luggage, deciding based on their economic situation and preferences. This is also evidenced by the fact that although passengers have voted Ryanair the “least liked” airline in customer surveys, they continue to flock to its flights. And ultimately even that it is bad marketing, it still remains marketing.
As almost the majority of organizations in today’s dynamic market, Ryanair also faces challenges. A challenge that it is facing, is continually searching for new ways to lower costs, as an addition to competing with fellow no-frills airlines such as easyJet and Air Berlin. Without emphasizing its battle with legacy airlines such as British Airways.
Another challenge is improving the customer service. With new problems and increasing competition, there is a continuing need for customer service training and customer service seminars. They should remind the fact that competitors are always looking for ways to improve service. Good customer service is significant to retain customers and grow the business.