Introduction
RyanAir is one of the world’s most famous ultra-low-cost airlines, providing transportation to over 40 countries in Europe, as well as several destinations in Africa and the Middle East. The company operates a large fleet of Boeing 737-800 aircraft, and was the largest budget airline in 2016 based on the number of international passengers flown (Rodríguez-García et al., 2020). RyanAir has over 17,500 employees and achieved its peak revenue in 2019, scoring at 9.5 billion dollars.
With the beginning of the COVID-19 epidemic, however, the company’s profits suffered a near 70% decrease, dropping to 3 billion dollars by the end of 2020 (Rodríguez-García et al., 2020). With vaccines being introduced to populations and borders slowly reopening, the question of whether Ryanair will be able to regain its dominant position in the market remains open.
Strategic Positioning
The airline industry has suffered a major blow during the COVID-19 pandemic. Many countries have prohibited flights for prolonged periods of time, significantly curtailing the number of passengers and revenue provided. Super-low-cost carrier companies were hit the most, as their business model relies on the volumes of transportation. Luxury and premium-based companies, such as Virgin Atlantic, Emirates Airlines, Singapore Airlines, and others were hit slightly less, as a certain minimum of air transportation had to be reserved for political and business leaders (Prichinet & Le Duc, 2020). The overall number of passengers in 2020 dropped 70% across all carriers, when compared to 2019. This increased the competition among the companies while significantly curtailing the size of the market.
Porter’s Five Forces consist of competitive rivalry as influenced by four other positions: supplier power, buyer power, thread of substitution, and thread of new entry (Ellis, 2020). As it stands, competitive rivalry is high, as motivated by low supplier power, high buyer power, and potentially high tread of new entry in the future (Ellis, 2020). The chance of substitution remains low, as air travel remains the fastest and most convenient way of getting across large distances. Low supplier power is justified by the fact that companies have an overabundance of plains compared to the number of allowed routes, as a result of restrictions and quarantines (Prichinet & Le Duc, 2020).
Supplier power decreased due to a lack of need for many planes to keep expanding until COVID-19 is over. Buyer power increased due to the fact that low-cost customers were largely cut off from traveling, and premium class customers remained capable of choosing between the remaining ones (Prichinet & Le Duc, 2020). Threat of new entry is at all-time low due to market shrinking by 70%, while supply remained largely the same (Rodríguez-García et al., 2020). The factors most relevant to RyanAir’s situation include buyer power and increases in competition.
The firm’s capabilities revolve around ultra-low-cost services, providing bare-bones traveling for extremely cheap. RyanAir’s strategy was not easy to imitate not because of specific company practices but because of a necessity to invest in planes – new entrants to the airline industry are few, and those already existing have their niche (Prichinet & Le Duc, 2020). The firm’s unique capabilities are not a good fit at this time, due to the volumes of traveling having been cut (Prichinet & Le Duc, 2020). The position of the company’s competitors that feature a more balanced number of services, including luxury traveling, is better, as they can tap into the less-restricted luxury market for businesspeople, politicians, and the like.
Synthesis of Competitive Positioning
Ryanair is in a position of weakness right now, having lost approximately 70% of their revenues in the past year. At the same time, the company managed to survive, and has most of its huge airpark of 400-500 planes intact (Prichinet & Le Duc, 2020). Their smaller competitors running fleets of 1-10 low-cost planes did not survive the crisis, resulting in a drastic reduction of potential low-cost offerings in the future (Prichinet & Le Duc, 2020).
Once the COVID-19 crisis has passed, Ryanair would be in the position, along with other survivors of the crisis, to retake the vastly-expanding market of airline travel. Customers are showing to be travel-starved, so a tourist boom is expected as soon as COVID-19 becomes less prevalent due to world-wide vaccination and immunization efforts (Prichinet & Le Duc, 2020). However, if the existing pandemic lasts for 2-3 more years, RyanAir will be at a disadvantage due to not having adapted to the crisis in time, resulting in company downsizing and a substantial market loss.
Conclusion
RyanAir was one among the many airline companies that suffered greatly from the restrictions placed upon traveling due to COVID-19. They suffered more than the mixed airline companies due to their sole focus on super-cheap low-cost business model, which relied on volumes of passengers to make ends meet. Without these volumes, RyanAir lost 70% of its income, dropping from 9.5 billion dollars to merely 3 billion dollars of revenue for the past year. The unique qualities the company possesses do not allow for seamless adaptation to the COVID-era market. However, there is the potential to wait out the crisis and gain momentum once it is over. The dangers of such a strategy would be further losses if the crisis prolongates and low-cost traveling becomes an unsustainable model.
References
Ellis, D. (2020). Developing a strategic framework of analysis for air transport management. Transportation Research Procedia, 51, 217-224.
Prichinet, G. C., & Le Duc, N. (2020). Strategic analysis of Ryanair. Web.
Rodríguez-García, M., Orero-Blat, M., & Palacios-Marqués, D. (2020). Challenges in the business model of low-cost airlines: Ryanair case study. International Journal of Enterprise Information Systems (IJEIS), 16(3), 64-77.