Business analysis of ryanair.

Despite the economic slump and the sluggish recovery of economies in Europe, Ryanair has continued to grow traffic by gaining substantial market share from BA (British Airlines), Lufthansa and Air France. In the four months of the 1st half of fiscal year 2010, Ryanair had already reached 36.4 million passengers which was a 15% significant increase from the first five months of fiscal year 2009. The load factor, which shows the probability of continued increase, has been found to be stable at 85%. Conservative estimates by Ryanair executives and industry analysts indicate that the number of passengers for 2010 can be as much as 66 million (CAPA, 2010a). The main reason for this growth is that as people have lesser disposable income, Ryanair’s fares become a wise choice for the thrifty customer. Figure 1 provides historical data on the total number of passengers served per year from 2006 to 2010:

Ryanair’s strength also lies in its cost discipline attitude that enabled it to post industry leading profit margins in the 1st Quarter of 2010 with 20% and expected to grow reach 30% points by the 2nd Quarter while other competitors are posting negative profit margins. Despite suffering from a 2.0% Euro revenue reduction in the 1st half of 2010 compared to 2009 as a result of declining average fares, Ryanair managed to offset this and post positive net profit margins by a 17% reduction in operating expenses. Critics argue that this reduction was primarily due to a 42% reduction in fuel costs. Fuel constitutes 35% total operating expense. Nonetheless, the company had also achieved significant cost savings by reducing airport and handling costs at individual airports by implementing web check-in initiatives. This initiative alone was estimated to cut costs by 50 million Euros each year.

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