Leveraging market position to drive revenue
Ryanair has the leading market share on most of scheduled routes between Ireland and provincial cities in the UK, carrying approximately 43% of all scheduled passenger traffic between Dublin and London. Additionally, the company has more than 45% market share on scheduled routes from Dublin, which include London, Manchester, Glasgow and Edinburgh, and London, which include Venice, Rome, Milan, Hamburg, Valencia and Gothenburg, as of January 2005. (Datamonitor, 2005) Ryanair has also been voted as the airline with the best punctuality highest frequency which, combined with the company’s leading market position, provides the company with the ability to leverage its market position to further expand its operating network.
Ryanair has also been reporting strong revenue growth since fiscal 1999, and the company reported revenues of 1336.6 million Euros during the fiscal year ended March 2005, an increase of 24.4% over 2004. (Ryanair, 2006) The increase was primarily attributable to an increase in passenger volumes, which increased by 19% over 2004, and the company’s revenues increased at a compound annual growth rate of approximately 28.6% from 1999 to 2005, despite the overall fall in air travel during that period (Global Market Information Database, 2005). Additionaly, Ryanair’s net income increased at a compounded annual growth rate of 29.1% from 1999 to 2005. Thus, the company’s strong consistent financial strength provides its operations with financial stability and the ability to fund its expansion strategies.
Ryanair thus has an extremely strong and aggressive business strategy, which is focused on its objective to firmly establish itself as Europe’s leading low-fares scheduled passenger airline. The company offers low fares designed to stimulate demand, particularly from fare conscious leisure and business travellers. (Ryanair, 2006) The company favours secondary airports, as they are generally less congested than major airports and can be expected to provide higher rates of on-time departures: the company can thus achieve faster turnaround times and fewer terminal delays and gain competitive handling costs. (Datamonitor, 2005) The strategy has enabled the company to have a better ‘on time’ performance record, than its bigger competitors. In addition, Ryanair enters into agreements with third party contractors to handle passenger and aircraft handling, ticketing and other services, and the company fixes its contracts on competitive terms by negotiating multi-year contracts, at prices that are fixed or subject only to periodic increases linked to inflation. Ryanair’s strong business strategy thus enables the company to synchronize its operational strategies in accordance with the market requirements, thereby enabling the company to maintain a cost effective business strategy.
Hedging against external threats.
Crude oil prices are at an all time high: in March 2005, light crude oil prices climbed to $55.40 per barrel after peaking at $56.1 per barrel. Additionally, jet kerosene prices have increased by over 80% from 2004. In order to protect their operations from significant volatility, airlines have fairly robust hedging positions, as the volatility in oil price and availability of jet fuel significantly affects operations. Although its European competitors have traditionally been sufficiently well hedged against volatile oil prices, Ryanair has always been unhedged. As of April 2005 the company was not covered by any hedging protection against oil prices however, as of November 2005, Ryanair hedged 90% of its estimated demand for the second half of its fiscal year, at prices corresponding with oil averaging $49 per barrel. Part of the carrier’s strategy is now to build hedges forward, and its financial prowess means it has the cash position to succeed. (Fiorino, 2005)
The company’s revenues are also highly dependent upon revenues from the UK and Irish market: historically the company has generated over 50% of total revenues from the UK. For fiscal 2003 and 2004, passengers on Ryanair’s routes between Ireland and the UK accounted for 35.9% and 28.6% of total passenger revenues respectively, with Dublin and London accounting for approximately 13.4% and 10.7%, respectively. Additionally, total passenger revenues, and the Dublin-London route accounted for approximately 7.6% and 6.0%, respectively. (Datamonitor, 2005) The company’s dependence on Ireland and the UK, could significantly impact the company’s revenues due to regional factors, and thus although Ryanair is also attempting to increase its market share as a whole, it is specifically attempting to do this into more diverse areas, such as Eastern Europe, in an attempt to reduce its exposure to the demand changes in the UK and Irish market.
Ryanair’s primary business strategy has always been to fly as many passengers at as low a cost as possible (Ryanair, 2006). Despite the fact that passenger numbers are generally not increasingly significantly (Global Market Information Database, 2005) and the fact that Ryanair has been forced to divert some of its resources to hedging, due to market conditions (Fiorino, 2005), this strategy still forms the core of the airline’s business model, and is often viewed as the company’s core competence (Johnson et al, 2005) Given that revenues, profits and passenger numbers have soared over the past few years, despite the uncertainty in the external environment (Datamonitor, 2005), this analysis concludes that, not only are Ryanair’s current strategies hugely successful, but they will continue to be for the foreseeable future.
History of Malaysia Airlines
Basically, Malaysia Airlines was established from a joint initiative and venture of Imperial Airways and the Ocean Steamship Company of Liverpool, the Straits Steamship of Singapore. This collaboration had piloted to a proposal towards the government of the Colonial Straits Settlement (CSS) to operate an air services between Penang and Singapore as these states are very well-known during that very era. On 12 October 1937, the agreement had result the incorporation of Malayan Airways Limited (MAL) which is also the pioneer company for airlines industry in Malaysia during that particular time. Moreover, MAL had been brought to the skies with its initial commercial flight as the national airline of Malaya on April 1947. Equipped by a well-defined and vibrant team of visionaries, MAL had successfully become a major player in international airlines industry in less than a decade.
In addition, after the formation of Malaysia back in the year of 1963, the airline company had altered its name to Malaysian Airlines Limited (MAL) and directly became the first national carrier of the country. Just within 2 decades, MAL had consistently grew from a single aircraft company into a company with more than 2,400 employees and engaged the then newest 6 F27s, Comet IV jet aircraft , 2 Pioneers, 8 DCs and so forth. However, the whole aviation platform in the industry had changed with the separation of Singapore from Malaysia in the year of 1965. With this unfavorable situation, MAL became a bi-national airline and was further renamed as Malaysia-Singapore Airlines (MSA). Furthermore, a new business mission was introduced and the airline developed significantly with new routes to Perth, Taipei, Rome and London. Moreover, in 1973, the partners went separate ways and this had directly led to the formation of Malaysia Airlines (MAS) which served the country till today. Nowadays, Malaysia Airlines flies almost 50,000 passengers daily and cover more than 95 destinations, cover across six continents while operating from its primary hub at Kuala Lumpur International Airport (KLIA), Kuala Lumpur.
On top of that, Malaysia Airlines holds an excellence record of service as the company has prouldy received more than 120 for the past 10 years since its establishment. Specifically, the most notable recognitions is the “World’s Best Cabin Crew” by Skytrax UK consecutively from 2001 until 2004, Number one for “Economy Class Onboard Excellence 2006” and “5-star Airline” in 2005 and 2006 as well. This credit will only applied to the other three airlines in the world and Malaysia Airlines was also ranked second among 88 contenders in Aviation Week’s Top Performing Companies, which measures the financial viability of an airline.
Type of Business of Organization
Initially, Malaysia Airlines (MAS) have it own humble beginning since its incorporation until today. MAS have been well- perceived as the services company due to its nature core of business. Loads of achievements have been experienced by MAS due to its outstanding and remarkable services in the airline Industry. From a small private-owned company since its establishment, MAS had consistently growth to become one of the multinational companies in Airline Industry. This had shown that the services provided to its prospects had been well-accepted and recognized. Moreover, MAS is a public listed company that listed on the stock exchange of Bursa Malaysia under the name Malaysian Airline System Berhad. With the well projected business mission and goals, MAS had owned numbers of subsidiaries namely such as MASkargo, MAS Aerospace Engineering, MAS Academy Sdn. Bhd., MAS Golden Holidays Sdn. Bhd., FlyFirefly Sdn. Bhd., and newly created company MASwings.
Malaysia Airlines business environment
Basically, MAS is operated on the service-based entity that accommodates its customers with the excellence flying experiences. The services provided are always being reviewed from time to time as to stay relevant to the requirement from the customers. Moreover, the target market for MAS are consists of all the customers from the high-end till the low. This approach had been executed with the introduction of sales promotion via media and the establishment of subsidiaries within its business. Therefore, all customers can enjoy the five star services at the low price whenever they fly with MAS. On top of that, the main competitors for MAS are consisting of low-cost carrier such as Air Asia, Singapore Airlines, Thai Airlines and so forth. Therefore, due to the high numbers of competitors, MAS has continuously introduced its turnaround plan and its marketing strategy as to stay competitive in the Industry. Hence, with the well projected plan and initiatives, MAS has shown a great reputation and successfully captured the market in South East Asia countries.
Company Mission and Objectives
Malaysia Airlines Mission
To champion the meaning of fly code (Malaysian Hospitality, MH) and provide air travel and transport service that rank among the best in terms of safety, comfort and punctuality.
To generate sustainable value for its stakeholders and offer the highest quality of care and services to its customers.
To continuously explore innovative ways of doing business and stay relevance to its core and inspiring motto; “Go Beyond Expectation”.
To provide a growth-oriented workplace that recognizes the interests, rights and ideas of its employees as well providing a corporate environment that encourages high integrity and ethical standards; and ensures compliance with all regulations and laws.
Malaysia Airlines Objectives
The primary objectives of the company were to furnish the people of Malaysia with a proficient and profitable air transport system which would enhance the placing of the country in the world. Moreover, as the Malaysia flag carrier, Malaysia Airlines had played a vital role in contributing to the economic and social integration of the country as a whole. Malaysia Airlines will consistently commit to its planning as to maximize market penetration with a reasonable number of aircraft type and fleet resources.
Business Strategies and Success factors