The Low Cost Airline Model

Southwest Airlines is a company that is known for its low ticket prices and profitability despite the highly risky industry in which it operates. This essay examines the cost behavior, cost volume profit (CVP), activity based costing (ABC), budgeting process, costing and decision making policies of the firm. The essay will discuss how the airline integrates these concepts in its daily operations.

Ryanair was established in the year 1985 by the RYAN family and has grown from a small airline flying a short hop from Waterford to London, into one of the Europe’s largest carriers. The company expanded and within 4 years it had 350 employees, 14 aircraft, and carried 600,000 passengers a year. It is currently serving to 26 European Countries with 148 destinations. It operates on 794 different routes daily serving by more than 1050 flights in a day. It has totally 169 aircrafts running for different routes with 5986number of employees working in it However, Ryanair’s costs rose drastically and it recorded losses of £20 Million sover four years despite its growth. Although consumers were continuing to fly Ryanair

Cathal Ryan and Declan Ryan have started Ryanair since 1985. For nearly a year, Ryanair had operated a 14-seat turboprop between Waterford and Gatwick Airport on the outskirts of London. The airline targeted low-fare segment market. It initiated service from London’s secondary airports. In terms of competition, Waterford and Gatwick didn’t pose any challenges.

A unique cost cutting policy would be the main core competence of Ryanair. It refuses to provide any meal vouchers or hotel accommodation for flights which are delayed or cancelled for reasons beyong Ryanair’s control in order to reduce the operating cost. (Ryanair, 2011) Meanwhile, Ryanair is using LFA business model to design the size of its

The strategic plan of Ryanair has been to establish itself as Europe’s leading low-fares airline.” Ryanair aims to offer low fares that generate increased passenger traffic while maintaining a continuous focus on cost-containment and operating efficiencies.” (www.ryanair.com)

Summary: Ryanair was founded in 1985 by the Ryan family to provide scheduled passenger airline services between Ireland and the UK, as an alternative to the then state monopoly carrier, Aer Lingus. It started out a full service conventional airline, with two classes of seating and leasing three different types of aircraft. However, despite growth in the passenger volumes financial problems were of a growing concern.

Ryanair consists of a centralised functional organisational structure. Normally, employees positioned within a centralised functional

Over the years, company sustained low operation costs and tickets prices following well-developed strategy. Among other measures, it was able to keep prices low by flying only one airplane type, minimizing service and maintenance expenses, and convincing employees to cut gate turn-around times and make the airline more efficient (Fitzpatrick, 2005).

The airline industry has always been a fiercely competitive sector. Since the invention of low-cost carriers, also known as no-frills or

The Airline industry has experienced continual problems with rising costs with both fuel and maintenance which has caused them to increase their fees to the consumers to pay for those rising costs. This paper will help explain what an airline such as Delta does to help alleviate such costs without forcing its consumers to flip the bill through high fees that consist of tickets, baggage fees and food. The costs of doing business in aviation today have spiraled out of control making it very expensive for both airlines and the

For the in-flight service, it is suggested that Ryanair should offer rental in-flight entertainments or internet services. As for a promotion, in the best case, it could offer a free flight or I£1 flight with limited seats to attract customers who never fly before or those who love travelling.

Set up in the year 1985 at a capital of 1 pound with a staff strength of 25, Ryanair is today the World’s favourite and most commonly used airline which operates more than 1,400 flights per day from 44 bases and 1100+ low fare routes across 27 countries, connecting 160 destinations. Ryanair operates a fleet of 250 new Boeing 737-800 aircraft and is expected to increase it by another 64 in 2 years. Ryanair currently has staff strength of more than 8,000 people. Its passenger base has been increasing

Ryanair is Europe’s largest low-fares, no-frills short-haul carrier. The organisation was founded in 1985 as a conventional airline but re-launched itself in 1990/1991 as a low-cost carrier, replicating American Southwest Airlines’ business model. Since then Ryanair has grown

Formulating an effective marketing mix is like cooking your favourite dish with the right ingredients in right quantities. Imagine what will happen if you are preparing your favourite desert and you put in a lot of salt instead of sugar, or making a savoury chicken and put in a lot of sugar and miss out on the spices? I bet these dishes will be disasters and they will rest in peace in your garbage bin.

The success of budget airlines forced traditional operators to lower their prices by adapting internet sales and yield management techniques. However they still struggle to compete with low prices offered by the LCCs. Further reductions in traditional airline ticket prices are expected.