Ryanair vs Easigroup

1504 Words7 Pages
Ryan Air versus The easyGroup : A comparison of business strategy 1. What are the main sources of economies of scale, scope and learning that underpin the strategy of Ryanair? The Ryanair business strategy is to be the cost leader in the airline industry. The cost structure of the airline industry is predominantly one of fixed costs. The Ryanair strategy is to keep paring away at fixed costs and increase the passenger load per aircraft to improve profitability. The fixed cost of operating a flight is spread over the larger number of passengers per flight. This is an example of Economy of Scale as defined by Besanko (Ref: Besanko, et al, 2010. Economics Of Strategy, 5th Edition, Wiley, 2010). The reduction of fixed costs has been made up of the following strategies: • Use of older leased aircraft in place of buying or leasing new aircraft. The Boeing 737 medium haul jet has been selected as standard to reduce maintenance costs, crew training costs and reduce spares inventory. This is also a measure of Economy of Scale according to Besanko. These planes were reconfigured with non-reclining seats to increase capacity. • Flying to smaller airports near the major European cities and using a point-to-point service model rather than the major airlines’ model of hub and spoke through major airports. Smaller airports have lower landing and usage fees, fewer time slot restrictions or congestion delays and enable faster turnaround times. As a result of this strategy, Ryanair targets the budget conscious leisure traveller rather than the business traveller. This strategy of Ryanair runs counter to Besanko’s theory on Economy of Scope where he cites the airline industry’s hub-and-spoke model as giving the airlines Economy of Density in having more passengers

More about Ryanair vs Easigroup

Open Document