Ryanair, connected or intra-EU. The airline industry
Ryanair,an Irish airline firm has applied to operate in British airspace to ensure alldomestic routes within the UK are retained after the UK leaves Europe in March2019 (Brexit). (The Guardian, 2018) 7. Failure to do so classifiesRyanair as a “foreign” airline. Similarly, rival firms such as Whizz Air, aHungarian airline have done so already to expand operation within the UK,whereas other firms such as EasyJet have moved headquarters to Vienna, settingup operations with Intra-EU flights so that the effect of Brexit is contained financiallyshould there be a loss of profit if they do not gain UK airspace operations.The aviation sector of the EU has no natural backup should Brexit happens’hard’, thus creating this large divide within airline firms over whether theywill decide to continue operations post-Brexit and suffer revenue loss oroperate elsewhere 7.Ryanairis a popular “cheap” airline, with competitors such as EasyJet, Whizz Air, and FlyBe.
It has a tarnished history with itscustomer base due to reasons ranging from proposing ‘fat taxes’ for obesepassengers back in 2009 (The Guardian, 2009) 8, To chargingpassengers extra for using their own debit or credit cards and insteadlaunching their own prepay card in 2011 (The Guardian, 2011) 9, tomore recently charging passengers to store hand luggage in the overheads (TheGuardian, 2018) 10. Their business environment is mostly shortflights, connected or intra-EU. The airline industry as a whole has not changedmuch over the years, thus such a drastic change to the business environmentwill heavily affect the operation ofRyanair. Brexit may see a vast shift in the market if these smaller airlinescannot get access to domestic routes and potentially will see Airlines turnaway from the UK. This change in businessenvironment for airlines to reconsider UK and EU separately can cause severestrains between trade and export, of both goods and tourism. Ryanair’s internalUK routes only account for roughly 2% of the business’ earnings 7 andwith the September 2017 pilot strike, cancellations of up to 285,000 flights (TheGuardian, 2018) 11, made UK routes not worthwhile and would bemore beneficial to “simply axe the routes”rather than following in EasyJet’s footsteps and spending £10m to create asubsidiary outside the UK to retain UK routes 7. This move could see other airlines ofsimilar scope pull out should Brexit fall harder on the airliners leavinglarger firms such as British Airways and Virgin Atlantic to increase theirprices so that intra EU flights cancontinue.
Ryanair’sstakeholder’s concerns are primarily onemployees, as the potential to cease services within the UK means unemploymentand the effect of profit on the company’s image. Furthermore, the ethicalinvestment into Intra-EU flights over operating in the UK post Brexit may tainttheir image further than the previous scenarios mentioned. Ryanair as a cheapairline falls under a monopolistic competition as they are a price setter ontheir flights and do have a small amount of market power, however withcompetitors such as EasyJet and Whizz Air that are operating also, if Ryanairwere to stop flying UK domestic routes, passengers would have to searchelsewhere for a similar service from another competitor. However,with Figure 1 (Source: tutor2u.net) Brexit affecting all airlines,should this market shift cause multiple cheap airliners to leave the UK due torunning costs being significantly more than the EU operations we could see lessroom for traveling intra EU. Low-costairlines like Ryanair and EasyJet have increased competition as their goal isto provide the cheapest flights. They differentiate their services, such as Ryanairnot offering free in-flight meals andreducing cab crew, charging for overhead storage.
Tactics as such allow cheapairlines to increase market share at lower costs. The neo-classical kinkeddemand curve model fits well as it can illustrate the effect of price increase/decreasefor airlines. (Figure 1)