Aveneu Park, Starling, Australia

The Eisenhardt and Zbaracki postulate the argument that “sometimes

 

The
purpose of this analysis is to evaluate the macroeconomic environment and to
identify the key factors of change that will ultimately have the biggest impact
on Ryan Air and the airline industry in the foreseeable future. The reading
will also demonstrate and analyse the impact of Brexit.  

 

“The macroeconomic environment consists of broad
environmental factors that impact to a greater or lesser extent many
organisations, industries and sectors” (Johnson et.al, 2017). Based on Johnsons
understanding of the macro environment, it would be well suited to utilise a
PESTEL analysis to understand the impacts on the organisation through a wider
lens. However, in the case of Ryan Air, there are two fundamental factors that
attract attention.  The Political and Legal
elements of PESTEL can change at any given point regardless of how ready organisations
are for such change. In more depth, Health and Safety regulations are now more uniformed
and regulated than previously and airlines operating in the budget sector are
under more pressure from regulating bodies, consumers and the media to demonstrate
the steps they have taken as an organisation to promote the welfare of their
passengers and workforce. However, changes in the legal and political environment
aren’t always detrimental, Eisenhardt and Zbaracki postulate the argument that “sometimes
politics emphasize the tactics of timing and opportunism” and they also define
the action as “logical incrementalism” deriving from Quinn’s vision (Quinn,
1982), (Eisenhardt and Zbracki, 1992). This tells us that whilst changes in
government priorities can be portrayed as negative, in turn, new initiatives
introduced may be beneficial to the airline industry.

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 In
November 2009, the EU court of justice “changed the interpretation of Regulation (EC) 261/2004
regarding flight delays to include cash compensation to passengers affected by
flight delays or cancellations” (Your Europe – Citizens, 2018). This meant that
Ryan Air and co. had to change their policies to remain in line with EU
legislation but to also help protect the organisations image. However more
recently, in September 2017, Ryan Air was facing a fresh backlash of customer
complaints regarding the epidemic whereby 20,000 flights were affected due to’
poor management of annual holidays for pilots and flight time limitations’
(Quinn, 2018). This caused an outburst of social media speculation and severe damaging
of Ryan Airs image and reputation. The Independent claims that Ryan Airs
competitors were benefiting, but the consumer was on the tail end of it as
flight prices surged and travellers were making “distress purchases” to reinstate
their journeys. (The Independent, 2018).

The changes in legislation to protect the consumer ultimately
have the biggest impact on the airline industry today and in the foreseeable
future. These changes mean that it could be a revolutionary change, whereby budget
airline companies put more emphasis on customer satisfaction creating a tighter
market where divergences are minimalised. Essentially, this means that for all
the European airlines operating at the lower end of the spectrum, it is vital for
them to reconsider their strategies moving forward in order to stay
competitive. But change in strategies are somewhat high risk, Johnson et.al highlight
the key elements of failure in the change process and are as followed; “Death
by planning, Loss of focus, Reinterpretation, Disconnectedness, Broken
agreements, Behavioural compliance and Misreading scrutiny & resistance”. (Johnson
et.al, 2017). Whilst these risks are undoubtedly vague, in the European airline
industry there are key players that will seek to overcome or avoid these risks
and (Miyasaki, 2018) postulates the argument that “the truly
differentiated organizations, are those that can deal with strategic risk
issues, whether they exist now or in the future, with talented people who are
clearly on the innovative curve”.

 

Adapting
to change appears to be the biggest challenge within the airline industry and
one massive change that all European airlines will have to acclimatise to is
Brexit. Amidst the media excitement following
the UK’s decision to leave the EU, there are few certainties about the effect
on the UK and the broader European airline industry. As we come out of a single
European market in aviation, airline companies are losing value as share prices
plummet. Following the decision to leave the EU the sterling fell sharply in
volatile trading conditions and is expected to continue to remain weak. If this
turns out to be an accurate forecast, then “the impact
that this would have on air travel is more clear-cut than the economic effects.

The weaker pound has immediately made outbound trips for UK inhabitants more
expensive (because a given amount of GBP will now buy less goods and services
overseas). At the same time, for overseas visitors to the UK, their
local-currency earnings will now stretch further than they did previously”
(Anon, 2018). It was anticipated that the referendum result would shake the UK
economy therefore UK airlines were campaigning against Britain’s exit. However,
for the aviation industry this is just another driver of change to add to the
growing list of influential factors, Figure 1 below shows the main drivers of
change for EU and International aviation, it puts into perspective the volume
of challenges airlines is facing.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 1 ( IATA, 2018)

 

 

Ryan Airs strategy is geared towards their objective of
becoming Europe’s leading low cost airline and an evaluation of Porters five
forces strengthened their decision of a cost-effective strategy as threats portrayed
by new market entrants put their position in the airline industry under
pressure. In order for their strategy to pay off, their prices had to compete
not only with other budget airlines, but with the Eurostar and car holidays. This
means that their costs had to be minimised to retain profits, as a result Ryan
Air claim to be geared towards optimizing efficiency, and information portrayed
on their website suggest that they are cleanest based on passenger volume and
they state that they use “barely more than a
third the fuel to transport its average passenger one mile compared to the
least efficient” (Ryan Air, 2018). However, whilst this is an effective strategy to utilise pre-Brexit,
 unless a bilateral Brexit deal around
aviation is agreed, their strategy must be reassessed. If no Brexit deal is
met, then it is vital for Ryan Air to consider revaluating their strategies and
looking at Lewins change model, three key steps are recommended to acclimatise.

(Burnes, 2004).  See figure 2.

Figure
2 Lewins Change Model

 

Whilst
change may go against their core values and beliefs and potentially damage
their business goals, in todays economic downfall, it can be the difference
between survival and failure for Ryan Air. 

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