Ryanair is an Irish low-cost airline that travels to Europe and a few destinations in Africa and the Middle East. The company was founded in 1984 and the company earns annual revenues in the range of more than 8000 million euros a year. The company has a workforce of more than 19000 highly qualified employees.
PESTLE Analysis is one of the important tools to analyze the external environment that can impact the industry. This article presents a fine PESTLE Analysis of RyanAir to examine how the external influences are going to impact the future operations of the company and its change management strategies. This Ryanair PESTLE analysis would prove to be beneficial for civil aviation companies to formulate strategies for efficient operations in Ireland as well as Israel.
So, let’s get started with the PESTLE analysis of RyanAir.
Table of Contents
An exegesis PESTLE Analysis of Ryanair
Political factors affecting Ryanair
Ireland is a major market for the airline industry and currently, the ongoing war between Russia and Ukraine may pose a threat to the Irish airline companies in a couple of ways. Firstly, the UK government has imposed sanctions on Russia and the companies would not be able to fly to Russia which may lead to a loss of revenue. Also, Irish airlines are the major lesser of the planes to the Russian airlines and the ongoing situation would make it difficult for the companies to get back their aircraft as the ultimate power to return the aircraft lies with the Russian government (Carswell, 2022). This uncertainty can lead to huge losses. Further, the European Commission in which Ireland is a member is planning to levy an aviation fuel tax on polluting aviation fuels (Macola, 2021). This would increase the cost of operations for airline companies.
Another emerging hub for the airline industry is Israel and the government has recently allowed the airlines to use its airspace for flying to other destinations. This would benefit the airline companies as the travel time between the Middle East and Europe and they would be able to save on fuel expenses. Further, the airlines can benefit from the fact that the Israeli government has signed a pact with the UAE government to resume flights to Dubai, a popular tourist destination. This can lead to an increase in business for airline companies. Furthermore, the government of Israel has announced a $44 million package for the airlines to compensate them for the losses incurred during COVID (Scheer, 2021). This would help the companies in recovering losses and maintaining financial stability.
Economic factors affecting Ryanair
The airlines in Ireland suffered a major loss in the COVID and a total of 183,000 flights were canceled which led to a 62% increase in air traffic. Further, almost all the Irish airlines lost huge amounts of money ranging from 1 billion euros to 4 billion euros per airline. However, the current economic scenario is wholly different and the Irish economy surged by a huge margin of 13.5% in 2021 (Gleeson, 2022). Such tremendous growth signifies an excellent opportunity for the companies to expand their business.
Another positive news for the companies seeking to invest in Israel is that the economy is rising by a significant margin and the country registered a double-digit growth of 16.1% in Q42021 whereas the growth on a year-on-year basis was also high at 8.1%. Further, Israel is among the top 20 countries in terms of GDP per capita. It was $51371 in 2021. Such a high per capita income signifies the availability of more disposable income for the people, hence the people would spend more on leisure activities which would lead to an increase in business for the airline companies.
The airline industry in Ireland is worth 10.4 billion euros with RyanAir and Aer Lingus as the major players.
Social factors affecting Ryanair
The trend of traveling is decreasing in Ireland with 11% of people not going on domestic trips in the last two years and even the business trips have drastically declined by 68%. This ongoing trend can lead to a decline in business for airline companies. However, after the settlement of the COVID-19 pandemic, the number of domestic and international air passengers is expected to rise which could be a positive development for the airline industry. Also, consumers are now highly educated and compare prices keenly before buying air tickets. Hence, the companies in the industry will have to work on competitive pricing strategies to acquire more customers. Also, consumers are now prioritizing customer service more than ever before and to retain their customers, airline companies will need to constantly improve the customer experience they offer.
Further, in Israel, more and more people are shifting to sustainable means of transportation because of environmental concerns. This means that the companies would need to shift to sustainable fuel options and as a result would need to modify or replace their existing fleet. This would increase the expenses for the companies.
Technological factors affecting Ryanair
Low R&D public investments in Ireland is a bit of a concern for Ireland-based companies as they will have to depend on private R&D investments for innovations. As per The Irish Times, there is an immediate need for Ireland to ramp up its R&D investments to match the level of global technological innovation.
However, Israel is one of the best countries when it comes to R&D investments. As per Trading Economics, Israel spends around 4.9 percent of its GDP on R&D expenditure. This is a great sign for the civil aviation sector given its large dependence on technology.
Various technologies that have revolutionized the airline industry include the use of blockchain for managing the supply chain and 3D printing for manufacturing various parts of aircraft. Another technology includes the use of the Internet of Things for predicting potential damage to the airplane. Further, the manufacturers are experimenting with planes that are capable of running solely on hydrogen. This can help the airlines reduce the carbon emissions from their operations. Further, artificial intelligence can be used to track customer behavior and offer personalized services. Also, recognition tools ease the tasks related to customer data entry.
Legal factors affecting Ryanair
The airline industry in Ireland is regulated by the Irish Aviation Authority and the agency is responsible for monitoring the safety and technical functions related to the passenger as well as cargo flights. The major operations in the country related to aviation like the operation of air traffic control centers and supervision of airspace are also done by the aviation authority.
Furthermore, The Israeli government is planning to introduce a law wherein the airline companies would be required to disclose the personal information of the travelers related to their travel plans, credit card numbers, and billing address. This would be a threat to the privacy of the customers and as a result, they would prefer to travel less to Israel which would lead to a loss of revenue for the airline companies (Schneider, 2021).
Environmental factors affecting Ryanair
The amount of carbon emissions that the aviation sector releases within Ireland is about 12.42 million tons. The largest source of emissions relates to the use of unsustainable fuel. The airline industry can face difficulties while operating as Ireland is a signatory to the biggest environmental pact which is the Paris Accord based on which it aims to reduce carbon emissions by 51% by 2030 and be a carbon-neutral economy by 2050. Likewise, the Israeli government is aiming to reduce greenhouse gas emissions by 27% by 2030. This can pose a danger to the operations of the airline companies as they would have to shift to sustainable means of doing business.
To conclude, the airlines in Ireland may face a tough time for a shorter period of time because of a lack of government support in getting back the planes that have been leased to Russian airlines and as a result, the companies may have to lose ownership of these planes. Further, the good news for the airlines is that Israel has allowed the companies to use its airspace after so long and this may cut the travel time between many destinations. Further, the Israeli economy is mostly based on sustainable transportation and the airline companies would have to alter their operations if they want to make a space in the country. In addition, the environmental pollution caused by the airlines can be a cause of worry for the airline companies as both the Irish and Israeli governments are aiming for a carbon-neutral economy in the near future which could force the companies to adopt different sustainable measures for the operation. Also, to learn about the internal strengths and weaknesses of the company, you can go through our diligent SWOT analysis of Ryanair.
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Carswell, S. (2022). New Russian law raises doubts over recovery of Irish-owned aircraft. www.irishtimes.com. Retrieved 6 April 2022, from https://www.irishtimes.com/business/new-russian-law-raises-doubts-over-recovery-of-irish-owned-aircraft-1.4823877
Gleeson, C. (2022). Exports drove Irish economy to growth of 13.5% in 2021. www.irishtimes.com. Retrieved 6 April 2022, from https://www.irishtimes.com/business/economy/exports-drove-irish-economy-to-growth-of-13-5-in-2021-1.4818388
Gleeson, C. (2022). Sharp drop in number of staycations last summer. www.irishtimes.com. Retrieved 6 April 2022, from https://www.irishtimes.com/business/transport-and-tourism/sharp-drop-in-number-of-staycations-last-summer-1.4790943?mode=sample&auth-failed=1&pw-origin=https%3A%2F%2Fwww.irishtimes.com%2Fbusiness%2Ftransport-and-tourism%2Fsharp-drop-in-number-of-staycations-last-summer-1.4790943#:~:text=%E2%80%9CDomestic%20trips%20were%20down%20by,down%20by%2068%20per%20cent.
Macola, I. (2021). European Commission aviation pollution tax proposal fuels debate. //www.airport-technology.com. Retrieved 6 April 2022, from https://www.airport-technology.com/uncategorised/european-commission-aviation-pollution-tax-proposal-fuels-debate/.
REUTERS. (2022). Israel to resume all flights to Dubai with new security deal -security agency. www.reuters.com. Retrieved 6 April 2022, from https://www.reuters.com/world/middle-east/israel-uae-reach-security-deal-allow-all-flights-israeli-agency-says-2022-03-04/
Scheer, S. (2021). Israel Offers $44 Million to Airlines in New Bailout. skift.com. Retrieved 6 April 2022, from https://skift.com/2021/11/21/israel-offers-44-million-to-airlines-in-new-bailout-support
SCHNEIDER, T. (2021). Planned law will let Israel collect personal info on all airline passengers. www.timesofisrael.com/. Retrieved 6 April 2022, from https://www.timesofisrael.com/planned-law-will-let-israel-collect-personal-info-on-all-airline-passengers/