Data for passengers on route to London Source: CA airline/airport statistics The numbers of passengers traveling by LLC airlines are also increasing ever since its entrants as shown in the statistics below: Total annual alarm passenger movements In 1 Source: Commission for Integrated Transport The LLC market is an oligopoly market as there are 3 major airlines which dominate approximately 70% of the market. The products are homogeneous, which is low cost IR travel though there are slight differentiation in terms of customer service, travel destinations and flexibility of travel times.
The firms within the market engage in price wars where they cut prices to grab a larger market share. The firms maintain their customers’ loyalty by offering the low air fares and brand themselves through advertising. Some customers may stick to an airline provider for some reasons such as convenience, flexibility and brand loyalty. Therefore, when another firm sells at a higher price, it doesn’t mean that the customer will switch airlines. However, it also isn’t mean that the customers won’t switch because are no restrictions or switching costs involved.
A factor which may cause customers to switch is when the price difference is too high to tolerate. In this market there is a significant barrier to entry because of the high set up cost. It is also difficult to penetrate the market because of the 3 major firms which accounts for a huge market share. The LLC market also shows some characteristics of monopolistic competition because of there are many other LLC airlines. There are also no legal barriers to entry because there are legal restrictions to enter the market.
Economic Analysis Essay
Moreover, the governments show that they want to encourage competition in this industry when the Irish government rejected a takeover of Are Lingua by Ryan in 2009 (Reuters). Conduct Ryan conducts its business by cutting costs and lowering air fare prices. The company cuts cost through many ways such as using secondary airports, reducing the weight of their airplanes, reducing staff costs, removing bookings through travel agents and removing in-flight meals. The company commits to the basic service to their customer which is flying them from one place to another without delays.
Any ore than that, the customers will be charged. Ryan charges the customers for various things such as in-flight meals, payment handling fees, wheelchair usage and online check-in (BBC 2009). The company also charges their staffs for training and interview sessions to reduce staff costs (Creator 2005). Since Ryan aims to provide the lowest air fare prices, they maximize airplanes capacity by removing business class and first class space. There are no pricing agreements arranged between other LLC operators, therefore, the prices of tickets varies. Non-price competition also exists in the LLC market.
Ryan commits to provide customer service and flight punctuality. Performance The revenue of Ryan has been increasing from financial year 2000 to 2009. Although the revenue has been increasing, the company made a net loss of ?169 million in the financial year 2009. This was due to an increase in oil prices and has increased the operating expenses. The fuel bill rose by 59% as compared to the Atlanta year 2 Source: Orbits 200,000 E-Resource for Company Information Besides that, the number of passengers carried has also increased since financial year 2001 as shown in the graph below.