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Ryanair, connected or intra-EU. The airline industry

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Ryanair,
an Irish airline firm has applied to operate in British airspace to ensure all
domestic routes within the UK are retained after the UK leaves Europe in March
2019 (Brexit). (The Guardian, 2018) 7. Failure to do so classifies
Ryanair as a “foreign” airline. Similarly, rival firms such as Whizz Air, a
Hungarian airline have done so already to expand operation within the UK,
whereas other firms such as EasyJet have moved headquarters to Vienna, setting
up operations with Intra-EU flights so that the effect of Brexit is contained financially
should 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 they
will decide to continue operations post-Brexit and suffer revenue loss or
operate elsewhere 7.

Ryanair
is a popular “cheap” airline, with competitors such as EasyJet, Whizz Air, and FlyBe. It has a tarnished history with its
customer base due to reasons ranging from proposing ‘fat taxes’ for obese
passengers back in 2009 (The Guardian, 2009) 8, To charging
passengers extra for using their own debit or credit cards and instead
launching their own prepay card in 2011 (The Guardian, 2011) 9, to
more recently charging passengers to store hand luggage in the overheads (The
Guardian, 2018) 10. Their business environment is mostly short
flights, connected or intra-EU. The airline industry as a whole has not changed
much over the years, thus such a drastic change to the business environment
will heavily affect the operation of
Ryanair. Brexit may see a vast shift in the market if these smaller airlines
cannot get access to domestic routes and potentially will see Airlines turn
away from the UK. This change in business
environment for airlines to reconsider UK and EU separately can cause severe
strains between trade and export, of both goods and tourism. Ryanair’s internal
UK routes only account for roughly 2% of the business’ earnings 7 and
with the September 2017 pilot strike, cancellations of up to 285,000 flights (The
Guardian, 2018) 11, made UK routes not worthwhile and would be
more beneficial to “simply axe the routes”
rather than following in EasyJet’s footsteps and spending £10m to create a
subsidiary outside the UK to retain UK routes 7. This move could see other airlines of
similar scope pull out should Brexit fall harder on the airliners leaving
larger firms such as British Airways and Virgin Atlantic to increase their
prices so that intra EU flights can
continue.

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Ryanair’s
stakeholder’s concerns are primarily on
employees, as the potential to cease services within the UK means unemployment
and the effect of profit on the company’s image. Furthermore, the ethical
investment into Intra-EU flights over operating in the UK post Brexit may taint
their image further than the previous scenarios mentioned. Ryanair as a cheap
airline falls under a monopolistic competition as they are a price setter on
their flights and do have a small amount of market power, however with
competitors such as EasyJet and Whizz Air that are operating also, if Ryanair
were to stop flying UK domestic routes, passengers would have to search
elsewhere 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 to
running costs being significantly more than the EU operations we could see less
room for traveling intra EU. Low-cost
airlines like Ryanair and EasyJet have increased competition as their goal is
to provide the cheapest flights. They differentiate their services, such as Ryanair
not offering free in-flight meals and
reducing cab crew, charging for overhead storage. Tactics as such allow cheap
airlines to increase market share at lower costs. The neo-classical kinked
demand curve model fits well as it can illustrate the effect of price increase/decrease
for airlines. (Figure 1)

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