Master’s thesis
M.Sc. in EU Business & Law

An analysis of the European low fare airline industry - with focus on Ryanair

Student: Thomas C. Sørensen
Student number: 256487
Academic advisor: Philipp Schröder
Aarhus School of Business
September 13, 2005
1

Table of contents
1. Introduction
1.1. Preface

6

1.2. Research problem

6

1.3. Problem formulation

7

1.4. Delimitation

7

2. Science and methodology approach
2.1. Approaches to science
2.1.1. Ontology
2.1.1.1. Objectivism
2.1.1.2. Constructivism
2.1.2. Epismotology
2.1.2.1. Positivism
2.1.2.2. Hermeneutics

9
9
9
9
10
10
10

2.2. Methodology
2.2.1. Types of research
2.2.2. Types of data
2.2.2.1. Quantitative data
2.2.2.2. Qualitative data
2.2.2.3. Primary and secondary data

11
12
13
13
13
14

2.5 Reliability and validity

15

3. Theoretical framework
3.1. The structure of this thesis

16

3.2. Theory on strategy and competitive advantage
3.2.1. The Positioning School
3.1.1.1. Theory on Porter´s Five Forces model
3.2.1.2. Theory of Generic Strategies
3.2.2. The Resource-based School
3.2.2.1. Theory on SWOT analysis

18
24
20
23
25
27

4. The low fare airline business model
4.1. Introduction

28

4.2. Differences between the LFA model and the FSA model
4.2.1. The service factor

29
29
2

4.2.2. Turnaround times
4.2.3. Homogenous fleet
4.2.4. Point-to-point travel vs hub-and-spoke travel
4.2.5. Higher seat density
4.2.6. Choice of airports
4.2.7. Distribution system
4.2.8. Frequent flyer programmes

30
31
31
32
32
33
34

5. Analysis of the macro environment
5.1. Introduction to the theoretical framework – PEST Analysis

34

5.2. Political/legal issues
5.2.1. Liberalising the European airline industry
5.2.2 State aid
5.2.3. Commision vs Ryanair/Charleroi Airport
5.2.4. Passenger rights in