Research Korner: Ryan Air

Ryan Air Business Environment

Ryan Air Business Environment   Explain chosen organizations major objectives and indicate the order of priority. What criteria were used to decide on the priority and why? The chosen organization is Ryan Air. Ryan Air, an airline industry that has undergone considerable trade structuring with certain opportunities in the airline industry business. Ryan Air’s market stature is becoming competitive, global market base of Ryan Air is expanding. Ryan Air is first prioritizing the human capital workforce as the main asset of its business operation. Next, is the customer service quality in bringing low cost airlines effective mode and then, achieving an ample level of sales and profit in the business zone of other airlines that are rival with Ryan Air. Ryan Air’s business environment is considering also tough caliber management and team wherein competition is in the context of improving services and products Ryan Air offer to its many passengers, the emphasis put forward on the low cost fair travel prices and Ryan Air’s known business marketing mix (Driver, 2000). Ryan Air was Europe’s original low fare oriented airline. Ryan Air's steady growth is achieved in environment friendly and sustainable way by investing in the latest aircraft and engine technologies and the implementation of certain operational and commercial decisions that help to further minimize environmental impacts, additional 10 percent between 1998 and the year 2008. Ryan Air was the industry leader in terms of environmental efficiency and working towards further improving its performance. Ryanair is investing some €17bn on its fleet replacement and expansion program, which commenced in 1999. There was focus on Ryan Air’s future growth plan providing acquisition of about 100 brand new aircraft of Ryan Air’s type. Another priority was on its fuel emission as the organization have minimized and continued to reduce fuel burn and CO2 emissions per passenger kilometer by means of combining fuel saving measure as well as commercial measure aimed at maximizing passenger numbers per flight to spread the fuel use and CO2 emission over number of Ryan Air’s passengers. Ryan Air's business model includes usage of secondary airports and point services, which help to increase fuel efficiency and limit emissions. Ryan Air avoids long taxiing times and holding patterns at congested primary airports, and delivers passengers to their destination directly on one flight opposed to forcing passengers onto connecting flights through congested hub airport. The criteria on human capital priority,  people working is the core asset of Ryan Air is through human resource related criteria such as the balanced scorecard looking on feedback and performance level of Ryan Air staff and management. For the customer service quality, the criteria on weighing the needs of every passenger at Ryan Air by various investigation, studies and surveys. For the sales and profits, there has been presence of financial assessments and Ryan Air global logistics forecasts and several statistics linked to its overall business environment. For the environment linked priority, there has been adaptation of effective CSR or the corporate social responsibility wherein Ryan Air is committed in reducing fuel emissions to keep a safe and sound environment for the rest of the community. The policy based criteria that connect to Ryan Air’s policy on business and its environment taxation. Ryan Air proves that air transport can be environmentally friendly whilst continuing to deliver huge economic benefits in terms of the lowest cost air travel for consumers, increased tourism, regional and social cohesion, job creation, inward investment and many others. Identify the organizations main stakeholders. Suggest how the organization can improve its stakeholder management and explain your reasoning. Moreover, business organizations usually set their mission, vision, and objectives in the purpose of serving the society, as well as benefitting the community throughout their business cycle.  When it comes to airlines, the determination of the demands, tastes and preferences of the people are still valid. The opinions of every people around the organization are also important to create a just and comprehensive strategy.  The main mission of every airline is to deliver the safety of their passenger, but how did the Ryanair attract the tourists and other individuals to travel is because of their undertaking to make air travel the most simple, convenient and inexpensive form of transportation in the world. The idea of low cost airlines are based on the idea and probably demands of the people to fly more often if the expenses is not that high or affordable for everyone.  Engaging in the low cost strategy is to fly mostly to and from airports that are not necessarily the busiest place which is also referred as the secondary airports. Ryanair proved that operating in the secondary airports is cheaper than the bigger major airports and also less complicated to make a maneuver on their aircraft. And with this strategic approach, Ryanair is the most suggested airlines when it comes to low-cost marketing.  Ryanair has a vision of a world where the fare could drop to lower rates to bring the steady traffic of business people and tourists to their region. Their concept is not new in every airlines and their vision only underpins their mission. The broader vision in building an effective business and push on the tourism is more applicable (Phillips, Chang and Buzzell, 2003). Bringing the fares down is not a common action on the airline business especially in the monopolistic type that usually pushes the fees up. It’s a major challenge for the Ryanair to sustain their mission and yet with accordance of their vision in promoting tourism. Ryanair will be tight on relationship with the stakeholders. Ryan Air use opinion of powerful stakeholders to shape business strategy and tactics respectively. Ryan Air have managed to gain support from their key stakeholders and winning their favor to make their plans possible. It is part of the organizational culture to understand the importance of each stakeholder and the benefits they might realize in working with them. And in a broader sense, anticipating the people’s reaction in their project may be build a strong relationship and winning their support. Ryanair’s Stakeholders are given much attention and priority in terms of their opinions and decisions in handling the business. The stakeholders are individuals or groups who have an interest in an organization’s ability to deliver intended results and maintain the viability of its products and services.   The marketing strategy of the Ryanair had been critically assessed by its stakeholders and formed a market busting strategy that made the entire organization of the Ryanair that made them one of the premier airlines in Europe. Aside from the low cost and secondary airports offered by the organization, there are other business approaches that Ryanair applied to fill up some of their losses.  The no frill method used by Ryanair has also improved the efficiency and productivity. The traditional flight services like seat allocation, complimentary drinks and meals, and free newspapers have been eliminated. Instead, Ryanair exchanged it with charging the services they offered to the customers for in-flight services and other travel expenses such as travel insurance (2009). Ryanair’s cost advantage is very significant and other low cost operations began to emerge and pushing the traditional way of offering services. Using selected products and / or services from your organization as examples, critically evaluate the impact of changes in conditions of demand. How does the organization respond to these changes? Ryan Air implies to the service oriented category, Ryan Air management team through HRM effectiveness and shareholder presence. Ryan Air rapport through the use of customer values and chain was the responsibility of Ryan Air. Thus, in delivering the tourists and the other individuals to their point of destination with full of satisfaction. There was about customer services rooted from the values of customer satisfaction and trust which is not just based on the affordability of the flying tickets but also on the experience that the airlines will leave to the clients especially when persuaded by first time flyers. Ryan Air’s competitive advantage, the outcome of strategy capable of helping the business to maintain and sustain favorable market position and translated into higher profits compared to those obtained by competitors operating in the same industry. The implementation of Ryan Air strategy an edge and not destroyable by its rivals. The change within Ryan Air success is outcome of the latter’s ability to respond to business related threats and opportunities within the airlines environment in which Ryan Air is an expert and operate completely. The customer base and quality service being influenced by changing market situation. Ryan Air has developed certain system on business objectives, adopting complex of airline functional policy on high quality base and standards of service. Ryan Air’s adaptation to business environment requirement has been dynamic in form, constantly adapt to shareholder actions upon control of negative changes that might hit the airline in the long run. The emphasizing need for Ryan Air to change focus in switching from analysis of business success and commitment. Ryan Air management must study the way low cost fare operates and put ample mechanism into the business process of choice (Ghemawat, 2000). Ryan Air have intended to replicate shareholder based strategies whereby opportunity comes into the picture more easily and more flexible in crafting an ideal decision making process into Ryan Air’s overall products and service environment. Ryan Air should recognize when it would be better to change any business driven strategy and when to continue striking a balance in its mission, vision and priorities respectively (Toh and Hu, 2001). Furthermore, Ryan Air will have to better understand the shareholder base and the process of human capital resource for Ryan Air’s core social competence into an enduring business approach. Ryan Air as a low cost airline can improve service quality image by communicating these attributes to passengers through variety of means. Recognizing of excellent service quality and continuing of upgrading fleet into the business hub. Ryan Air, formulating effective strategies for achieving business goals as important concern of Ryan Air shareholders and management leaders (Doganis 2001). Even if Ryan Air managed to be low airlines producer, some of its rival carriers may defeat priorities by pursuing other domain on business strategy, targeting low cost airline scaling and composition. The evidence of low fare price service as being practiced by Ryanair with introduction of business fares which has open fares, suited to meet the ticket flexibility needs of Ryan Air passengers (Company Barclaycard, 2000). The increase in fare at some time will find Ryan Air service prices significantly higher than others such as on dawn and morning departure. Compare and contrast transitional and emerging economies. Use examples to support your answer. What do you conclude? There is about transitional and emerging economies which Ryan Air act upon on certain circumstances since  Ryan Air started in year 1985 with only 57 staff members and with one 15 seater turboprop plane from the south of east of Ireland to London-Gatwick which carried 5000 passengers on one route (Harrison, 2002).  There was EU airline transport deregulation allowed Ryan Air to open up new routes to Continental Europe. Ryan Air launched services to Paris and Brussels and took time out to float Ryan Air plc on Dublin. The booking of Ryan Air web accounts have increased, probably with opening of other 26 routes. There facilitate the rapid European growth plan (Binggeli and Pompeo, 2002). Ryan Air implement different marketing strategy to make the company survive in the competition and to be able to gain competitive position in the airline market.  It is said that the company was regarded recently as the most punctual airline between Dublin and London, In addition, Ryanair offer minimum standards of service and very low prices for point-to-point, short haul flights.  The goal of Ryanair is to meet the needs of travelling at the lowest price. The success factor linking on strategic focus of airline prices, reliable for Ryan Air base and service frequency, Ryan Air on featuring adaptability like reservation, baggage handling and consistent service. Ryan Air use cost reduction strategy. Such cost reduction strategy relies on five main aspects like fleet commonality, contracting out services, airport charges and route policies, managed staff costs and productivity and managed marketing costs. In terms of fleet commonality, the company used only one kind of plane which limits the cost for staff training, maintenance services and facility of obtaining spares, facility in scheduling aircraft and crew assignment.  Ryan Air has made judicious choice of dealing with secondary and regional airports, where the traffic is not jammed and fees incomparably lower. Since Ryanair, is a true windfall for such airports, the airline company has a bargaining power which enables it getting favourable access fees. In addition, Ryan Air provides only a point-to-point service, thus, it has no cost concerning connecting passengers and focus on time departures because it means maximizing airline utilization.  Managing staff costs and productivity is another factor used for reducing the cost for Ryanair. In this manner, the company pays its staff on modest salary but has set up a performance related pay structure which urges employees to maximize the number of sectors flown daily. This way, Ryanair both controls productivity and keeps staff costs down. Using the business cycle model as an analysis framework describes the current economic climate in either the UK or USA and identifies its origins. Discuss the steps that the UK or US government might take to influence the economic climate. Business cycle model help Ryan Air to establish and exploit competitive advantage within a particular competitive scope (Phillips, Chang and Buzzell, 2003). By applying these strengths, three generic strategies are resulted: cost leadership, differentiation and focus.  The strategies used include cost leadership, differentiation strategy and focused differentiation. Cost leadership strategy is based upon a business organising and managing its value-adding activities so as to be the lowest cost producer of a product within an industry (Robbins and Barnwell, 2002). Cost advantage may achieve in terms of how product or services is designed or in terms of its quality. Differentiation strategy is based upon persuading customers that a product is superior to that offered by competitors. The value added by the uniqueness of the product or services may allow the company to charge a premium price for it. However, the danger associated with differentiation may include imitation by competitors and changes in customer tastes. The focus strategy is aimed at a segment of Ryan Air business for services rather than limiting business potentialities of Ryan Air possible market led operation. Ryan Air has become a focuser because it concentrated on a narrow customer segment which include Irish and UK business people or travellers who could not afro to fly major airlines. Ryan air has restyled itself and shifted from a full service conventional airline to the first European low fares, no frills carrier. Identify the advantages and disadvantages of price intervention in the EU agricultural sector. What do you conclude? The advantages of price intervention in the EU agricultural sector can relate to Mason (2000 p. 28) have written: “low cost airlines are more successful in attracting business travelers from small and medium sized companies and these companies are more likely to book directly with the airline, but these airlines will find it more difficult to attract travelers that work for very large companies”. There can be advantage placing cost leadership base wherein Ryan Air seeks to be lowest cost producer by selling standard, mass products. Enough price differentiation where the airlines introduce unique dimension that is considered to be important to the market. The targeting certain segment of Ryan Air market and be adopted by EU airlines. Ryan Air industry is unique and fascinating industry and has capture the interest of a wide audience because of its glamour, reach and impact on the large and growing numbers of consumers worldwide. The disadvantage can affect certain industry figures on Ryan Air culture base. Disadvantage for Ryan Air being at the heart of travel and tourism, employing culture innovation, also on business planning, strategic move in pricing market and be able to provide good customer services to the customers like by having discounted flights and value promotion to keep the competitive advantage at stable mode within its competitors and will need to focus more on the core competencies that allow those low cost airlines to practically and wisely design suitable airline operations within the bracket of their marketing network services in Ryan Air market on a standard perspective. Ryan Air need to be goal oriented and must not stop to rejuvenate and change their marketing plan strategies from time to time in order to re-invent the performance process upon the upgrading of rules and regulations of these airlines as mandated by the state and should adhere to further liberalization in price market along with the commoditization of airline travel, the enduring decline in sales and profits due to prices posed by Ryan Air sales centers (Doganis 2002). Discuss the factors that might cause international mergers and acquisitions to fail. Describe and discuss the main cultural factors that would influence an international organization starting to do business in your country. The failure on the part of Total Quality Management is a philosophy of management that is driven by the constant attainment of customer satisfaction though the continuous improvement of all organizational processes (Robbins and Barnwell, 2002).  Ryan Air quality base adhere an array of dysfunctional management system if not given ample attention and monitoring throughout Ryan Air environment and there was limitation on ensuring that Ryan Air has to continuously level up an ideal merger acquisition requirement. The airline culture is changing from time to time wherein business strategies fall short of Ryan Air focus on the process of desirable business and customer empowerment. There failed to recognize culture standards and instrument, applicable in Ryan Air service and airline industry. The lack of management related philosophy that seeks to integrate every Ryan Air functional tenet such as marketing, finance, design, engineering, production, customer service, and others to focus on meeting customer needs and organizational objectives (Doganis, 2002). That, total quality management involve planned procedure for satisfying internal and external customers and suppliers by integrating Ryan Air’s business environment, continuous upgrading, through with advancement, growth and safeguarding business cycle while changing organisational culture. Furthermore, the lack of attention on service quality and unified support and decision on the party of merging and acquiring companies. The presence of improper delegation of job roles and responsibilities on the part of Ryan Air management. The culture factor on what are the values and preferences of passengers and tourists and the general public. The culture difference in terms of language spoken and written and the lack of culture related communication system that can be used for moving further and positively into Ryan Air’s overall business impact in the US and UK society. The limited access on entrance power, as there can have political and legal issues along with Ryan Air business operation. Fierce level of competition coming from giant airlines can also affect merger and acquisition process thus affecting deeply on cultural norms and beliefs of involved parties.   References Company Barclaycard (2000) Travel in Business Survey, Company Barclaycard, London Doganis, R. (2002) Flying off Course: The Economics of International Airlines, Routledge London Driver, J.C. (2000) Airline marketing in regulatory context", Journal of Marketing Practice: Applied Marketing Science, Vol. 5 No.6 Ghemawat P. (2000) Commitment: the dynamic of strategy, Free Press, New York Mason, K. (2000) The propensity of business travellers to use low cost airlines, Journal of Transport Geography, 8(2), pp. 107 - 119. Phillips, L., D. Chang and R. Buzzell (2003) Product Quality, Cost Position and Business Performance: A Test of Some Key Hypotheses, Journal of Marketing, 47 pp. 26-43. Robbins, S. and Barnwell, N. (2002), Organization Theory: Concepts & Cases, Sydney Prentice Hall Toh, R.S., Hu, M.Y. (2002) A multiple discriminant approaches to identifying frequent flyers in airline travel: some implications for market segmentation, target marketing and product differentiation, The Logistics and Transportation Review, pp.179-97

Ryan Air Business Environment

Ryan Air Business Environment Explain chosen organizations major objectives and indicate the order of priority. What criteria were u...

VALUATION METHODS

This paper analyses the feasibility of a takeover bid of the commercial aviation company Ryanair Holdings PLC by a North American airlines firm through determination of the appropriate method of valuation which the latter can adopt to verify the practicability of bidding for the takeover of Ryanair Holdings. Financial factors need to be taken into consideration when deciding for any decision to bid for takeover. Generally, the target company’s financial statements, such as the balance sheet and profit and loss statement are the basis for such financial analysis. There are non-financial issues that must be carefully weighed as well. These issues are those that need to be sorted out in order to come up with a decision which will lead to either taking the takeover bid forward or not. The valuation methods available for utilisation may produce different results as they are based on a variety of variables. The approach deemed most fit for the situation of Ryanair is the earnings-based model which assumes that the value of an entity is equal to the present value of future earnings that will be generated by the business. This approach is applicable to the Ryanair case, as the company’s financial documents offer the year when they have observed a decline in net profit, it will be most useful to use this type of approach to company valuation. INTRODUCTION             With a North American airline’s plan to takeover Ryan air PLC, it is imperative that the latter be valued either formally or informally. Owing to asymmetry in terms of the underlying financial incentives, it is fundamentally important for the purchaser to understand the principles of business valuation so as to anticipate and, more importantly, to interpret the other's offer. Valuation, as a science, deals with, among other things, the following: (1) adherence of general accounting principles for the organization and presentation of the financial data of the business; (2) chronicalization of the facts associated with the historical growth of the business; (3) extrapolation of financial data into future time periods; and (4) calculation of various valuation ratios and statistical formulae (Boger & Link 1999). These are, without question, critical dimensions to a business valuation, but they are not the only dimensions of a business valuation that are important. All too often, for a variety of reasons, individuals may fall into the trap of believing that business valuation is little more than a formulistic exercise.             There are, in line with the above, non-financial factors affecting business valuation. It deals with, among other things, the following concepts: (1) understanding the economically efficient life of productive assets, compared to the general accounting practice defined depreciable life of productive assets; (2) understanding the economically relevant industry in which the business being valued operates; (3) understanding the appropriateness of one valuation method or one statistical method over another; (4) understanding the limitations of financial information from comparable businesses; and (5) understanding the economic environment into which financial data are being extrapolated, and the appropriateness of such an extrapolation. As such, there is the need for the detailed analysis of Ryanair Holdings PLC in terms of the financial and non-financial factors affecting the planned takeover of the North American Airline in order to arrive at a recommendation either a bid should be made for the takeover or not. FINANCIAL FACTORS AFFECTING THE TAKEOVER BID             In general, the data needed to provide a valuation of Ryanair are: projected and historical financial data, ownership records, information on products and services, sales and marketing data, and supplementary information on banking, legal and contractual relationships (Mastracchio Jr. & Zunitch 2002). Before work could be started, company data that is needed include financial statements and tax returns for three to five years; an accounting of all outstanding payables, and receivables, if there are any; the actual value of inventories; identification of key customers and the percentage of business tied to the relationship; equipment, including its age; industry, geographic and market comparisons; sales and other projections; resumes of key personnel; the most recent business plan; published corporate literature and press articles; and the percentage of revenues dependent on each product line or service. There is also the need to gather information from other sources, including industry and geographic comparisons, as well as a survey of sales of comparable businesses.             The preparation of financial statements should be foremost in mind in the preparation of a corporate valuation in order to come up with a recommendation if the takeover bid is going to push through or not. It is through peruse of these documents that the valuator will most accurately provide a recommendation for the North American airline client. Another issue relevant to any valuation is whether the valuation should be conducted on a pre-tax or an after-tax basis. The valuation profession differs with regard to this issue, and there is no definite right or wrong answer. What is important is for all parties to understand the underlying assumptions being brought to the valuation and for all parties to verify that the data used in the valuation process are consistent. Valuations are generally conducted on a pre-tax basis. Some who frequently argue that valuations should be done on a pre-tax basis often point to the fact that courts have argued that future tax liabilities are too uncertain to be included in a valuation. In other words, while all valuators rely on assumptions regarding the future and attempt to predict future financial situations (e.g., profitability), predicting the tax rates that might be applicable to those future financial situations adds another level of judgment and an entirely new set of assumptions. Although this is true, future tax liabilities are no more uncertain than other elements in a valuation, such as the economic conditions that will surround the business in the future. Some who frequently argue that future tax liabilities should be included do so by making the rather obvious observation that taxes are a reality of doing business. These points aside, the justification for conducting business valuations on a pre-tax basis comes from a more pragmatic perspective. It is generally the case that the valuation is done as if there were a reasonable and fully informed buyer, when in most cases there is no buyer at all. As such, there is no a priori way to know the tax liabilities that will pertain to such a hypothetical, and it would be speculative to assume that the potential buyer's tax structure will be the same as that of the seller. As a general rule, the smaller in size and the more limited the scope of activities of the business being valued, the less likely there will be a set of publicly traded companies that are comparable, or even a single comparable publicly traded company. Publicly traded companies are for the most part large, measured in terms of revenues or assets, and they are diversified across product lines. This diversification implies that reported revenues are from various lines of business, not all of which are relevant for comparison purposes. Also, diversification reduces the operating risk of the company, and to the extent that this reduced risk is reflected in the company's realized earnings and in the publicly reported price, the comparison may be less than accurate. Most small closely held companies are not diversified, and this characteristic alone makes financial comparisons difficult. There are many sources for information on publicly traded companies including information provided by Value Line and Standard and Poor. Internet access to traded securities research services is the more common means to acquire the needed information.             In particular to Ryanair Holdings PLC, their sales, operating profit, and net income have recorded an increase since the company went public prior to the financial setback in 2004. Regardless of the poor financial performance of the company during the said year, they still continued to acquire assets while managing to keep down their flight fares through internal efforts on the part of the Ryanair management and employees to lower costs of providing their commercial aviation services to the public. And although they posted a decrease in net profits in 2004, they still managed to have the highest return on equity percentage among fifteen flight passenger carriers that the company was compared with. To discuss further, published research on the application of marketability discounts when valuing a business on the basis of information from publicly traded companies follows two lines. One line of research is based on reviews of court cases and the marketability discount that the court has allowed. The conclusions from this line of research are interesting, but not generally applicable to a particular business valuation. First, there is selectivity bias in the sense that only those valuations that are litigated and appealed are available for such study. Second, the court's decision reflects the opinion of a judge or small group of judges, as swayed by the rhetoric of attorneys, many of whom may have less expertise in valuation than the valuator. The other line of research is based on comparisons in the price of initial public offerings of stocks to actual transaction sales, where the initial public offering is viewed as a reliable observation of fair market value in the absence of market demand. Again, there is no reason to assume that the companies involved in the initial public offerings are comparable to the particular businesses being valued. NON-FINANCIAL FACTORS AFFECTING THE TAKEOVER BID             Apart from the financial considerations, there are non-financial factors that would affect the decision to bid for the takeover of Ryanair Holdings PLC as well. For instance, the business model of the particular company that is under analysis would have to matter. The fundamental business structure of Ryanair is the proven Southwest model, where low fares are combined with high frequencies and excellent punctuality, while giving emphasis to on-time performance, baggage handling and customer satisfaction. Their smaller market share leaves ample room for growth, which is why room for expansion is likewise considered in takeover bids. Britain is saturated, but there is plenty of room in Spain, Low Countries, Germany, Italy, Scandinavia for Ryanair to explore and penetrate. For long-term markets, there is the need to look into regions yet untapped, in particular Eastern Europe. Also, keeping an eye on Singapore/Asia ventures, as it is still enormously untapped markets, will prove helpful in making the decision whether to bid for the takeover of Ryanair or not. As it appears that Ryanair is well-poised to take advantage of new opportunities in the emerging markets of the next decade, it is one point towards a positive reaction to taking the takeover bid. However, there are also certain considerations to look out for, for example, the Charleroi case, because if Ryanair loses, as they are appealing to EU Supreme Court in Luxembourg, the company will lose all revenue from that airport, numbering to an estimated 2 million passengers. This is a huge hit, if ever the case fails, though it may be made up in growth in other airports, so it is another dimension to look into. Long term, analysts say it may lead to more transparency, shorter leases with publicly-owned airports. This can elevate costs and hurt the bottom line, thus affect everyone in the company equally. It might be wise to wait for the Charleroi decision to settle before entering a position. If it decides against Ryanair, it is expected that headline influence will drag prices down further than fundamentals, which leads to a better entry. If it decides for Ryanair, then it is a very good decision to enter based on its long-term potential. There is the wide belief that EU will not side with Ryanair due to lobbying/protectionist pressure. After all, they saw what happened to UAL/AMR in the time span of a single year. Additionally, politics must also be considered. Ryanair claims that the EU decisions are heavily lobbied by its traditional competitors like the British Airways and Air France. A similar battle played out in U.S. courtrooms with Southwest and American Airlines over Dallas is observed. It could just be a matter of time in Europe, as well, because in the end, the customers – the public – are on Ryanair’s side due to the low flight fares that they are offering. On a deeper inspection, even British Airways and Air France could not be considered a competitor of Ryanair, as the said companies have a notably higher rate of air fare if compared with the commercial aviation firm under analysis. Thus it can be said that they operate with a different market profile than where Ryanair is currently operating. Deregulation and strong growth is also seen in Europe, as an accompanying depreciation in the dollar makes the European company more attractive. The consensus is that the dollar will depreciate further in 2004 as the deficit soars, so the company is a very lucrative venture to become involve with. VALUATION METHODS There are six general types of valuation: (1) earnings valuation; (2) revenues valuation; (3) cash flow valuation; (4) equity valuation; (5) yield valuations; and (6) member valuations. The type of valuation that the North American airline company should adopt would depend on what reliable information they have at hand in order to pose for easier company valuation and arrive at a decision to bid or not to bid at the earliest time possible. The choice of a valuation method requires thought and contemplation. The valuator should first learn about the business and then select the one valuation method that is the ‘most appropriate’ based on the relationship between the circumstances for understanding the valuation and the assumptions that underlie each of the valuation methods. The valuator should not, in Boger and Link’s (1999) opinion, define ‘most appropriate’ based on the results that follow from the application of several methods. There should be an a priori reason for selecting one valuation method over another. Income-based valuation methods use the businesses or a comparable business's income statement as the starting point for the analysis. Doing a corporate valuation is not a mysterious process that is open only to the few (Copeland, Koller & Murrin 2000). It does require, however, a different perspective from that taken by many managers. It requires focus on long-run cash flow returns, not quarter-to-quarter changes in earnings per share. It also requires a willingness to adopt a dispassionate, value-oriented view of corporate activities that recognises businesses for what they are – investments in new productive capacity that either earn a return above their opportunity cost of capital or do not. There are many areas in valuation where there is room for disagreement, according to Damodaran (2002). This includes how to estimate true value and how long it will take for prices to adjust to true value. But there is one point which there can be no disagreement: asset prices cannot be justified by merely using the argument that there will be other investors around willing to pay a higher price in the future. Similarly, asset-based methods use the business's balance sheet at the starting point. However, even when conducting an income-based analysis, the valuator should carefully study the balance sheet, and vice versa. Income statements and balance sheets describe aspects of the financial condition of the business, and hence, both should be examined. In fact, all financial information should be considered in detail. A fundamental and extremely important assumption that underlies all business valuations is that the financial health of the business is accurately characterized by its financial statements. If the financial statements are incorrectly prepared, or if they overstate or understate the true financial picture of the going concern for some accounting reason, then it follows logically that the valuation will be imprecise. Analysts use a wide range of models in practice, ranging from the simple to the sophisticated. The models enumerated previously belong to the general category. These models often make very different assumptions, but they do share some common characteristics and can be classified in broader terms, which makes it easier to understand where individual models fit into the big picture, why they provide different results, and when they have fundamental errors in logic. Following is the recommended valuation model that fits the need of the North American airline company to aid in its decision whether or not to take a bid for takeover. RECOMMENDATION             It is deemed that the earnings valuation method is the best model to use for valuing Ryanair. It is, first and foremost, the most common way to valuation. It is an approach to valuing a company by capitalising its earnings, which generally involves multiplying one or another income statement earnings figure by some multiple (Luecke 2002). The earnings-based valuations assume that the value of an entity is equal to the present value of future earnings that will be generated by the business. Further, this method is based on two elements, the price/earnings ratio and the post-tax earnings per share of a business, which, when combined, give the market price per share (Ogilvie 2006). There maybe a different (higher or lower) future earnings estimate based on efficiencies arising from new management (higher earnings) or restructuring costs (lower earnings) that will gave an impact on price negotiations.             Particularly, the Normalised or Average Earnings should be used. This approach, which is similar to that used for cyclical firms, uses an average average-based valuation upon a period when the earnings were healthier as the base-year earnings for analysis (Damodaran 2002). The assumption is that the firm will revert back to health in the near future. As the company’s financial documents offer the year when they have observed a decline in net profit, it will be most useful to use this type of approach to company valuation. When there are difficult choices to make between relevant treatment of accounting items on the balance sheet or income statement, the income statement tends to win out. The earnings-based formulation has intuitive appeal. It implies that if a firm can earn only a normal rate of return on its book value, then investors should be willing to pay no more than the book value for the stock. Investors should pay more or less than book value if earnings are above or below this normal level. Thus the deviation of a firm’s market value from book value depends on its ability to generate ‘abnormal earnings’ (Damodaran 2002). The formulation also implies that a firm’s stock value reflects the cost of its existing net assets (that is, its book equity) plus the net present value of future growth options (represented by cumulative abnormal earnings). To further strengthen the argument, the AICPA’s Management Advisors Services Practice Aid, Valuation of Closely Held Businesses indicates that the Internal Revenue Service strongly recommends the use of earnings-based valuation models for valuing businesses (as noted by Sipes 2005).             But, as with any other model, the output of an earnings-based valuation model will only be as good as its inputs. To help improve the quality of accounting inputs in the valuation process, earnings should be properly classified according to their components. To further assist in seeing through the potential biases inherent in financial data provided by Ryanair management, it is important to understand the discretion involved in making accounting classifications. As asserted by Hirst & Hopkins (2000), being armed with better knowledge about how accounting data are generated puts analysts in a better position to use the information effectively.

VALUATION METHODS

This paper analyses the feasibility of a takeover bid of the commercial aviation company Ryanair Holdings PLC by a North Amer...

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