Credit crunch and its impact on Ryanair

Essay by ethan1982University, Master's March 2009

download word file, 16 pages 4.8

Contents1. Background31.1 Theories of Credit Crunch31.2 History of Credit Crunch 2007-200842. About Ryanair83. What effect Credit Crunch has on Ryanair?93.1 Risk Management in the past93.2 Risk Management of Ryanair in 2008114. Conclusion12References131. BackgroundThe world in 2008 suffers from a phenomenon called credit crunch. In this essay I am going to examine the credit crunch and its impact on Ryanair a Low Cost Carrier company. Credit crunch can be defined as sudden reduction in the general availability of loans, or increase in the cost of obtaining loans (Wei Ding n.d.) . If it evolves into a global financial crisis then the domino effect - due to the financial links between institutions and countries - could boost its spread world-wide.

Credit crunch can have effect on:•financial markets, such as stock exchanges, derivative markets•equity funds as they go short on cash when investors try to get rid of assets•insurance, pension funds as they cannot meet their profit expectations due to receding asset portfolio•public finance, as bailout plans are financed from tax payers money•foreign exchange markets (FOREX), as investors move their assets to strong currenciesUltimately borrowing and equity rising will be harder which could lead to an economy crises.

Certain signs of coming changes in the world economy could be detected prior to the obvious appearance of credit crunch in 2008. These signs are for example: economic downturns in major economies, high-oil and high food prices which generated higher global inflation. In February 2008 Reuters reported that global inflation was at historic levels (Reuters 12 02 2008)1.1 Theories of Credit CrunchNikolai Kondratieff drew attention to certain waves (called as Kondratieff or K-waves) which may be defined as pattern of regular characteristic of structural change in the modern world economy. K-waves are attributes of world economy visible in international production data. In other words, phased...