Ryanair Case Essay
1. What is your assessment of Ryanair’s launch strategy. After establishing its ability to transport passengers from Ireland to secondary London airports (i.e. Luton and Gatwick), Ryanair entered competition with British Airways and Aer Lingus to provide air travel from Dublin to London. They were able to complete with these well-established carriers by: A. focusing intently upon first-rate customer service and amenities comparable to BA and AL B. offering a simple ticket w/ no restrictions
C. pricing of ₤98 in comparison to BA or AL price of ₤208
2. How do you expect Aer Lingus and British Airways to respond? Why? Both carriers were already well-established in the Dublin-London route and the route provided a high volume of business and return on capital especially for AL. In order to eliminate loss of passengers to Ryanair, both carriers would probably opt to offer lower fares and greater frequency of flights.
3. How costly would it be for Aer Lingus and British Airways to retaliate against Ryanair’s launch rather than to accommodate it? Marginal cost would be higher than marginal benefits for BA or AL to retaliate.
4. Can the Ryan brothers make money at the fare they propose? They’ve concentrated all their efforts and resources upon very specific travel between Ireland and England that allows them to be competitive and cost-efficient compared to BA and AL.
1. What is your assessment of Ryanair’s launch strategy? What do you think about their approach? Company operates a low-fares scheduled passenger airline serving short-haul, point-to-point routes primarily between Ireland and the UK. Cost containment and operating efficiencies has always been vital part of the way things are done at Ryanair. Primary targeting fare conscious or business travelers who might otherwise not travelled at all or use other methods of transport such as ferries or trains. Low fares can be used to stimulate demand. Ryanair’s air was be able to reduce or control expenses on aircraft equipment cost; customer service costs and airport handling and access costs. Ryan positioning is among the pure low cost airline segment and focuses on targeting this market.
The company has limited its entire fleet to the Boeing 737, which the company claims lets them save on training costs as all staff are only be trained for one type of aircraft and are then mobile throughout the entire fleet. The company also saves on maintenance supplies and labor as only one type of parts and skills are needed. Ancillary sales: In adjunct to airline ticket sales, ancillary sales are becoming more important component of low-cost model and generate additional high net margins. These could include car hire, hotel bookings, excess baggage claims and credit card fees. Expand aggressively the development of the internet as the core form of distribution that will provide a low-cost model a competitive cost base, scalability across the entire European market and platform from which ancillary sales can be derived.
2. How do you expect Aer Lingus and British Airways to respond? Why? Their cost base would not allow them to effectively compete on short-haul routes. Aer Lingus and BA can partner with their franchises sharing some ticketing and other distribution systems. Another option to achieve competitive advantage is moving nearer to the low-cost core business model by cutting their costs and differentiating in the services they offer to their customers, i.e. cutting costs and improving efficiency. The key is to remain competitive on price – they could focus more on long haul operations to offset or lack of profitability on short-haul routes. They can tighten up by increasing aircraft utilization and reducing turnaround times which will result in possibility of reducing workforce in line. Also consider to outsource of functions to reduce costs. 3. How costly would it be for Aer Lingus and British Airways to retaliate against Ryanair’s launch? Financial analysis
4. Which competitor is more threatening to Ryanair
British Airways is more threatening as it operates in UK and Ireland. Ryan air does not offer transatlantic flights and would therefore have a limited growth and would depend on short-haul routes. Ryan Air has made a unsuccessful bid to buy AL with the intention to propel outside of its growing European footprint. Increasing airport charges or fees that airlines must pay in order to use airports are rising significantly throughout many of RA hubs. Low airport costs have constituted an important part of RA’s low cost structure. The cost of jet fuel may increase operating costs for RA.