Topics: Aer Lingus, Profit, Airline Pages: 2 (680 words) Published: March 18, 2011
1.What is your assessment of Ryanair’s launch Strategy?
Ryanair’s launch strategy was solid because it targeted an already proven profitable route, it underpriced the competition by streamlining its costs, and it made air travel more affordable and more attractive than other modes of transportation for this route. Ryanair recognized the profitability of the Dublin-London route, which was the only route that was profitable for Aer Lingus. While the direction of British Airways and Aer Lingus‘business models diversified worldwide, Ryanair saw an opportunity to streamline its costs by specializing on this specific route. Ryanair introduced a low cost, unrestricted fare, which undercut BA and Aer Lingus by £110 per ticket, while still focusing on first rate service. Ryanair was able to offer this low fare because it only planed to run four roundtrips per day, use small aircrafts, and fly to a secondary airport which charged lower fees. Recognizing that three-quarters of a million people regularly spent I£55 to travel via rail and sea ferries , Ryanair determined that it could offer a competitively low fare and shorten travel time to attract this customer base. Ryanair’s launch will be successful because of their low operating costs and their ability to expand the market. 2.How do you expect Aer Lingus and British Airways to respond? Why? How costly would it be for Aer Lingus and British Airways to retaliate against Ryanair’s launch rather than accommodate it? Aer Lingus and British Airways will not be able to respond effectively to Ryanair’s launch. According to Game Theory principles, Aer Lingus and British Airways will not be able to compete with Ryanair’s low fare because their cost to fly each passenger exceeds Ryanair’s fare per passenger by I£110. It would be too costly for BA and Aer Lingus to reduce their fares on their most lucrative route. British Airways ran one of the world’s most extensive airline networks, relying heavily on international travels,...
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