Ryanair's strategy is mainly focused on low costs and increase in market demand
The current market is a stabilized market, with a duopoly amongst the two strong players: British Airways and Aer Lingus. Both airlines established routes in the lucrative Dublin - London markets and tap on profits from this route to finance their other less profitable operations. The demand for air travel between the Dublin and London has probably stabilized over the 10 years from the stagnant market share of half million air travelers. Ryanair's strategy is focused on breaking this duopoly with the introduction of Ryanair's low costs and efficient service on the same route. The strategy entails to achieve the following:
1. With the competitive price of I£98, many travelers from this stabilized market pool would choose to fly with Ryanair, especially if Ryanair could maintain the proclaimed high quality service to its passengers.
2. Ryanair's 4 daily flights provide much flexibility to the travelers who could travel at their time of convenience in a day.
3. Ryanair's usage of 44-seater turboprop would greatly enhance its occupancy rate and at the same time, cost Ryanair much less to operate when compared to BA's operational cost since BA used bigger capacity planes for this route (67% occupancy).
Ryanair will not make money at the IP 98 fare structure
Due to Ryanair's constrained capacity, the long-term increase in demand of air-travelers which switch from other modes of surface transportation would probably be more beneficial to its larger competitors and hence the economies of scale would not considerably bring down the costs. Ryanair would also have a slightly higher operating cost than BA/AL because of their capital expenditure in the new aircraft and training/hiring of staff to operate this new aircraft. With the same level of service and catering in the flight, Ryanair cannot subsidize its costs through its operations. BA also has record operating profits in...
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