Dogfight over Europe: Ryanair
What is your assessment of Ryanair's launch strategy?
Ryanair's strategy to launch airline with single fare no restriction ticket at price less than half of other players would certainly get it the market share quickly. However, the success of this strategy would require Ryanair to manage the expenses and keep costs low.
Ryanair has decided to offer full service (meals and amenities) while offering lower price. This would definitely put strain on the costs. Moreover, they are planning to get a larger aircraft. This will increase aircraft maintenance costs as they will have to service 2 different types of aircrafts.
Also it is important that Ryanair focus on this route turn it profitable before they decide to expand to other routes. Growing too fast will increase costs further. --
Ryan brothers took account about various factors when he launched his company, the key choices from were: first, they chose the most lucrative route possible (at the moment one of the most lucrative routes for their competitors), and with a potential growth if they can attract passengers from train or sea ferries. In second, his position as late-movers, allowed them to enter in the market with a lower price than its competitors. A lower price is a good strategy to quickly gain market share. Last but not least important, thanks to his father’s money, they had sufficient financial resources to maintain their prices.
How do you expect Aer Lingus and British Airways to respond? Why?
Since, Ryanair will be providing comparable service for less than half the price, Aer Lingus and British Airways will have no choice but to lower their price. If they do not then it Ryanair will be running full flights and their flights would probably run at less than current 60-70% full. This would further erode the profit margins.
The only silver lining for the airlines was to convert few of currently 750K people who used rail and ferry rather than...
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