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    Ryanair

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    Reevu Adhikary
    This document analyzes Ryanair's entry into the Dublin-London route market in 1986 and the potential responses from its competitors, Aer Lingus and British Airways. It finds that Ryanair's significantly lower ticket price of 98 Irish pounds compared to competitors' 166.5 Irish pounds price would be profitable. Aer Lingus may choose to focus on its other non-airline businesses rather than lower prices to compete. British Airways is seen as a bigger threat than Aer Lingus due to its government support and ability to withstand short-term losses by lowering prices to push Ryanair out of the market.

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    Ryanair

    Uploaded by

    Reevu Adhikary
    1K views16 pages
    This document analyzes Ryanair's entry into the Dublin-London route market in 1986 and the potential responses from its competitors, Aer Lingus and British Airways. It finds that Ryanair's significantly lower ticket price of 98 Irish pounds compared to competitors' 166.5 Irish pounds price would be profitable. Aer Lingus may choose to focus on its other non-airline businesses rather than lower prices to compete. British Airways is seen as a bigger threat than Aer Lingus due to its government support and ability to withstand short-term losses by lowering prices to push Ryanair out of the market.

    Original Description:

    HBS case study: dogfight in europe

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    This document analyzes Ryanair's entry into the Dublin-London route market in 1986 and the potential responses from its competitors, Aer Lingus and British Airways. It finds that Ryanair's significantly lower ticket price of 98 Irish pounds compared to competitors' 166.5 Irish pounds price would be profitable. Aer Lingus may choose to focus on its other non-airline businesses rather than lower prices to compete. British Airways is seen as a bigger threat than Aer Lingus due to its government support and ability to withstand short-term losses by lowering prices to push Ryanair out of the market.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    1K views16 pages

    Ryanair

    Uploaded by

    Reevu Adhikary
    This document analyzes Ryanair's entry into the Dublin-London route market in 1986 and the potential responses from its competitors, Aer Lingus and British Airways. It finds that Ryanair's significantly lower ticket price of 98 Irish pounds compared to competitors' 166.5 Irish pounds price would be profitable. Aer Lingus may choose to focus on its other non-airline businesses rather than lower prices to compete. British Airways is seen as a bigger threat than Aer Lingus due to its government support and ability to withstand short-term losses by lowering prices to push Ryanair out of the market.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    You are on page 1of 16
    At a glance
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    The key takeaways are that Ryanair entered the Dublin to London route with very low fares that were profitable for the company. This posed challenges for the existing competitors Aer Lingus and British Airways.

    Ryanair analyzed its competitors Aer Lingus and British Airways by looking at details like average ticket prices, costs, passenger loads, and staff efficiency. It also looked at how it could reduce its own costs compared to the competitors.

    For Aer Lingus, the document proposed either lowering its own prices and accepting short-term losses, or focusing on other business lines like maintenance where it was already profitable. For British Airways, the strategies proposed were expanding to other routes or directly competing with Ryanair on price since it was government-funded.

    Dogfight over Europe: Ryanair

    Introduction

    Analysis of Ryanair company in 1986, new Dublin-London route

    Competitors analysis

    Ryanairs profitability of the new route

    How Aer Lingus should respond?

    How British Airways should respond?

    Which competitor should Ryanair be more afraid of?

    assessment of Ryanairs strategy

    Whats going on?


    Ryanair is already
    operating since 1985, and
    were flying between
    Waterford (Ireland) and
    Gatwick (London, UK)

    1986 Ryanair
    announced, that
    they will start
    flying between
    London and
    Dublin

    Quick facts
    British
    Airways

    145 destinations in
    68 countries
    Fleet of 163 aircraft
    Own passenger and
    ground services
    171 retail shops
    49,000 independent
    travel agents
    Full range of classes
    of service

    Ryanair
    1985, Ryan
    brothers
    Dublin-London
    (secondary
    airports)
    4 round trips per
    day with a 44seat
    Single fare for a
    ticket with no
    restrictions

    Aer Lingus
    Partnership with
    BA until
    development of
    trans-Atlantic
    routes
    Losses in the
    1970s prompted
    to diversification
    Maintenance
    service, engineer
    training, computer
    consulting, hotel

    Revenues of Ryanair

    Ryanair managers assumes that plane will be always full

    44 seats in the jet

    4 trips a day

    365 days in a year

    98 Irish pounds per ticket

    Number of passengers in a year = 365*4*44 = 64240

    Revenue = 64240 * 98 = 6 295 520 Irish pounds per year

    Costs of Ryanair
    Ryanair
    The case do not provide
    possible costs of Ryanair.
    However, there is given
    average revenues and
    average costs of
    competitor (British
    Airways) for the same
    Dublin-London route
    British Airways average
    price of ticket: 166,5 Irish
    pound
    Profit of 11,4 Irish pound

    British Airways costs (prices in Irish pounds):

    Staf

    35,7

    Depreciation and amortization

    8,6

    Fuel and oil

    31,8

    Engineering and other aircraft costs

    9,8

    Selling

    18,0

    Aircraft operating leases

    3,4

    Landing fees and en route charges

    11,7

    Handling charges, catering and other

    16,6

    Accomodation, ground equipment and other

    19,5

    TOTAL

    155,1

    Costs of Ryanair

    Load of competitors were only 6070%, load of Ryanair will be 100%.

    Ryanair costs (prices in Irish pounds):

    Staf (reduced by 31,8%, multiplied by 65%)

    15,8

    Competitors in Europe staff was not


    as efficient as in US (in average,
    708,2 passengers per staff member
    in US, 341,2 passengers per staff
    member in Europe).

    Depreciation and amortization (multiplied by 65%)

    5,6

    Fuel and oil (multiplied by 65%)

    20,6

    Engineering and other aircraft costs (multiplied by

    6,3

    Staff efficiency of British Airways


    482,9 passengers per staff member
    (31,8% difference from US)

    65%)
    Selling (reduced by 31,8%)

    12,3

    Aircraft operating leases (multiplied by 65%)

    2,2

    Landing fees and en route charges (reduced by

    8,0

    Costs where staff is included (variable


    costs) will be lowered by 31,8%.

    31,8%)

    Fixed costs will be spreaded for more


    passengers (multiplied by 65%)

    31,8%)

    Handling charges, catering and other (reduced by

    Accomodation, ground equipment and other

    11,3

    12,7

    (multiplied by 65%)
    TOTAL

    94,8

    Profit of Ryanair

    Total revenue per ticket = 98 Irish pounds

    Total costs per ticket = 94,8 Irish pounds

    Profit per ticket = 3,2 Irish pound

    Yearly profit = 3,2 *64240 (number of passengers) = 205 568


    Irish pounds

    Aer Lingus scenarios

    Lowering prices

    Aer Lingus sustains short term losses

    155-98=57 Irish pounds lost per person

    64240*57 = 3.6 million Irish pounds lost

    If Ryanair retreats, old prices may prevail again

    Leaving the market

    Losses in trans-Atlantic flights

    Low operating profit: 0.5 million Irish pounds

    High operating profit in other activities

    Maintenance services - 12.7 million profit

    Non-airline services 17.1 million profit

    British Airways scenarios

    Expanding in other routes

    The best time to expand in other routes and countries

    Try to continue reach as many customers as it can

    Leave Ryanair in local market

    Push Ryanair out from the market

    Lowering prices

    Try to push out Ryanair from the market

    Attract as many customers as it can

    Which competitor Ryanair should


    afraid more?

    British Airways

    Government support

    Not afraid of losses

    May compete with Ryanair for flight prices

    Findings

    The new route was profitable (profit of 3,2 Irish pound per ticket)

    Very low price (significantly lower than competitors)

    With such low price, Ryanair have an ability to attract travelers by


    ferries (price difference is 48 Irish pounds, time difference is 8 hours)

    However, Ryanair had nothing more to offer, besides lower price.

    possible strategies of Aer Lingus

    Most likely, they will let Ryanair come to the market, and will focus on
    other kinds of businessess, in which they do perform well

    possible strategies of British Airways

    They will compete with Ryanair, because they can loose profit, while
    theyre government funded company

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