CASE 3 4
Doyoung Kim
1311180
Global Service Department
Business Opportunity Analysis
CASE 3. Dogfight over Europe: Ryanair
1) Do you believe Ryanair’s entry into Dublin-London route was successful?
Yes, Ryanair’s entry into Dublin-London route could be counted successful. Ryanair, which has been operated since 1985, is a small and rather domestic company compared to Aer Lingus and British Airways (BA). They will operate a turboprop that contains 44 seats, that takes 4 round trips per day. Unlike the two giants, Ryanair is not under the restrictions from the government, and have single fare for ticket. Therefore, the main strategy of Ryanair would be the “low-cost pricing”. While the substitutes for a flight are rail and sea ferries, which takes 9 hours and costs 55￡, the low cost of the Ryanair would attract those customers to take an aircraft. Moreover, since they are offering single fare, the service could be more intense, and BA, especially, focuses on international targets, Ryanair can focus on domestic targets and potentially expand their business likewise domestically.
2) How do you expect Aer Lingus and British Airways to respond? Explain your reasoning by answering the following sub-questions.
a. How costly would it be for Aer Lingus and British Airways to retaliate against Ryanair’s launch rather than accommodate it? (in terms of the “operating income”)
For Aer Lingus, it is very unlikely to be able to provide a low cost. The company has been having losses, and it urged the company to seek new sources of revenue and profit. “Aer Lingus’ domestic and European routes earned a modest operating profit while its trans-Atlantic flights sustained operating losses”. Therefore, for Aer Lingus, it would rather try to use government alliance or other strategies than price competition due to the reason that it would further reduce its marginal profit. On the other hand, BA is earning about 80% of its operating income from the international routes. Yet since the
1311180
Global Service Department
Business Opportunity Analysis
CASE 3. Dogfight over Europe: Ryanair
1) Do you believe Ryanair’s entry into Dublin-London route was successful?
Yes, Ryanair’s entry into Dublin-London route could be counted successful. Ryanair, which has been operated since 1985, is a small and rather domestic company compared to Aer Lingus and British Airways (BA). They will operate a turboprop that contains 44 seats, that takes 4 round trips per day. Unlike the two giants, Ryanair is not under the restrictions from the government, and have single fare for ticket. Therefore, the main strategy of Ryanair would be the “low-cost pricing”. While the substitutes for a flight are rail and sea ferries, which takes 9 hours and costs 55￡, the low cost of the Ryanair would attract those customers to take an aircraft. Moreover, since they are offering single fare, the service could be more intense, and BA, especially, focuses on international targets, Ryanair can focus on domestic targets and potentially expand their business likewise domestically.
2) How do you expect Aer Lingus and British Airways to respond? Explain your reasoning by answering the following sub-questions.
a. How costly would it be for Aer Lingus and British Airways to retaliate against Ryanair’s launch rather than accommodate it? (in terms of the “operating income”)
For Aer Lingus, it is very unlikely to be able to provide a low cost. The company has been having losses, and it urged the company to seek new sources of revenue and profit. “Aer Lingus’ domestic and European routes earned a modest operating profit while its trans-Atlantic flights sustained operating losses”. Therefore, for Aer Lingus, it would rather try to use government alliance or other strategies than price competition due to the reason that it would further reduce its marginal profit. On the other hand, BA is earning about 80% of its operating income from the international routes. Yet since the