Ryanair Case
Ryanair Case Analysis
1. What is your assessment of Ryanair’s launch strategy? Was it a good strategy? In your answer consider potential market demand, pricing and Ryanair’s likely cost structure.
After having grown up in the airline industry, the Ryan brothers proved they were able to operate a scheduled airline successfully with their 14 seat flights between southeast Ireland and a secondary London airport. Their strategy was to expand to the Dublin-London route, a known lucrative route for British Airways and Aer Lingus. Ryanair planned to have unrestricted fares priced at I£98, while providing first-rate customer service.
Ryanair chose to enter the market at a time when the consumer base needed a low cost alternative and the airline industry was being deregulated. At the time, there was a large segment of the European population, over 750,000 people, who were traveling from Dublin to London via rail and sea ferries instead of air. Ryanair assumed that if these customers had a more economical option, they would likely choose to take a flight and cut the time of their trip by 8 hours. Aer Lingus also offered discount fares that were on par with Ryanair but they weren’t always available and had to be booked one month in advance. Ryanair’s option offered consumers the option to have no advance commitment and still only pay I£43 more to save 16 hours roundtrip. This was a perfect alternative for last-minute business travelers, as well as leisure travelers who didn’t fly because of historically high prices.
Elements of Ryanair’s operating structure allow for the low cost fare they are offering. Utilizing 44-seat turboprop planes versus the 747s used by competitors is a significant cost differentiator for Ryanair. The large planes used by BA and AL are estimated to be only 60-70% full so there is a certain amount of overhead to manage these planes that is not covered. Additionally, BA and AL have the costs for the staffing, maintenance, service and
1. What is your assessment of Ryanair’s launch strategy? Was it a good strategy? In your answer consider potential market demand, pricing and Ryanair’s likely cost structure.
After having grown up in the airline industry, the Ryan brothers proved they were able to operate a scheduled airline successfully with their 14 seat flights between southeast Ireland and a secondary London airport. Their strategy was to expand to the Dublin-London route, a known lucrative route for British Airways and Aer Lingus. Ryanair planned to have unrestricted fares priced at I£98, while providing first-rate customer service.
Ryanair chose to enter the market at a time when the consumer base needed a low cost alternative and the airline industry was being deregulated. At the time, there was a large segment of the European population, over 750,000 people, who were traveling from Dublin to London via rail and sea ferries instead of air. Ryanair assumed that if these customers had a more economical option, they would likely choose to take a flight and cut the time of their trip by 8 hours. Aer Lingus also offered discount fares that were on par with Ryanair but they weren’t always available and had to be booked one month in advance. Ryanair’s option offered consumers the option to have no advance commitment and still only pay I£43 more to save 16 hours roundtrip. This was a perfect alternative for last-minute business travelers, as well as leisure travelers who didn’t fly because of historically high prices.
Elements of Ryanair’s operating structure allow for the low cost fare they are offering. Utilizing 44-seat turboprop planes versus the 747s used by competitors is a significant cost differentiator for Ryanair. The large planes used by BA and AL are estimated to be only 60-70% full so there is a certain amount of overhead to manage these planes that is not covered. Additionally, BA and AL have the costs for the staffing, maintenance, service and