Ryanair Case Study
Do a five forces analysis of the airline industry in 1999 with the information available in the case study
- Threat of new entrants o Airport slot availability
• There is limited access to airport slots as national airlines had access to the best slots in the major airport hubs and new entrants to the market would only have little success as they would be given none or off-peak slot allocations at the airports
• So-called grandfather rights at certain airports.
• For instance in Heathrow Airport in London, British Airways can still control a slot although the flight number for this slot has been terminated and is therefore technically vacant.
• This is rarely a problem for LFA ́s though, as they rarely use these large hubs such as Heathrow, London or Schiphol, Amsterdam, because they are often congested due to the high frequency of long-haul flights and have high airport fees, although Easyjet uses the latter as one of its main continental airports.
• In addition, EU introduced airline liberalization measures and deregulate the industry o Predatory pricing as a barrier to entry
• The concept of predatory behaviour is based on incumbents in an industry squeeze out new entrants by temporarily lowering their prices to match the new competitor or even introduce prices below the levels of these new entrants, who often do not have enough capital to survive such a price war, until they have been driven out of the market.
• After the new entrant has lost this price war, the incumbent then increases its prices back to pre-competition levels. Within the context of the airline industry allegations of predatory pricing is most often made when a low fare carrier enters a market or specific route serviced by a full-service carrier prior to its entry. The latter will then lower its prices attempting to cause the former to exit this market or route. o Frequent flyers program
• These programs have made many customers, especially business travellers, prefer a
- Threat of new entrants o Airport slot availability
• There is limited access to airport slots as national airlines had access to the best slots in the major airport hubs and new entrants to the market would only have little success as they would be given none or off-peak slot allocations at the airports
• So-called grandfather rights at certain airports.
• For instance in Heathrow Airport in London, British Airways can still control a slot although the flight number for this slot has been terminated and is therefore technically vacant.
• This is rarely a problem for LFA ́s though, as they rarely use these large hubs such as Heathrow, London or Schiphol, Amsterdam, because they are often congested due to the high frequency of long-haul flights and have high airport fees, although Easyjet uses the latter as one of its main continental airports.
• In addition, EU introduced airline liberalization measures and deregulate the industry o Predatory pricing as a barrier to entry
• The concept of predatory behaviour is based on incumbents in an industry squeeze out new entrants by temporarily lowering their prices to match the new competitor or even introduce prices below the levels of these new entrants, who often do not have enough capital to survive such a price war, until they have been driven out of the market.
• After the new entrant has lost this price war, the incumbent then increases its prices back to pre-competition levels. Within the context of the airline industry allegations of predatory pricing is most often made when a low fare carrier enters a market or specific route serviced by a full-service carrier prior to its entry. The latter will then lower its prices attempting to cause the former to exit this market or route. o Frequent flyers program
• These programs have made many customers, especially business travellers, prefer a