Ryanair

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Ryanair

  1. 1. R Y A RN A I
  2. 2. •WW1 – First appearance of commercial airlines •Government introduced “flag carriers” •WW2 – IATA created regulated airline industry •European countries – “pooling” agreements •1950s – Unification attempt of “flag carriers” failed
  3. 3. •Despite high price, airlines still incur losses •Customers turn to charter airlines •Counter attack - Flag carriers established discounts and started their own charter subsidiaries •OPEC raised price of jet fuel •Recession – Cut demand for air travel
  4. 4. •1978 – Deregulation of U.S. domestic airline •Prices drop •Hub-and-spoke route structures •Computerized reservation systems •European commission wants pooling arrangements abolition •1992 – Unified European market
  5. 5. Tony Ryan Founder : Tony Ryan together with Cathal and Declan Ryan First Plane : 14-seat turboprop aircraft Route : Waterford and London Gatwick Airport Duopoly British Airways and Aer Lingus 1 9 8 5
  6. 6. 1 9 8 6 Dublin-Luton route European Union Deregulation • Irish government (pooling arrangement) Protect Aer Lingus • British government (Margaret Thatcher) Consumers have equal weight when allocating licenses for new routes Ryanair added second route
  7. 7. “Dublin-London is the only route on the Aer Lingus network that has the volume of business to allow of itself a reasonable return on capital,” Aer Lingus’ chairman. Ryanair • 4 trips / day (44-seat turboprop) •First rate customer service •Single ticket with no restriction I£ 98 Ryanair I£ 208 Aer Lingus VS
  8. 8. INDUSTRY COMPETITIVEN ESS High Supplier Power High Threat of Entry High Threat of Substitutes Medium Buyer Power High PORTER’s 5 Forces
  9. 9. INDUSTRY COMPETITIVEN ESS •Charge a low price •Maintain first rate customer service Supplier Power Strong labor union Concentrated aircraft makers Threat of Entry High capital requirement Difficulty to get a license to operate Threat of Substitutes Rail-and-ferry Autos Buyer Power Low switching cost No loyalty PORTER’s 5 Forces
  10. 10. •Ryanair had to face severe competition from two major airlines that were British Airways and Aer Lingus. •British Airways was a huge firm that benefited from economies of scale, focused on efficiency and continuously expanding its services to different destinations globally. •British Airways focused on catering both Business travelers and tourists. •As observed, the margins in the European routes were already relatively low with 4.4% profit for British Airways. S W O T
  11. 11. •British Airways and Aer Lingus both attempted to push Ryanair out of the industry by trying to lower the fares almost to cost and thereby block its entry. •Aer Lingus is strongly supported by the Irish government and was heavily subsidized for long period of time when it was making successive losses. •Aer Lingus tried to specialize in the travel market for tourists and offered them tailored attractive packages. •The deal between Aer Lingus and the British Government offered it exclusive rights for flights to and from London, which was very beneficial for it. S W O T
  12. 12. RECOMMENDATIONS oPrice War o Create hub and spoke for rural areas o Competitive advantage o Computerize reservation system o Loyalty program

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