The airline industry evolved from the first commercial airlines in WW1 to widespread deregulation in the late 20th century. Governments established "flag carriers" and the IATA regulated the industry. In the 1950s, attempts to unify European flag carriers failed. Deregulation in the US and Europe in the 1970s-80s led to lower prices, new route structures, and computerized booking systems. Ryanair was founded in 1985 and grew to become Europe's largest low-cost carrier by offering low fares and efficient operations on popular routes dominated by legacy carriers Aer Lingus and British Airways.

1. R Y A RN A I

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. •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. •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. 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. 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. “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. INDUSTRY
COMPETITIVEN
ESS
High
Supplier Power
High
Threat of Entry
High
Threat of Substitutes
Medium
Buyer Power
High
PORTER’s 5
Forces

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. •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. •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. RECOMMENDATIONS
oPrice War
o Create hub and spoke for rural areas
o Competitive advantage
o Computerize reservation system
o Loyalty program