Ryanair Dogfight over Europe

Dogfight over atomic exit 63 Ryanair (A) 1) What is your assesment of Ryanair? s launch dodge? The Ryanairs launch strategy was not the best for that moment. They began flying between Ireland and London, in a very saturated trade, which competed with cardinal crocked companies owned by the government and with corking see Aer Lingus and British Airways (who likewise had come to make believeher to make better their perform). And also entered the market independent carriers Such as British Midland.An other important factor was that the Dublin-London r issuee was the b atomic number 18ly one that provided comely returns for Aer Lingus, so it was not dismissal to permit customers easily take him by force, and Ryanair impart be difficult without a really differentiating strategy. Ryanairs stigmatize notion was delivering first-rate customer service with commence f atomic number 18s. But for a new company as Ryanair would not be able to compete in prices fol measlying the sam e strategy as other companies in the market focus on meals and conveniences and well service.Ryanair also has high fixed be (characteristic of this industry) and has enough volume in order to wait a price war (economics of exfoliation). Although the market was saturated, Ireland is a gnomish country with a small creation and the two big companies were operating at 60-70% capacity. If since 1986 was utilise new Boeing 747s with room for nearly 400, means that all plane carried 360 passengers on average, which was down the performance of the planes.But on the other hand, Ryanair could only contain a authorize for aircraft with room for 44 Passengers, so it had to make eight-spot flights, with the maximum capacity to carry the same number of passengers than BA or Aer Lingus. This could decrease the efficiency of Ryanair and ontogenesis the cost per flight management. Although it also beca practise of the low sign demand Ryanair (only 4 flights per day to 44 passengers, 17 6 passengers) privy be a smashing strategy to zonk out the flights throughout the day and get more customers.Moreover this market consists intimatelyly by Irish emigrants who resided in the UK. These clients are marked by unfluctuating seasonal character, and the about important, the majority of customers traveling in economy syllabus and they are very price sensitive, so we are going to be interested in low prices and discounts and are not interested in great facilities and services. Again we see that Ryanairs idea was not the most appropriate for this market, ecause although Ryanair turn down the price, customers will be more interested in large decreases in the price. Meals also make little sense in a flight of one hour duration. In favor of Ryanair we find to say however, that it test the initial service between Waterford y ? Gatwick Airport, which was a small service, in order to prove the company? s ability to operate. So if the company had problems or losses would b e on a large scale and this would give you the ability to identify problems and improvements.Similarly, although Ryanair did not get expected outcomes, with their low prices, I hypothesise it would get take away some customers to the other companies and suck up started to consider the proposal in the market. To sum up, The Ryanair? s launch strategy wasn? t successful from my psyche of view because it did not do a good analysis the market to which was coming and did not numerate the chances of success between these two great companies.They were strong companies with experience and great brand recognition, so if prices dropped to the aim of Ryanair and Ryanair provides the same service to the market, customers will continue to use the companies that are already used. 2) How do you expect Aer Lingus and British Airways to respond? Why? As I utter earlier, the only differentiation of was in the price Ryanair, because the immediate reaction of Aer Lingus and British Airways will be reduce the price. If these two companies started a price war, Ryanair would have no chance.They were flag carriers and they had the support of the government, so they can have overleaps during a while of time, at least until they get Ryanair out of the market. On the other hand, B. A was one of the biggest aircraft of Europe and it has an operating margin of 6. 9%, because of B. A can decreased the price at Ryanair level (? 98). While, the Dublin- London route was the only for Aer Lingus, with reasonable return of capital. Therefore is not going to let easily Ryanair steal their clients. ) How costly is it for Aer Lingus and British Airways to strike back against Ryanair? s launch? Even though, as we think the launch of Ryanair was not successful or at least the outcomes did not reach the expected ones, was a new competitor in the market and also with a more competitive price than theirs so it is threat their capability to meet demand.. With price-sensitive customers such as tra velers between Ireland and UK I believe that the two companies would draw back customers. Furthermore, a price war is never good for any company, even if it will be winner.These two companies would have to reduce their prices to more than half the linguistic rule price, which would generate losses until they get Ryanair out and this would break in the two companies. If these companies reduce so much the price, once they get Ryanair out of the market, they can not automatically raise the price to the previous number because customers would incur cheated and companies would lose their credibility. If Aer Lingus and British Airways didn? t get Ryanair out with the war of Price, they would get only weaken themselves and lose the most profitable route for Aer Lingus.