In April , the Ryan brothers announce that their fledging Irish airline Ryanair will soon commence service between Dublin and London. For the first time, Ryanair will face formidable competitors such as Aer Lingus and British Airways on a major route. Students are asked to assess Ryanair's entry and anticipate the response of incumbent carriers. Rivkin, Jan W. Revised November Jan W.
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Sign Up. This analysis also briefly sheds light on options available to both of these competitors and the consequences each option carry. Moreover, an evaluation of the profitability of this new route is also included, in this analysis. Please prepare a breakeven analysis to prove your point. A specified landing fee such as X dollars or X Irish pounds is charged to the airline for every passenger that lands or takes off on a given flight.
Would you retaliate by lowering fares? To what level? How costly would it be for Aer Lingus and British Airways to retaliate against Ryanair's launch rather than allow it? You need to have a cost to the combination of British Airways and Aer Lingus in Irish pounds of accommodating the Ryanair entry not cutting their fares and a cost of retaliating against that entry with some sort of price change. Since, Ryanair aims of providing the same service and catering to its customers as British Airways and Aer Lingus, it cannot cut down its cost under this head.
Therefore, this leaves Ryanair with an option of cutting cost in other major heads like staff salaries, selling expense, landing fees etc. This step in necessary as Ryanair aims of providing the same quality service as Aer Lingus and British Airways but at a considerably lower price.
Moreover, bearing a short term loss would be a better option rather than losing the market share to a new comer. It should be kept in mind that it is highly unlikely for Ryanair to operate at a lower operating cost and provide the same service as the already existing companies. Both the companies should slightly lower their prices and then use wait-and-watch strategy to evaluate the new comer.
In the case of Aer Lingus, it should be noted that not only the company has its government backing but also their focus is on providing engineering capabilities and hospitality services. Despite of all these additional businesses and resources of Aer Lingus, the company will have to reduce its fares and match Ryanair pricing strategy so as to stay in the competition otherwise it will lose a considerable market share.
This represents a considerably small amount of the annual operating profit of British Airways and Aer Lingus combined. Currently, , people use Rail and ferry route annually. While, there would be an addition of a new market, the already existing market revenue would decrease significantly because of the low fares. The remaining share is still safe with British Airways and Aer Lingus.
But the strategy of not lowering the price would allow Ryanair to increase its number of flights per day; thus, resulting in higher market share. As discussed earlier, it would be feasible for both British Airways and Aer Lingus to bring in new discount packages or lower their prices to a certain extent so as to stay competitive in the market. Providing a high class service at a considerably lower rate has never been profitable for companies in a longer run. At this moment, the target market of Ryanair is not clear; it cannot target both the first class and economy customers with a single price strategy.
Presently, Ryanair is not only trying to grab market share from its competitors, British Airways and Aer Lingus, but it is also trying to attract rail and ferry customers who are highly price conscious. Payment Make Payment. Download Download. Forgot Password? We are working in the lockdown for our clients! We are an online custom writing website and most of our writers are available. Make sure to follow all the precautionary measures and stay at home. What is your overall assessment of Ryanair's launch strategy?
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Dogfight over Europe: Ryanair (A)
Below are the available bulk discount rates for each individual item when you purchase a certain amount. Register as a Premium Educator at hbsp. Publication Date: June 12, Source: Harvard Business School. In April , the Ryan brothers announce that their fledging Irish airline Ryanair will soon commence service between Dublin and London.
In April , the Ryan brothers announce that their fledging Irish airline Ryanair will soon commence service between Dublin and London. For the first time, Ryanair will face formidable competitors such as Aer Lingus and British Airways on a major route. Students are asked to assess Ryanair's entry and anticipate the response of incumbent carriers. To analyze the dynamics of competition. Provides cost and revenue figures to allow students to examine the economics of retaliatory pricing in a business with high fixed costs and low marginal costs.
Dogfight over Europe Ryanair A