Aer Lingus and British Airways Case

Q1.

In its' penetration of the aviation industry in 1985, Ryanair adopted a two prong strategy of focusing intently on providing first rate customer service and charging a simple, single fare for a ticket with no restrictions.

This generic strategy was in contrast with British Airways and Aer Lingus which focused on providing a wide variety in its' choice of ticket offerings to cater to the different market segments and in diversifying its business to derive more sources of revenue.

Ryanair's strategy to focus on customers' satisfaction and to provide more affordable, no frills ticket was a great move because flight tickets it was a budding airlines and it was important to take small steps to develop its reputation in the industry.

To define the attractiveness of Ryanair's entry into the industry, the Porter's 5 forces would be used.

1. Threat of rivalry:

As flights of Aer Lingus and British Airways between Waterford and Gatwick Airport were running at 60-70% of its total capacity for the past 10 years, there meant that there was still excess capacity in this route. Hence, competition in that route was not as intense and Ryanair's entry would not result in a knee-jerk reaction of the existing competitors.

Therefore, as there was spare capacity in this industry, it was attractive for Ryanair to enter the industry.

2. Threat of substitutes:

Ryanair's competitors on the Waterford and Gatwick route were Aer Lingus and British Airways. These competitors were established players in the market and had deeper pockets. Hence, it was pertinent that Ryanair adopted the right strategy and threaded carefully because they had the ability to force Ryanair out of the industry by underpricing.

Ryanair's strategy to focus exclusively on providing 4 flights daily on the Waterford and Gatwick route was well planned because this allowed it to concentrate its resources instead of stretching its resources thin. This allowed Ryanair to build its brand name slowly, which is essential in the aviation industry, while not alarming its rivals.

In addition, as Aer Lingus and British Airways priced themselves as full-fledged airlines while Ryanair positioned itself as a low cost carrier, it was not in direct competition with the incumbents. As both groups of airlines had different market segments, it was certainly attractive for Ryanair because it could tap into a market that had an unfulfilled demand.

3. Bargaining power of consumers

The market for passengers between Waterford and Gatwick Airport could be segmented between the budget travelers and the non-budget travelers. Non budget