Dogfight over Europe

DOGFIGHT OVER EUROPE: RYANAIR

1. How do we expect Aer Lingus and British Airways to respond :

Considering the fact that RyanAir is very nascent to fully fledged airline service and very volatile revenues of Airline industry, Aer Lingus and British Airways should not retaliate on Ryan Air’s price strategy.

Aer Lingus is highly diversified and is into various other services (hotels etc.). Getting into price war would further reduce its margins and it is very unlikely to provide such low cost air fare since most of its operating costs like staff, landing fee, selling charges are unavoidable and cannot be reduced drastically.

British Airways has 80% of its profits from international routes. Considering Dublin-London route being one of its most profitable one getting into price war with competitors will be a huge loss to whole industry.

Both Aer Lingus and British Airways are supported and hence policies are also controlled by respective governments, offering low cost airfare requires whole systemic change which is not practically possible just for the reason of retaliating Ryan air.

Statistics:

At present Ryan Air can operate 4 trips with 44 passenger capacity.

So in a year Ryan Air can carry 64240 passengers.

The Dublin-London route has around 500,000 travelers.

Also IE 98 fare is very lucrative for attracting rail and ferry travelers.

Hence the market share of Ryan Air from current Airline market will be significantly low (would be < 10%)

Also Ryan Air strategy brings new penetration for airline industry, creating more consumers who will get used to air travel.

Also