Ryanair - Dogfight over Europe

>What is your assessment of Ryanair's launch strategy?<

Ryan brothers took account about various factors when they launched their company, the key

choices where:

• first, they chose the most lucrative route possible (at the moment one of the most lucrative routes for their competitors), and with a potential growth if they can attract passengers from train or sea ferries.

• Second, their position as late-movers, allowed them to enter in the market with a fare price of I£ 98,- (lower price than its competitors). A lower price is a good strategy to quickly gain market share. (Price penetration stategy)

• Last but not least important, thanks to their father his money, they had sufficient financial resources to start up and to maintain their prices.

>Will it be successful? Or is it fatally flawed? Why?<

• Ryanair's strategy to launch airline with single fare no restriction ticket at price less than half of other players would certainly get market share quickly. However, the success of this strategy would require Ryanair to manage their expenses and keep costs low.

• Ryanair has decided to offer full service (meals and amenities) while offering lower price. This would definitely put strain on the costs. Moreover, they are planning to get a larger aircraft. This will increase aircraft maintenance costs as they will have to service 2 different types of aircrafts.

• It is important that Ryanair focus on this route turn it profitable before they decide to expand to other routes. Growing too fast will increase costs further.

While BA focused primarily on business passengers, and was profitable on the London-Dublin route relying on travel agents being responsible for 83% of its scheduled revenues. And ceased service if smaller routes become unprofitable surrendering them to competitors. Although the Dublin-London route gave a reasonable return on capital for Aer Lingus, the overall airline and its trans-national flights were facing losses. For that matter Aer Lingus Management had diversified into other areas and earned significant profits on its maintenance, training services, computer reservation system, and even hospital management businesses. As a result management was contemplating a sale of the airline.

Given that BA has a recent history of ceding unprofitable routes to competitors and that AL was considering selling the airline business, I believe Ryanair was positioned right to seek an entry opportunity to compete on the London-Dublin route with BA and AL.

>Does Ryanair's strategy give it a competitive advantage over the rivals?<

• Ryanair its strategy comprises of