Airline Industry

Airline industry is characterized by high fixed costs in equipment, labor and facilities. The most significant operating costs that airline faces are labor/staff costs and cost of fuel and Oil. In addition, exhibit indicated relatively small operating profit margin of company (6.9%). Airline companies in general have very little influence over fuel prices, relatively lower price can only be attained for volume consumption that is more relevant for large airlines. In this case, higher operating margins can be attained by lowering other operating expenses and maximizing revenue by increasing per passenger sales.

Ryanair market entry strategy was based on cost leadership that enabled the company to operate on lower costs and offer lower prices accordingly. BR and AL will not be able to compete with Ryanair’s low fare because their cost to fly each passenger exceeds Ryanair’s fare per passenger, thus it will be too costly for BA and AL to reduce their fares on their most lucrative route. Prior to entry of Rynair, both companies were well established in Dublin-London route that provided high volume of business and return on capital especially for AL. In order to eliminate loss of passengers, both companies would probably try to offer as lowered price as possible and at the same time increase the frequency of flights. That can also be generated by implementing loyalty programs and various incentives to be offered to passengers to retain existed and loyal customers.

Regarding the enemies, for me angriest one is more dangerous than the strongest one, since it becomes quite difficult to forecast any further actions that might be implemented by the angriest competitor, as far as anger is fully based on internal ago that goes beyond the rational frames of competition.