Marketing Management- Dogfight over Europe Case Study

DOGFIGHT OVER EUROPE: RYANAIR (A)

Ryanair is a newly established airline with one year of experience under its belt of flying passengers between Waterford and Gatwick airport.  The founders of Ryanair are the two brothers, Cathal and Declan Ryan, who feel the 14-seat turboprop that flies on this route has established itself well. They now wish to commence service between Dublin and London, and have announced the same. However, this is reputedly one of the most lucrative and busiest routes for many major players like British Airways and Aer Lingus. This is also the first time Ryanair will be facing the brunt of already established airline giants.  

1. Statement of the problem

• The route, which they wish to enter, is highly competitive with big market players like Aer Lingus and British Airways, which have been in service since a long time. These are backed by the governments of their countries. Will Ryanair be able to sustain its efforts along such a route?
• The strategy to be employed by Ryanair is two fold: first rate customer services, which many other airlines are also providing; and second, low prices on fares. Should we go forward with this present strategy or not?
• They have the license only for a 44-seater turboprop and do not have a license to fly a larger jet aircraft yet, although they have applied for one. When they do get one, which segment should they be targeting? Should they proceed with their policy of single fares or should they target high end segments as well?

1. Causes of the problem

• Since they are fairly new to this industry, they have the uphill task of staying on their toes all the time to attract a large customer base and compete against such big players.
• The total number of air passengers on the route that they have chosen has been stagnant for past 10 years.
• There can be a potential price war between airlines as the price proposed by Ryanair may urge the already established companies to slash their existing prices.
• When we look at Exhibit 4, the total operating cost of British Airways is 155 pounds per passenger. If Ryanair has similar cost structure, it will incur a huge loss by selling tickets for 98 pounds per passenger.

1. Decision criteria and alternative solutions

Ryanair can choose any one of the following alternatives:

• FLANK ATTACK

A flanking strategy is another name for identifying shifts that are causing gaps to develop, then rushing to fill the gaps. In this case, we have identified the gap, which is the low-end customer segment that might wish to travel by flight provided the cost is on a lower side. Many of the travellers of this route use other modes of transportation like ferry and rail, which roughly amounts to 0.75 million. By using a low cost single fare for all the passengers, Ryanair can use flank attack to enter the market.