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Suevival of ryanair in the airline industry

20 Feb 2017Government and Law Essays

The focal point of this paper is to prepare a report on the successful survival of Ryanair in the airline industry or the strategies implemented by the company that enabled them to compete with top airlines like British airways and Aer Lingus. It can be stated in the very initial stage that the strategy taken by the Ryan brothers surely made money at the £98 fare that they propose and for valid reasons. It can be stated that the airline launched by the Ryan Brothers by the name Ryanair is basically a low cost economic airline and this helped the company to make a decisive entry in the airline market with relative ease fighting the greater potential and market penetration of bigger players like British airways and Aer Lingus.(King, 2003, 31)

The Ryan brothers publicized in the month pf April 1986 that they were about to launch an air service between London and Dublin. This was the first time that their airline was about to face competition and steep rivalry from two fellow airlines that were operating on the same route. These airlines were British Airways and Aer Lingus. This was because this route was a very busy route and thus this Irish airline by the Ryan brothers was subjected to face difficult oppositions. The best possible strategy for countering this competition was based on a movement the supported a low cost economic fare structure. The £98 fare structure was to make money because the initial infrastructure of this airline lacked huge overhead costs generally incurred by an established airline company like British Airways and Aer Lingus. (Kar, 2006, 188)

This was more relevant because the move of economic fare structure was based on the strategy that it was indented to make an entry into an already populated route of air service between London and Dublin with established competitors like British Airways and Aer Lingus. This was the best possible method of penetrating the market by luring the customers with extremely low fare. It is obvious that the £98 fare structure would yield profit because it would have two specific advantages along with being about 50% to 90% lower rate than its competitors.(Fletcher, 2003, 56-57) First, with the lower fare system the company was able to attract better amount of customers and thus was able to penetrate the market which is expectedly advantageous for the long run and secondly, with lower cost infrastructure like lower number of employees the company was able to sustain its position and plough back profit margin in a gradual manner. (Rivkin, 1986, 7) The cost advantage of this company can be enumerated as follows:
(Bhagavan, 2003, 18)

On the other hand it was surely proved to be costly for Aer Lingus and British Airways to retaliate against Ryanair's entry into the market rather than accommodate it. The Ryanair was to make an entry with a recognizable stamp with their extremely low fare in the market of populated route of air service between London and Dublin surely it would be a challenge for company like British Airways and Aer Lingus to confront it. These present carriers were to respond in a positive approach to counter the advent of this new market entry. It is easily anticipated that the existing company were in a position to allow any substantial price cut to compete with this new entrant in the field of fare structure because Ryanair was already offering a rock bottom fare and price would not be made possible to drop further for British Airways and Aer Lingus. However, the existing companies British Airways and Aer Lingus were to cut prices at least for an eye wash to make a substantial impact on the customers’ impression. Never the less, even this eyewash was to prove costly because for long serving companies like British Airways it is obvious that the cost analysis and the fiscal balance would be demanding for the two companies. With a huge infrastructure and great number of employees it was certainly be difficult for these two companies to cope with the initial coup. (Lamb, 2004, 225-226)

The overall assessment of Ryanair's launch strategy is clear and absolutely effective. Ryanair’s basic intention was to penetrate an already populated air market. This was risky but profitable if successful. Secondly, Ryanair was trying to access into the existing customer strata of Aer Lingus and British Airways. Thirdly, Ryanair was trying to create a new breed of passengers with its economy price structure. The fourth point enumerates that the new airline company Ryanair was confident enough about sustaining with this price structure. The fifth point could be enumerated as an aggressive market planning as Ryanair was trying to drive away the existing airline companies from having the prime market share of the industry that were already successful in the said field. Next it could be mentioned that Ryanair was looking for a long term market goal and thereby is ready to sacrifice short term profit. It is also true that the company Ryanair was looking for the business traveller section of the market segment which is logical for this specific route. Lastly it could be stated that Ryanair was scheduling itself as a point to point service provider which is logical for a low priced agency. (Lamb, 2004, 231-32)

At this point it would be relevant to mention the response of Aer Lingus and British Airways to counter the advent of Ryanair. Firstly, Aer Lingus and British Airways looked for a price cut to negate the advantage of Ryaair, next, these two companies advertised heavily and banked more on reliability, comfort and class along with incorporating extra services like better food or beverage for example. British Airways installed better security services and a virtually risk free flight for the passengers. British Airways also incorporated better mode of frequency of flight. Alongside these measures British Airways also provided loyalty rewards for the customers. (Dollard, 1999, 79-81)

But it was seen that in spite of huge amount of changes in part of infrastructure from the point of view of these two established airline, especially British Airways, Ryanair was proved to be undaunted by these facts and they became one of the most successful airline services of all time depending on their strategy of economic travel principals. The case study of Ryanair has become an icon for students and teachers alike and continues to be a successful model in the parameters of industrial and management success formulations. This specific case study remains to this day as a ground breaking approach in the world of business studies where a high valued industry like airline business is penetrated mainly on the aspects of low priced and economic fare structures. (Dos, 2006, 178)

Reference:

  • Rivkin, Jan W; Dogfight over Europe: Ryanair (A); HBSP; Harvard Business School Publishing; Ref: 9-700-115; 1986
  • Bhagavan, Mukund. Ertekin, Oguz. Geijerman, Peter & Kuznetsov, Vasily; Budget Airlines – Ryanair; High Technology Entrepreneurship & Strategy; 2003; retrieved on 25.03.07
  • Dos, M; Future of Management Thought Process; Alliance Publications. 2006
  • Dollard, John; Business Aggression; New Haven and London: Yale University Press. 1999
  • Fletcher, R; Beliefs and Knowledge: Believing and Knowing; Howard & Price. 2003
  • Kar, P; History of Pacific and Atlantic Airline; Dasgupta & Chatterjee; 2006
  • King, H; Management Today; HBT & Brooks Ltd. 2003
  • Lamb, Davis; Cult to Culture: The Development of Civilization on the Strategic Strata; National Book Trust. 2004

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