RYANAIR Iris Yu Ting Hsueh Wen Shan Li

RYANAIR Iris Yu Ting Hsueh Wen Shan Li Jong Wong Baek Sung Pae BY THE SMART BRUINS

Launch Strategy • Smaller aircraft to avoid empty seats • Fly 4 roundtrips a day gives customers flexibility and choices • Provide the same meals and amenities as its competitors • Focus on delivering first-rate customer service • single fare ticket without restrictions at 98 Irish pound, which is twice as cheap as its competitors’ average price • Also provides flexibility because customers would not need to book the flight in advance to get the low price • This could possibly capture the business side of the market and convert ferries/rail travelers to fly instead (larger customer base)

Competitors’ Response 1. Improve customer service & quality luxury flight (differentiate) 2. Not respond: Ryanair is such a small competitor that it would not be profitable for BA and Aer Lingus to compete with it 3. Cut prices and enter into a price war • Dublin-London route is one of the most lucrative so Aer Lingus and British Airway would respond to Ryanair’s entrance to this market

Cost to Retaliate • If the airlines enter into a price war, Aer Lingus and British Airway would have to lower their price by almost half in order to match Ryanair’s price assumption: lowest price capture 100% customers • Cost of price matching = I£ 4, 850, 000 • 500, 000 (I£ 166. 5) = I£ 83, 250, 000 rev before Ryanair (62. 5% capacity) • 800, 000 (I£ 98) = I£ 78, 400, 000 rev if price match (jumps to 100% capactiy) • Cost of matching = I£ 83, 250, 000 - I£ 78, 400, 000 = I£ 4, 850, 000 • Can maintain profit if undergo restructuring • Currently, the highest cost = staff and fuel & oil for Aer Lingus and British Airway (40. 5% of revenue)

Cost not to Retaliate • If the airlines if airlines ignore Ryanair Cost of price matching = I£ 5, 806, 000 • 500, 000 (I£ 166. 5) = I£ 83, 250, 000 rev before Ryanair (62. 5% capacity) • 436, 000 (I£ 166. 5) = I£ 72, 594, 000 rev if price not match (lose customers to Ryanair) • Cost of matching = I£ 83, 250, 000 - I£ 72, 594, 000 = I£ 5, 806, 000 • It’s better to retaliate

Potential errors in the model • Bigger airline have royal customer base • Ryanair getting all its customer from BA and IA • Matching the price does not guarantee 100% capacity for BA and IA

Profitability • Is the proposed Irish pound 98 fare profitable? • Ryanair would make profit with the proposed fare until its two competitors respond • It would be able to attain a large customer base with its low fares • If respond by price matching, Ryanair would have to find ways to cut cost and lower the price even more or differentiate from the two competitors to stay profitable