Ryanair Section C
PGP 2011-13 Page 3
Secondly, Ryanair has decided to run 4 round trips per day with a 44-seat turboprop. This strategyhas dual benefits. First with the increase in frequency of trips, it provides the customer with greaterflexibility of choosing their time of travel. Secondly, with a low-seat aircraft of only 44, it almostguarantees Ryanair a load of 90% as compared to only a load of 67% load for BA3.
Thirdly, Ryanair has decided to land at one of Londo
n’s secondary airports, Luton rather than
Heathrow. Since, Heathrow is the busiest airport in London; the landing charges are quite high.Instead, by choosing to land at a secondary airport, Ryanair will reduce its operating expenses4.
Fourth, its employees would offer first-rate customer services. By offering meals and amenitiescomparable to BA and AL, Ryanair has made sure that it is on level ground with its competitors.Moreover, by offering first-rate services, it is trying to retain its first-time customers5.
Fifth, the low air fare of Ryanair has made it possible for it to get new customers: travelers who userail and ferry. With only 40 £ difference between the air ticket and the ferry ticket (as compared toabout greater than 100 pound difference in the case of BA and AL), Ryanair has made customersthink about which is more important, time or money. With far more reasonable fares, thecustomers will have to make a trade-off between 40£ excess fee and 8 hours of wasted time.Thus, the launch strategy applied by Ryanair is highly competitive and will grab the attention of itscompetitors. By distinguishing itself from the flag carriers in three of the most important aspects forcustomers (price, frequency and service), Ryanair is bound to attract customers.
Expected Response of British Airways and Aer Lingus:
The Dublin-London air route is reputed to be a quite lucrative for both Aer Lingus and British Airways. Itis considered to be a network that avails them a reasonable return on capital. Thus they are the majorplayers operating at this route. The current prices charged by Aer Lingus and BA stand at I£208. Thoughdiscount fares as low as I£99 are available but the booking has to be done one month in advance whichis not feasible for the instant travelers. Also three fourths of one million round trip travelers prefer to gofor a nine hours journey by rail and sea ferries rather than aircraft. This clearly shows that customers arehighly price conscious as they prefer paying I£55 to I£208. This is probably the reason the number of airpassengers on the route have been stagnant.Under these circumstances if a new airline like the Ryanair enters the route with a simple, single fare of
I£98 for a ticket then it’s a great threat to the existing pla
yers like the Aer Lingus and the BA. Thoughinitially Ryanair proposes to run four round trips per day with a 44 seat turboprop i.e. maximum of 352travelers in a day, it is optimistic of getting a license for flying bigger jets on the route. With a low farethe airline targets those 75% travelers who travel through rail and ferries as the prices for airline ticketare very high. It thus intends to change the traffic flow on the route which is stagnant for the last 10years.Aer Lingus and BA could retaliate by following either the Flank Defense or the Pre-emptive Defenseapproach. In Flank Defense BA and AL can start budget airlines to counterattack the rising threat of Ryanair. This shall help them to attract the target segment of Ryanair by their already existing brandimage. Further innovation and value addition like increase in safety measures shall help them to assure
that new customers don’t trust a new airline. The existing players can protect themselves by following
the marketing approach of defense which leads players to look for unknown and unmet demand bybringing
more and more innovation in their processes. A sudden reduction in price fare can’t be a
solution as the economic costs involved can be huge though temporary measures can be taken tocompletely eliminate new competition.