03. Ryanair Case

MARKETING MANAGEMENT

CASE ANALYSIS

DOGFIGHT OVER EUROPE: RYANAIR

Submitted by: PGP ‘H’, Group 8 SN 1 2 3 4 5 6 7

Name of Student ASHISH TOMAR PARESH KOTKAR ISHANI MITTAL TATSAT PRAKASH PANDEY PRATIBHA INDORIA SAHIL AGGARWAL DHAVAL VAIDYA

Roll No. 2014PGP067 2014PGP245 2014PGP137 2011IPM112 2011IPM072 2014PGP318 2014PGP411

Company’s Background: Ryanair was an upstart Irish airline company set up by Cathal and Declan Ryan in 1985. The airline initially operated only a single scheduled service between Waterford (south

east Ireland) and Gatwick Airport (on the outskirts of London), through a 14-seat turboprop aircraft. The setting up of the business was greatly enabled by the million Irish pound-contribution of Mr. Tony Ryan, the father of the Ryan brothers, who had earlier co-founded Guinness Peat Aviation, the largest aircraft leasing company in the world. In 1986, the company announced that it would soon commence service on the Dublin-London route.

Industry & competitors’ profile: The airline sector in the United Kingdom (U.K.) and Ireland comprised mainly of two major players  –  the British Airways in U.K. (founded in 1930s) and Aer

Lingus in Ireland (founded in 1936). Both these airlines were already operating profitable services along the Dublin-London route which Ryanair was looking to enter.

Issue: Ryanair is looking to enter a segment in which 2 competitors are already earning well and its

only differentiator in doing so is lower air fares (I£98) compared to the average I£208 price charged by them. What should be the marketing strategy of Ryanair to gain a competitive edge? Whether Ryanair should aim to compete with established players for the existing 0.5 million passengers or should it aim at attracting the rail and ferry users (new market) to travel through air by offering lower costs?

Analysis:

Strengths:  The founders (Ryan brothers) have previous experience in airline industry  Sufficient financial resources available to offer low-cost services at I£98. Offering first rate services to customers  comparable to big airlines, despite low priced tickets. Past record of successfully operating a  scheduled airline between Waterford and Gatwick Airport Offers flexibility of timing to customers as  it offers 4 round-trips in a day Opportunities: Only 0.5 million travellers utilise airways  on this route, while another 0.75million road/sea travellers still remain to be tapped to utilise the airways.

Weakness:  Permission to operate only 44 seat turboprop aircraft.

Threats: Consolidated Market as Large established  players such as British Airways and Aer Lingus were operating profitably on the new route.  From 1983 to 1985, British Airways’ customer base increased at a good rate of 12.8% (16.3 to 18.4 mn) and tonne-km capacity also increased, making it a strong competition for Ryanair.

An analysis of Ryanair reveals that despite cut-throat competition on the London-Dublin route, there lies huge opportunity for Ryanair to enter into the market. The surplus funds available with the company is one of the biggest advantages the company holds, as it can focus on adopting a low-cost strategy to attract customers and establish itself. Further, as mentioned in the case, Ryanair aims to distinguish itself from the other players in the industry through providing superior customer satisfaction and charging single fare for a ticket with no restrictions. Such a strategy will further help Ryanair to establish a consolidated and loyal customer base. Now even though the existing established players are running at a below par capacity utilisation of 60-70%, Ryanair’s value-for-money strategy can directly compete with the existing players for these customers. Further, the company should also focus on tapping the new market of the 0.75 million rail and ferry users as it can project substantial value to them by saving 8 hours (9-1) of travel time in return for just £I 43 extra (£I 98 - £I 55). As of now, Ryanair has a good opportunity to establish itself on the London-Dublin route. Further, if Ryanair is able to get permission to fly larger jet aircraft on the route, it can hope to reap benefits of large scale, which will help it to strengthen its position. A reverse scenario could also apply, whereby privatization of British Airways (BA) around 1987 along with its strong financial position could enable BA to reduce air fares in order to increase its dominance in the market. This could adversely affect the growth of an upstart like Ryanair which is struggling to find its feet in the industry.