Ryanair Strategy

What is your assessment of Ryanair's launch strategy?
Our assessment should start with the analysis of the entry barriers of this market. For an entire new company entering the market requires high investment in airplanes, for existing companies to acquire them for new routes is not very difficult due to the existence of a previous trading relation between the supplier and the company but fornew companies is very difficult to get a lease of airplanes to start the company. Also when you enter the market you have to start your relationships with the travel agencies, especially in 1975 when the direct channels between the airlines and the customers were not so developed so the travel agencies were vital to arrive to the customers. Also the negotiation with the airports to get “slots”in the schedule of the airport, nowadays this is key for companies but thinking about the situation in 1975 this might not have been so important due to a lower demand on flights, even though this you will have to fight for the best slots in this airports that will be of the main companies, for example, a slot at 17:00, a very good hour and expensive because users like to travel at that hour willbe very expensive and if you try to get it bigger companies will increase their offer for those hours. Looking at all this you have to have a very good idea that will break the dynamic in the market, or segment the market in a way the companies inside it have not thought about. This is the analysis of the entry barriers in the airlines market; it is a chart of the situation in 2010 but stillapproximates to the situation in 1975.

Source: MARKETLINE, Airlines in Europe.

My assessment of Ryanair would be to look for what the customers want, there might exist a latent demand for one specific type of product like the very price sensitive market. It is a not written law that in every market there is a segment of it that only looks for price not giving so much importance to all the othercharacteristics of the product. But for that, especially in this market, you have to achieve a much higher efficiency.
The idea of going to secondary airports is a very good starting point, their fares are much lower and this allows you to get the best places in the secondary airports because a big company will not risk part of its assets to pay a slot in a secondary airport incurring in therisk of losing the best slot in the main airport. Another recommendation for them would be to try to imitate the USA airlines, by studying them and look at their way to do thing they might make more efficient the system in Ireland and UK, besides if they are the first company to apply their methods in UK and Ireland they will achieve the first mover advantage of a non-state company to succeed inthis market. An increase in the utilization of the resources of the company would be also helpful, as seen in the Exhibit 3 there is an utilization of 67% of the resources and Ryanair believes that the flights are normally 60-70% full, an increase in utilization to 70-80% would be enough to rocket the sales and decrease the fixed costs, even selling the flight tickets at the last minute in order tocover the costs would be an idea that, because they are a small company, Ryanair could implement in all their flight. Going to the 80-90% or even 90-100% could be possible but the management capacity of the company.
The key factor in all this is for Ryanair to achieve lower costs than the other companies and to have a source to finance in order to survive the first years, when the rivalcompanies will retaliate to take them out of business.
Can Ryan brothers make money at the 98 fare they propose?
It is possible. If we look at the two other companies they were Government owned companies, that gave the companies a huge advantage for a long time living in a monopoly that they had to cover, even though this for long they registered losses thing that might us think about the two...