Aer Lingus

Bilateral agreement with BA allowed Aer Lingus to stop in Manchester and

continue onto continental Europe while BA was allowed to land at Shannon and
continue on trans-Atlantic flights.
1970s Decreased tourism and erratic seasonal demands forced AL to seek
new sources of revenue and profit (maintenance service and engineer training
to other airlines, computer consulting, hotels, hospital management in Baghdad,
etc).

Ryanair
Tony Ryan worked as an aircraft leasing manager for AL before co-founding
Guinness Peat Aviation aircraft leasing company.
1985 Funded the venture of his 2 sons to start Ryanair. The airline started
operating a 14-seat turboprop aircraft to run scheduled service between
Waterford Ireland airport and Gatwick London airport (secondary airport).
1986 After establishing credible service, Ryanair obtained a license to fly
between Dublin and Luton (another secondary airport).
At the time, BA and Aer Lingus provided airfare from Dublin-London at a price
of 208. Ryanair decided to compete by offering a non-restricted ticket of only
98 that provided first-rate customer service, that required a 1 month advance
purchase.

Case Analysis of Dogfight over Europe: Ryanair

1. What is your assessment of Ryanairs launch strategy.
After establishing its ability to transport passengers from Ireland to secondary
London airports (i.e. Luton and Gatwick), Ryanair entered competition with British
Airways and Aer Lingus to provide air travel from Dublin to London. They were
able to complete with these well-established carriers by:
A. focusing intently upon first-rate customer service and amenities comparable
to BA and AL
B. offering a simple ticket w/ no restrictions
C. pricing of 98 in comparison to BA or AL price of 208

2. How do you expect Aer Lingus and British Airways to respond? Why?

Both carriers were already well-established in the Dublin-London route and the
route provided a high volume of business and return on capital especially for AL.
In order to eliminate loss of passengers to Ryanair, both carriers would probably
opt to offer lower fares and greater frequency of flights.

3. How costly would it be for Aer Lingus and British Airways to retaliate against
Ryanairs launch rather than to accommodate it?
Marginal cost would be higher than marginal benefits for BA or AL to retaliate.

4. Can the Ryan brothers make money at the fare they propose?
Theyve concentrated all their efforts and resources upon very specific travel
between Ireland and England that allows them to be competitive and costefficient compared to BA and AL.