11175282_Arun Prakash Dhanapaul_C03_Case: Dogfight over Europe: Ryanair (A) & (B)
Ryanair began its operations in 1985 by concentrating on servicing secondary airports. In
1986, Ryanair positioned itself to enter the Dublin-London route, the traditional bastion of
two flag carriers- Aer Lingus and British Airways. The flights of these two carriers
operated with 60-70% capacity on this route. This volume had been stagnant for over 10
years. This could be primarily due to the fares that were prevalent on this route
(unrestricted round trip fares at I208 and discount fares at I99). Price sensitive customers
opted to use rail and sea ferries instead, where the round trip fares were as low as I55. The
target segment of Ryanair therefore was not only the existing customers of these two
airlines but also customers who used other modes of transportation. Therefore it had
widened its targeted customers. Its value proposition that differentiated the service it
offered from the other two players was first rate customer service, single fare for a ticket
with no restrictions and a low price of I98. It set off an intense price war with the ticket
price in this segment falling to as low as I70. Ryanair was able to maintain a load factor of
100% in this heavily competed sector. In 1987, jet service to London had been approved
and Ryanair began operating 104 seat jet in this sector. Then there was a sudden wave of
expansion, with Ryanair serving routes between Dublin, Manchester, Liverpool and
Glasgow. It also explored services to rural Irish airports. In the process of expansion, it
